When Lawful Proposals Become Unlawful Bargaining Conduct: The Board Holds An Employer’s Adherence to Lawful Proposals Nonetheless Constitutes Bad-Faith Bargaining

By: John Phillips and Ken Dolin

Seyfarth Synopsis: Reversing a Trump Board case, the Biden Board recently found that an employer engaged in bad-faith bargaining based on adhering to its bargaining proposals—despite (1) the employer engaging in no unlawful conduct away from the bargaining table, (2) not even one of the employer’s proposals being unlawful in and of itself, (3) the employer making several concessions from its initial proposals in response to concerns expressed by the union, (4) no evidence that the employer insisted on, or even refused to bargain over, any of its proposals, and (5) the union repeatedly refusing to engage in back-and-forth bargaining with the employer to test the employer’s willingness to compromise, not offering substantive counterproposals beyond regressing on some of its proposals, and repudiating an agreement to which it had initially agreed.

The essence of bad-faith bargaining is a purpose to frustrate the possibility of arriving at any agreement, and the Board examines the totality of an employer’s conduct to determine whether the employer has bargained in bad faith. The National Labor Relations Act does not compel either party “to agree to a proposal or require the making of a concession.” Accordingly, even adamant insistence on a bargaining position is not of itself a refusal to bargain in good faith. Rather, a party is entitled to stand firm on a position if it reasonably believes that the proposal is fair and proper or that it has sufficient bargaining strength to force the other party to agree.

Historically, the Board has not sat in judgment on specific proposals and has not decided whether specific proposals are “acceptable” or “unacceptable.” However, the Board has examined proposals to determine whether they demonstrate that the employer was seeking to frustrate any agreement with the union, as, for example, when accepting proposals would leave the union with no meaningful role as the employees’ statutory bargaining representative.

In George Washington University Hospital, 373 NLRB No. 55 (May 8, 2024), the Biden Board recently deviated from prior applications of that standard by finding an employer engaged in bad-faith bargaining because the employer’s adherence to a combination of proposals, taken as a whole, would have left employees and the union with substantially fewer rights and less protection than provided by law without a contract. The Biden Board found that the employer’s proposals, taken together, evidenced the employer’s effort to frustrate the reaching of a collective-bargaining agreement—despite not finding that any employer proposal was unlawful on its face and despite the existence of give-and-take bargaining conduct by the employer but not the union.

Factual Background

The employer and the union had a collective bargaining relationship for more than 20 years. The parties commenced bargaining in 2016 and continued bargaining for 30 sessions over nearly two years. From the outset, the employer asserted that, in its view, there were many deficiencies in the expiring collective-bargaining agreement, and thus it sought to substantially alter many of the contract provisions.

The employer commenced negotiations by proposing an extremely broad management rights clause, where among other items, it could unilaterally change the employee health insurance, and the employer paired this management rights clause with a zipper clause, a no-strike proposal, and a proposal to eliminate binding arbitration and replace it with nonbinding mediation.

Through nearly two years, the employer maintained the same basic positions, though it solicited counterproposals from the union, made concessions in response to the union’s bargaining positions, never refused to bargain over any mandatory subject, and all the while calmly answered the union’s bellicose conduct by continuing to bargain.

The Board’s Initial Decision

In 2021, the Trump Board, after reviewing the employer’s proposals and the parties’ conduct at the bargaining table, held that the employer did not engage in bad-faith bargaining. The Trump Board found that the employer’s initial proposals did not evince an intent to frustrate reaching an agreement when they were not presented as final offers, and the employer always remained willing to move from its position and engage with the union. Accordingly, in considering the totality of the employer’s conduct—including its bargaining proposals, as well as its willingness to engage with the union and to modify and revise its proposals, and the union largely refusing to engage with the employer and largely declining to provide counterproposals—the Trump Board found that the employer did not engage in surface bargaining.

The Trump Board’s decision was decided over the vigorous dissent of Chairman McFerran, the only Democrat-appointed Board member at that time. McFerran found that the totality of the employer’s conduct, as revealed in the combination of its proposals and adherence to those proposals, was designed to frustrate agreement and was therefore determinative evidence of “egregious” bad-faith bargaining.

