The National Labor Relations Board has reinstated a previous long-standing rule, holding that union employers do not have to bargain over “changes” to employment terms as long as they are consistent with past practice. In a case involving Raytheon Network Centric Systems, the Board held that employer actions do not represent a “change” if they are similar in kind and degree with an established practice that the employer followed in taking comparable unilateral actions. It concluded that it makes no difference whether the past practice arose from a collective bargaining agreement or before any contract was in place, nor does it matter if the action involved some degree of discretion.
The 3-2 decision was one of several end-of-the-year decisions by the Board’s new majority, in which it overturned previous decisions and reinstated interpretations that the Board previously took. The Raytheon decision overturned a 2016 decision, returning to a long-standing rule that the Board had followed since 1964.
As a basic matter, the National Labor Relations Act mandates that union employers bargain over “wages, hours, and other terms and conditions of employment” as mandatory subjects of bargaining. In 1962, the United States Supreme Court interpreted the NLRA as requiring that union employers must refrain from making a unilateral “change” to mandatory bargaining subjects, without first giving notice to the union and the opportunity to bargain. Since 1964, the Board held that a union employer did not have to give notice and the chance to bargain when taking a unilateral action, as long as the action was consistent with an established past practice. If based on a past practice, the action thus was not a “change” requiring notice and bargaining.
In its 2016 decision in E.I. du Pont de Nemours, 364 NLRB No. 113 (2016), the NLRB abandoned its 52-year-old rule. It significantly broadened what constituted a “change” requiring notice and the opportunity to bargain. There, regardless of how many times an employer had taken an action or over how long a period, the Board held that taking the action again constituted a “change” if a union agreement authorized the action, but the contract no longer was in effect. The DuPont majority also concluded that notice and the opportunity to bargain always were required if the employer’s action involved some type of “discretion.”
The DuPont standard was not easily workable. To determine whether an action constituted a “change,” it did not simply compare past actions with the new action. It involved looking at whether a collective bargaining agreement existed previously, whether it contained a provision authorizing management to take the action, and whether a new agreement contained the same language. If not, then the employer’s action constituted a “change” requiring notice and the chance to bargain, even if they continue what an employer did previously and without any substantial departure from past practice. Again, if the employer’s past and present actions involved any type of “discretion,” its action always involved a “change,” regardless of whether it continued past practice.
The Board’s new majority overruled DuPont as “fundamentally flawed.” It concluded that the previous decision was “inconsistent” with the NLRA, “distorts the long-understood, commonsense understanding of what constitutes a ‘change,’ and contradicts well-established Board and court precedent.” The Board held that the DuPont rule “makes no sense” and could require reviewing contract provisions going back decades. According to the Board in the new Raytheon decision, DuPont’s required scrutiny of past contracts used “a standard with which most employers will find it impossible to comply,” and “it clearly requires meticulous scrutiny into myriad details.”
Going forward, the Raytheon decision concluded that in determining whether a union employer’s action involves a “change,” and thus triggers the obligation to give the union notice and the opportunity to bargain, “the only relevant factual question is whether the employer’s action is similar in kind and degree to what the employer did in the past.” The circumstances under which a past practice developed no longer matter. Instead, “an employer’s past practice constitutes a term and condition of employment that permits the employer to take actions unilaterally that do not materially vary in kind or degree from what has been customary in the past.”
The Board emphasized, however, that employers still have the duty otherwise to bargain over all mandatory subjects of bargaining, upon request, unless an exception applies. It also held that its new decision in Raytheon – reinstating the Board’s previous rule – applies retroactively in all cases.
Raytheon involved an employer’s unilateral decision to make changes to union employees’ health benefits. The collective bargaining agreements provided for coverage under the employer’s health benefits plan, with the employer allowed to make changes. Between 2001 and 2012, the employer made annual changes to benefits in accordance with the plan and the contracts, including premium increases and changes to benefits. After the union agreement expired, the employer made another annual change, as it had done in the past. The Board held that doing so was proper, as the employer simply continued its past practice. As the Board determined, “All of the changes were typical of the changes one regularly sees from year to year in cafeteria-style benefits plans. Changes made from year-to-year did not materially vary in kind or degree from one year to the next.” The changes thus constituted “a past practice and a term and condition of employment privileging” the employer “to make further changes in costs and/or benefits,” as long as “those further changes did not materially vary in kind or degree from what had been customary in the past.” Finally, the Board concluded that the fact that the past practice developed under contractual language no longer in effect did not detract from the existence of a past practice.
The NLRB’s new Raytheon decision reinstates a commonsense rule that had been in place for 52 years until 2016. Most likely, union employers will find relief in the return to the previous rule, as it will be much more clear when they can rely on an established past practice to take an action, rather than having to give the union notice and the opportunity to bargain over a change. The overruled DuPont standard was difficult and unworkable to apply. The Raytheon decision may be appealed into court, but likely will be upheld and enforced in court. In the meantime, the NLRB will apply the Raytheon decision rather than DuPont. Even so, as a good practice, employers are reminded that it makes sense to consult with counsel to determine whether they must provide notice and the opportunity to bargain, as mandatory subjects of bargaining are not always clear.