Recent lockouts of NFL referees and NHL players have once again brought labor disputes to the forefront of the media.  Additionally, the lockout of sugar beet processing workers in Minnesota and North Dakota by American Crystal Sugar has continued to drag on for over a year now.  These recent situations highlight a relatively uncommon occurrence in labor disputes – the lockout.

In a labor dispute there are two main economic weapons – the strike and the lockout.  If employees choose to withhold their services and strike, the employer has the right to hire replacement workers.  Replacements may be permanent or temporary, depending upon whether the employees are striking over disputed contract terms or whether the employees are striking in protest of an employer’s unfair labor practice.  Strikers generally may not collect unemployment benefits while they are on strike.  When the employees end their strike, the employer is required to rehire them if there were temporary replacements.  If the employer hired permanent replacements, the strikers are placed on a preferential recall list and may return to work as the permanent replacements resign or are terminated, however many months or years that may take.

In contrast, a lockout occurs when an employer refuses to allow employees to come to work.  The lockout may be offensive to put pressure on employees to accede to the employer’s contract demands, or it may be defensive in response to a threatened strike by employees.  In either situation, the employer may only hire temporary replacements.  Additionally, because the employees are readily available to work and are unable to do so through no fault of their own, locked out employees are generally eligible for unemployment benefits.  The employer must also inform the locked out employees and their union what contract demands the employer has that will end the lockout, if agreed to by the union.

Both the strike and the lockout are akin to high-stakes poker in a labor dispute.  There is risk and the potential for great losses in either event.  Lockouts, however, are far more unusual than strikes, in part because of the greater costs to the employer and the inability to hire permanent replacements.  In a lockout situation, the employer faces potentially high costs associated with replacement workers, added security and transportation costs for replacements, and unemployment benefit costs, among others.  Despite the greater costs, some employers may view a lockout as a viable tool in a labor dispute, particularly where the employer has the economic ability to pay for a lockout, or where an employer may be concerned about its vulnerability to a strike negatively impacting the employer’s ability to meet customer demands, or to care for patient needs in the health care industry.

Takeaway:  The decision to lockout employees during a labor dispute has many significant legal, financial, and practical implications.  An employer contemplating a lockout in a labor dispute would be well served by consulting with counsel far in advance of contract expiration to consider all of the pros and cons of such an action.  A lockout should not be undertaken lightly as miscalculations or rash actions could prove to be very costly.