The Board Vacates Its Initial Decision

The Trump Board’s decision did not last.[1] In 2023, the newly-comprised Biden Board, including Chairman McFerran, vacated its prior decision on the grounds that one of the Trump Board members who participated in the decision owned shares in a mutual fund that in turn owned shares in the parent company of the employer.

The Board Reverses Itself and Finds Bad-Faith Bargaining

Most recently, the Biden Board issued its new decision, over the dissent of Member Kaplan, reversing the prior decision, and essentially adopting Chairman McFerran’s dissent from the original decision.

The Biden Board majority, which included Chairman McFerran, concluded that the employer engaged in bad faith bargaining. In particular, the Board found the following employer proposals were unlawful, principally when the employer pressed them in combination for 14 months:

• An expansive management rights proposal that, in combination with the zipper clause proposal, the Board found left the employer with unilateral control over virtually all significant employment terms
• A no-strike provision
• A grievance provision that eliminated binding arbitration but instead culminated in non-binding mediation

The Biden Board found that the employer’s adherence to its proposals, taken as a whole, would have left employees and the union with substantially fewer rights and less protection than would be provided without a contract, would have required the union to cede substantially all of its representational function, and would have so damaged the union’s ability to function as the employees’ bargaining representative that the employer could not seriously have expected meaningful collective bargaining.[2] Thus, the Biden Board found that the employer’s adherence to its proposals evidenced its effort to frustrate the reaching of a collective bargaining agreement.

While purporting to apply existing law, the Biden Board’s analysis extended the law because its analysis ignored the union’s conduct. Specifically, the Biden Board glossed over the evidence that the employer did not insist on any of its proposals, but instead offered to bargain with the union, made modifications to its proposals, and even withdrew its no-strike proposal. Furthermore, the union did not engage with the employer, did not offer substantive counterproposals, and did not test the employer’s willingness to compromise.

Thus, the Biden Board majority found that the employer’s adherence to its proposals during negotiations was conclusive evidence of bad faith bargaining and that the union was not required to test the employer’s willingness to compromise by presenting counterproposals, even where the employer, but not the union, had made significant concessions, had not withdrawn from any tentative agreement, and was engaging in give and take bargaining.

Takeaways

Despite purporting merely to apply existing Board law, the Biden Board’s decision actually expands the scope of review of the substance of the employer’s proposals, and the employer’s adherence to those proposals during bargaining, even when those proposals are not unlawful on their face and there is no unlawful conduct away from the bargaining table.

This decision puts employers on notice that proposing waivers to the union’s statutory right to bargain over wages, discipline, and discharge, and broad managements rights in combination with broad zipper and no-strike and limited arbitration provisions—even when such proposals are simply opening positions—will be strictly scrutinized by this Board. Indeed, the employer’s adherence to those proposals may ultimately be found unlawful by this Board, especially if they remain on the bargaining table throughout the negotiations.

Given this, employers, when formulating initial proposals, should strictly review “waiver” proposals addressing wages, discipline, and discharge and those providing for other broad management rights, broad zipper and no-strike protection, and limited grievance-arbitration, as well as any proposals impacting union security.

Employers should then develop a plan to articulate during bargaining substantial business justifications for proposals, especially those addressing bargaining waivers and union security. When doing so, employers should account for the often opaque and shifting approaches to collective bargaining taken by the Board, depending on which political party is the majority party of the Board.

Specifically, the risks of an employer adhering to a combination of problematic waiver proposals that are not per se unlawful but nevertheless represent a major change from the status quo and could be found to leave the union and employees worse off than if no collective bargaining agreement existed must now be more carefully considered, as well as proposals impacting union security, irrespective of the union’s failure to engage in bargaining over these proposals.

[1] In 2021, the newly appointed General Counsel indicated that she intended to challenge the propriety of this Trump Board decision.

[2] The Board also found that the employer’s opposition to a union security clause, the employer’s wage proposal that granted the employer a large amount of discretion in setting wage increases, and the employer correcting a mistake with regard to its arbitration proposal and arguably committing one instance of regressive bargaining was further evidence of bad-faith bargaining.