FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

INTERNATIONAL CHEMICAL WORKERS 

UNION COUNCIL OF THE UNITED No. 04-72270 FOOD & COMMERCIAL WORKERS

INTERNATIONAL AND NLRB No. ITS LOCAL 1C,

Petitioner, 31-CA-25761 

v. ORDER AND

AMENDED NATIONAL LABOR RELATIONS OPINION BOARD,

Respondent. 

On Petition for Review of an Order of the

National Labor Relations Board

Submitted December 8, 2005*

Pasadena, California

Filed April 28, 2006

Amended June 30, 2006

Before: Harry Pregerson, Robert E. Cowen,** and

Sidney R. Thomas, Circuit Judges.

Opinion by Judge Pregerson

*This panel unanimously finds this case suitable for decision without

oral argument. See Fed. R. App. P. 34(a)(2). 

**The Honorable Robert E. Cowen, Senior United States Circuit Judge

for the Third Circuit, sitting by designation. 

7169
COUNSEL

Randall Vehar, Trial Counsel, and Robert W. Lowrey,

ICWUC/UFCW Legal Department, Akron, Ohio, for the petitioner.

Aileen A. Armstrong, Deputy Associate General Counsel,

NLRB, Washington, D.C., for the respondent.

ORDER

The petition for rehearing is granted without further oral

argument. 

The Opinion filed on April 28, 2006, and appearing at 447

F.3d 1153, is amended as follows: 

At 447 F.3d at 1165, the sentence currently reading “Petition GRANTED.” shall be replaced with the following: “The

Union’s petition for review is GRANTED, and the matter is

REMANDED to the National Labor Relations Board with

directions to reinstate the ALJ’s January 24, 2003 Decision

and Order.” 

Petition for rehearing GRANTED; opinion AMENDED;

and the case REMANDED with instructions. No further petitions for panel rehearing or rehearing en banc may be filed.

OPINION

PREGERSON, Circuit Judge:

Petitioner International Chemical Workers Union Council

of the United Food and Commercial Workers International

and Its Local 1C (“Union”) petitions this court for review of

INT’L CHEMICAL WORKERS UNION v. NLRB 7173
a decision by the National Labor Relations Board (“Board”).

This case arises out of events that took place while the Union

and American Polystyrene Corporation (“Company”) were in

negotiations for a successor collective bargaining agreement.

Applying the rule announced by the Supreme Court in NLRB

v. Truitt Mfg. Co., 351 U.S. 149 (1956), the Board held that

the Company bargained in good faith, even though it refused

a request by the Union to turn over its financial documents.

Am. Polystyrene Corp., 341 N.L.R.B. No. 67, 2004-2005

NLRB Dec. ¶ 16,656 (Mar. 30, 2004). We hold that substantial evidence does not support the Board’s conclusion that the

Company bargained in good faith. The Company clearly

asserted an inability to pay that, under Truitt, required it to

disclose corroborative documents to the Union. Furthermore

the Company never effectively retracted its claim that it could

not afford to pay for the Union’s proposals. We have jurisdiction pursuant to 29 U.S.C. § 160(f), and we grant the petition

for review. 

I. Factual Background

The Company manufactures plastics at its Torrance, California facility. During the relevant period, the Union represented the Company’s eight-person production and

maintenance unit and was party to a 1999-2002 collective bargaining agreement covering those employees. 

On April 22, 2002, the Company and the Union held their

first meeting to negotiate a successor collective-bargaining

agreement. Union representative Jeffrey Ferro (“Ferro”) presented the Union’s proposals, which included increases in

wages and company contributions to employee 401(k) plans.

In response, at the April 23rd bargaining session, Company

General Manager Carolyn Tan (“Tan”) proposed smaller

wage increases, discontinuation of company 401(k) contributions for an unspecified period, and the elimination of

company-provided meals. 

7174 INT’L CHEMICAL WORKERS UNION v. NLRB
At the April 29th bargaining session, the Company proposed to discontinue its 401(k) fund matching for one-year.

After a discussion of the Company’s counterproposals, Ferro

asked if “things were really that bad” that the Company could

not continue to match the 401(k) plans, provide meals, or provide a meaningful wage increase. Tan replied that “things are

tough.” Ferro asked, “Are you saying that you can’t afford the

Union’s proposals?” Tan replied, “No, I can’t. I’d go broke.”

