Reductions in Force in the Unionized Environment - Traps for the Unwary

By Ian Meklinsky, Fox Rothschild LLP

In today’s tough economic times, many employers are looking to cut costs. One of the most significant cost centers for employers is its workforce. While looking to cut overhead may be a necessary evil to keep an organization afloat, employers must take careful aim when implementing a Reduction in Force (RIF) especially in the unionized environment.


In the unionized environment, in addition to the anti-discrimination laws that normally need to be carefully considered in developing and implementing a RIF, employers need to look to their collective bargaining agreements (CBA) and the National Labor Relations Act (NLRA) to determine if they have additional contractual and statutory obligations before developing or implementing a RIF.


An employer’s CBA may either restrict the organization’s ability to implement a RIF or it may provide broad discretion to the organization in this regard. Careful attention must be paid to any contractual provisions regarding management rights, seniority and layoff. CBAs may also provide for mandatory notice provisions greater to those required by either federal WARN or any state-specific mass lay-off or plant closing law. The union may have also negotiated into the CBA additional severance obligations (either with or without mandatory severance agreement language) that need to be taken into account when developing a severance pay program in the context of a broader RIF.


If the organization’s obligations under a CBA were not enough to trouble those developing and implementing a RIF in the unionized environment, the NLRA may place additional obligations upon the employer. For those unfamiliar with collective bargaining, employers may bargain with a union about any legal subject. Some legal subjects are permissive subject of bargaining (e.g., the inclusion of supervisors in the CBA) while others are mandatory (e.g., generally anything to do with wages, hours and other terms and conditions of employment). Depending upon the reason for the RIF, the NLRA may impose an obligation on the employer to bargain with the union before implementing the RIF (i.e., decisional bargaining) and in most cases the NLRA imposes an obligation on the employer to bargain after the decision is made (i.e., effects bargaining).


As to decisional bargaining, unionized employers need to understand that, in general, if a decision to layoff or close a facility is being made for purely economic reasons, it will not have an obligation to bargain with the union before making the decision to implement the decision. However, on the other hand, if the cost of labor (e.g., wages, benefits, overtime, etc.) are or could be a factor in the decision making process and the union could - theoretically – agree to concessions that would permit the employer to reduce or eliminate its planned RIF, the employer has an obligation under the NLRA to bargain with the union before making its final RIF decision. The body of case law under the NLRA in the RIF arena is vast and is not susceptible to a “cookie cutter” approach; thus, in each and every RIF situation in the unionized environment the employer should seek counsel to determine their statutory rights and obligations. In any event, regardless of whether an employer has a decisional bargaining obligation, unionized employers in the RIF setting have an obligation to engage in effects bargaining. These negotiations often focus on amount of severance and other post-employment benefits as well as possible changes to the CBA to deal with future RIFs.


The failure of an employer to adhere to its obligations under a CBA or the NLRA cannot be understated. Employers who fail to abide by their CBAs may subject themselves to grievances and ultimately arbitration (a non-judicial forum) and be liable for damages including back pay, benefits, and potential reinstatement for the displaced workers. Additionally, employers that take unilateral action in contravention of the CBA may also find themselves faced with an Unfair Labor Practice Charge (ULP) and have to respond to same before the National Labor Relations Board (NLRB). Finally, the failure of an employer to engage in decisional and/or effects bargaining may be met with the filing of a ULP by the union before the NLRB also opening the door for potential back pay, benefits and reinstatement obligations. Employers need to tread carefully in these waters.