The answer to this question is important because, under the National Labor Relations Act, an employer and union must bargain in good faith with regard to matters to be covered by a collective bargaining agreement, and the employer can change the conditions of employment only when agreement is reached or when the parties reach impasse. A recent case from the U.S. Court of Appeals for the D.C. Circuit offers some enlightenment on when impasse has been reached.

In Thrifty Payless, Inc. d/b/a Rite-Aid v. NLRB, the employer and union were engaged in negotiations over healthcare benefits for the employees, which were provided through a Trust Fund funded by employer contributions. Because the Fund was not financially stable (according to an independent consultant), the parties negotiated over proposed changes to the contributions and the impact on other benefits. The employer also suggested an alternative – switching to an employer-sponsored healthcare plan. There were several extensions to the existing agreement while the parties negotiated but were unable to come to agreement. The employer then declared the parties at impasse, and moved the employees to an employer-sponsored healthcare plan. The union filed unfair labor practice charges, arguing that the parties were not, in fact, at impasse and thus the employer should not have taken unilateral action. The National Labor Relations Board agreed, and the employer then appealed the Board’s ruling to the D.C. Circuit.

Under Board precedent, an impasse occurs only when both sides have exhausted the prospects of reaching a deal and are “at the end of their rope” leaving no “realistic prospect” that further discussions will be fruitful. The Board determines the existence of an impasse by considering, among other things, the parties’ bargaining history, their good faith in negotiations, the length of the negotiations, the importance of the points of contention, and the “contemporaneous understanding of the parties as to the state of negotiations.”

In this case, the D.C. Circuit found sufficient evidence to support the Board’s ruling that impasse had not been reached. Noting that impasse has been reached when neither party is open to compromise, the D.C. Circuit pointed to the fact that the union stated that it was open to further discussion, proposed additional bargaining dates and, just before the employer declared impasse, made a proposal with significant movement – involving hard numbers and proposed changes to benefits – towards the employer’s position. Significantly, the employer did not evaluate the union’s proposal by taking it back to its own experts for analysis, or conferring with the union’s experts to understand how they had developed the plan, or seek input from the original consultant on the Fund’s viability. The D.C. Circuit further noted that this was not a situation where the employer issued an ultimatum and the union fell short of fully-agreeing with the demand – the employer did not indicate that the employer-sponsored plan was the only option, and the union never rejected that proposal outright.

The D.C. Circuit also remarked on the brief duration of the negotiations as supporting the lack of impasse – at their last meeting, the parties discussed the employer’s proposal in the morning and spent 44 minutes discussing the union’s proposal in the afternoon. Given the complexity and importance of the issues, the Board found, and the D.C. Circuit agreed, that the employer was unjustified in walking away from the negotiations after less than an hour of negotiations on the union’s proposal, following only a handful of meetings in the prior months. The process was not exhausted, and the employer was wrong to declare impasse.

This case illustrates the importance of following through on the process of negotiations, and firmly establishing no possibility of compromise, before an employer may declare the parties to be at an impasse that would then allow it to take unilateral action. The failure to do so can have significant economic consequences – in this case, the employer was ordered to rescind the unilateral changes, to make current employees whole for any loss of benefits, to make the withheld contributions to the Fund, and to reimburse employees for any resulting expenses they incurred, as well as additional monetary damages to employees who had retired after the employer switched out of the Fund.