At the end of the April 29th session, Ferro composed the

following letter on his laptop computer and hand delivered it

to Tan:

Based on your responses on April 23 and today to

Union Proposals . . . and the fact that you claim that

things are tough and the Company cannot afford

these items, the Union demands access to review the

Company’s books. Please let us know when they

will be available for our review, so we can make

arrangements for our accountant[’]s schedule. 

On April 30th, in a hand-delivered letter to the Union, Tan

responded: 

I am in receipt of your letter dated April 29, 2002,

in which you request access to the Company’s

books. I am rejecting this request. While I have told

you that we are a small company and times are

tough, at no time have I ever told you we cannot

afford your proposals. Rather, in these uncertain economic times, we believe that we need to take a more

cautious approach than what you propose. I hope this

clears up any confusion that you have regarding our

responses to your proposals. 

At the next bargaining session on May 2nd the parties discussed the Company’s financial condition again. During the

INT’L CHEMICAL WORKERS UNION v. NLRB 7175
session, Ferro asked if business was really that bad. Tan

replied, “Have you seen sales lately?” 

The topic of the Company’s financial health came up again

during the next bargaining session, on May 14th. Tan stated

that the Company was not taking the position that it was experiencing financial hardship. Ferro asked why the Company

had proposed “all these take aways.” Tan, responding specifically to the inquiry about the Company’s meal plan, stated

that other companies were not providing meal coverage. By

hand-delivered letter to Tan dated May 14th, Ferro wrote:

We have reviewed our notes and our understanding

of what has been said by you . . . and it is clear that

you said you could not afford the Union[’]s proposals or to continue paying meal allowances or matching money on the employee’s 401K. During one

session our notes reflect the following dialog: 

Union: Are things that bad that you can’t

continue to pay meal allowances

and continue to match the 401K

plan? 

Carolyn: Things are tough. 

Union: So are you saying you cannot

afford the Union[’]s proposals? 

Carolyn: No I can’t. I’d go broke. 

Therefore, by this statement, your proposals to

freeze 401K matches for one year, to discontinue

meal allowance and your efforts to have nonbargaining unit employees, the Union again demands

access to review the Company’s Financial Records.

Failure to comply will result in the filing of Unfair

7176 INT’L CHEMICAL WORKERS UNION v. NLRB
Labor Practice Charges with the National Labor

Relations Board. 

Tan responded by letter the same day:

I am in receipt of your letter dated May 14, 2002,

that I received today in which you assert that I told

you that American Polystyrene could not afford the

union proposals. You further contend that your notes

reflect that I said, “No I can’t. I’d go broke.” I never

said these words or anything similar. As I wrote you

in my last letter, I have never stated that we could

not afford any of your proposals. The fact of the

matter is that after I informed you that times are

tough, you asked me, “Are things that bad?” I

responded, “Have you looked at sales.” Because I

have never told you that we cannot afford any of

your proposals, it would be inappropriate for me to

allow you access to our financial records, and hence,

I am denying your request. 

On June 18th, the Union filed an unfair labor practice

charge with the Board alleging, in part, that the Company

refused to supply information to the Union in violation of

Section 8(a)(5) of the National Labor Relations Act (“Act”),

29 U.S.C. § 185(a)(5). 

On August 1st, Tan notified the Union that due to unimproved sales and rising inventories, the Company planned to

stop production and lay off some employees beginning

August 30th, for approximately ninety days. On August 30th,

the Company laid off six of the eight unit members. 

On September 4th, the Union again requested access to the

Company’s financial records. By letter dated September 6th,

the Company again refused the Union’s request to see its

financial records. 

INT’L CHEMICAL WORKERS UNION v. NLRB 7177
II. Administrative Proceedings

A. Before the ALJ 

The Administrative Law Judge (“ALJ”) found that the

Company violated Sections 8(a)(5) and (1) of the Act when

it “refus[ed] to provide the [Union] with requested information to substantiate a claim that it [could not] afford to agree

to bargaining demands.” The ALJ held that Tan “specifically

stated during negotiations that the company could not afford

the union’s proposals”

1

 and then repeatedly denied making the

statement. The ALJ found that the totality of the Company’s

conduct was consistent with a claim of inability to pay: (1) the

Company had “proposed reducing contractual benefits”; (2)

the Company “said it would ‘go broke’ if it met the Union’s

proposals”; and (3) the Company “instituted an economic layoff of most of the unit employees.” Further, “even while

denying the ‘go broke’ statement, [Tan had] said that ‘things

are tough.’ ” Relying on Lakeland Bus Lines, Inc. (Lakeland

I), 335 N.L.R.B. 322 (2001), the ALJ found that those actions,

which followed Tan’s “No, I can’t. I’d go broke” statement,

could not constitute a retraction of the “I’d go broke” statement, and thus, that the Company had not shed its duty to disclose corroborative evidence. The ALJ held that by refusing

to provide the Union with the requested financial information,

the Company committed an unfair labor practice under Sections 8(a)(5) and (1) of the Act. 

B. Before the Board 

On appeal, a 2-1 majority of the Board reversed the ALJ.

First, the Board held that Tan’s statement that the Company

would “go broke” was not necessarily a claim of inability to

pay. Moreover, the Board determined that the Company’s

1The ALJ credited Ferro’s testimony that Tan had said the Company

would “go broke” if it acceded to the Union’s demands. Neither party disputes the ALJ’s finding. 

7178 INT’L CHEMICAL WORKERS UNION v. NLRB
response to the Union’s request for information “unequivocally advised the Union that the [Company’s] ability to pay

for the Union’s bargaining proposals was not in question.”

Because, in the Board’s opinion, the Company had clarified

its bargaining position within a day of the alleged inability to

pay, the Company had absolved itself of any duty to provide

the requested financial information. Accordingly, the Board

found nothing in Tan’s denials to suggest that the Company

was bargaining in bad faith. The Union appealed. 

III. Analysis

The Board “has the primary responsibility for developing

and applying national labor policy.” Glendale Assocs., Ltd. v.

NLRB, 347 F.3d 1145, 1150 (9th Cir. 2003). So long as the

Board’s interpretation is “rational and consistent” with the

Act, its rulings are afforded “considerable deference.” Id. at

1151. The Board’s order will be upheld on appeal if “its findings of fact are supported by substantial evidence and if it correctly applied the law.” NLRB v. Int’l Bhd. of Elec. Workers,

Local 48, 345 F.3d 1049, 1053 (9th Cir. 2003).2

[1] During the course of negotiations, “[g]ood-faith bargaining necessarily requires that claims made by either bargainer should be honest claims.” Truitt, 351 U.S. at 152. In

Truitt, the Supreme Court held that if an employer asserts an

inability to pay for a union’s demands, “it is important enough

2Citing Penasquitos Village, Inc. v. NLRB, 565 F.2d 1074 (9th Cir.

1977), the Union contends that a less deferential standard of review is

appropriate in this case. The Penasquitos Village court held that “a

reviewing court will review more critically the Board’s findings of fact if

they are contrary to the administrative law judge’s factual conclusions.”

Penasquitos Village, Inc., 565 F.2d at 1078 (emphasis added). Here the

Board did not explicitly or implicitly overrule any of the ALJ’s factual

findings. Indeed, Penasquitos Village recognized that the “ ‘substantial

evidence’ standard is not modified in any way when the Board and [an

ALJ] disagree.” Id. at 1076 (citation omitted). The substantial evidence

standard is appropriate in this case. 

INT’L CHEMICAL WORKERS UNION v. NLRB 7179
to require some sort of proof of its accuracy.” Id. at 152-53.

Thus, a “refusal to attempt to substantiate a claim of inability

to pay increased wages may support a finding of a failure to

bargain in good faith.” Id. at 153. 

The Truitt Court explicitly limited its holding, however,

stating that 

[w]e do not hold . . . that in every case in which economic inability is raised as an argument against

increased wages it automatically follows that the

employees are entitled to substantiating evidence.

Each case must turn on its particular facts. The

inquiry must always be whether or not under the circumstances of the particular case the statutory obligation to bargain in good faith has been met. 

Id. at 153-54. Therefore, here we consider whether the Company’s actions as a whole satisfied its statutory obligation to

bargain in good faith.3See NLRB v. W. Wirebound Box Co.,

3Cases from other circuits have stated that the Supreme Court’s cautionary language has a very limited effect. Those cases hold that “[a]lthough

there is language in . . . Truitt that might support [the position that a

refusal to supply properly requested financial information is not per se bad

faith bargaining], the general consensus today is that ‘for all practical purposes’ a refusal to disclose alone constitutes a failure to bargain in good

faith.” NLRB v. Harvstone Mfg. Corp., 785 F.2d 570, 579 (7th Cir. 1986)

(citations omitted); see also Teleprompter Corp. v. NLRB, 570 F.2d 4, 9

n.2 (1st Cir. 1977). The Board affirmed this interpretation in 1991. See

Ameron Pipe Prods., 305 N.L.R.B. 105, 109 n.7 (1991) (“Although the

[Supreme] Court limited its holding, the case has become widely accepted

as establishing for all practical purposes such an ‘automatic’ rule.”). 

Harvstone, Teleprompter, and Ameron Pipe Products have never been

overruled or criticized for using a simple, mechanical application of Truitt

when a company asserts an inability to pay. Nevertheless, this court must

adhere to the Supreme Court’s mandate and thus, should accord the relevant language appropriate deference. See Mesa Verde Constr. Co. v. N.

Cal. Dist. Council of Laborers, 861 F.2d 1124, 1129-31 (9th Cir. 1988)

(en banc) (holding that circuit court should defer to Supreme Court’s interpretation of the Act). Moreover, those cases are out-of-circuit authority,

which are not binding on us. 

7180 INT’L CHEMICAL WORKERS UNION v. NLRB
356 F.2d 88, 91 (9th Cir. 1966) (analyzing ALJ decision in

light of Truitt cautionary language); see also Lakeland Bus

Lines, Inc. v. NLRB (Lakeland II), 347 F.3d 955, 961 (D.C.

Cir. 2003); Rivera-Vega v. ConAgra, Inc., 70 F.3d 153, 159

n.5 (1st Cir. 1995); Torrington Extend-A-Care Employee

Ass’n v. NLRB, 17 F.3d 580, 588 (2d Cir. 1994). 

A. Whether the Company’s assertions constituted a

claim of inability to pay 

We first consider whether the Company’s actions triggered

a duty that required the Company to disclose its financial

records. We must determine whether the “essential core of the

[company’s] bargaining posture as a whole, as expressed to

the Union, was grounded in assertions amounting to a claim

that it could not economically afford” to pay for the Union’s

proposals. Rivera-Vega, 70 F.3d at 160 (quoting The Shell

Co., 313 N.L.R.B. 133, 133 (1993)).4 We ascertain the Com4

In Western Wirebound Box Co., this court extended the Truitt rule to

cover employer denials of wage increases based on claims of “competitive

disadvantage.” 356 F.2d at 90-91. We held that Truitt is “not confined to

cases where the employer’s claim is that he is unable to pay the wages

demanded by the union.” Id. at 90. We concluded that “[w]e see no reason

why, under the same rationale, an employer who insistently asserts that

competitive disadvantage precludes him from acquiescing in a union wage

demand, does not have a like duty to come forward, on request, with some

substantiation.” Id. at 91. 

Until 1991, the Board and other circuits generally agreed with the Western Wirebound Box Co. expansion of Truitt. See, e.g., United Steelworkers

of Am., AFL-CIO, Local 5571 v. NLRB, 401 F.2d 434, 436 (D.C. Cir.

1968); Int’l Tel. & Tel. v. NLRB, 382 F.2d 366, 370-371 (3d Cir. 1967);

NLRB v. Celotex Corp., 364 F.2d 552 (5th Cir. 1966); but see Facet

Enters., Inc. v. NLRB, 907 F.2d 963, 980 (10th Cir. 1990) (citing Harvstone Mfg. Corp., 785 F.2d at 575) (noting that distinction exists between

claims of competitive disadvantage and claims of inability to pay). In

1991, the Board changed course in Nielsen Lithographing Co., 305

N.L.R.B. 697 (1991). There, the Board first recognized a distinction

between claims of “inability to pay,” which give rise to the disclosure

duty, and claims of “competitive disadvantage,” which do not. Id. at 701.

INT’L CHEMICAL WORKERS UNION v. NLRB 7181
pany’s intent from “the substance of the employer’s bargaining position, not the formal words used by the employer.” Id.

at 159. Indeed, it is often recognized that “[a]lthough no

magic words are required to express an inability to pay, the

words and conduct must be specific enough to convey such a

meaning . . . .” United Paperworkers Int’l Union v. NLRB,

981 F.2d 861, 865 (6th Cir. 1992) (quoting Harvstone Mfg.

Corp., 785 F.2d at 575); see also New York Printing Pressmen Local 51 (Milbin Printing) v. NLRB, 538 F.2d 496, 500

(2d Cir. 1976) (“So long as the Employer’s refusal reasonably

interpreted is the result of financial inability to meet the

employees’ demand rather than simple unwillingness to do so,

the exact formulation used by the Employer in conveying this

message is immaterial.”). 

“The test for determining whether an employer has communicated such an

inability is whether it asserts that it ‘cannot,’ as opposed to ‘will not,’ pay

a particular wage demand.” Facet Enters., Inc., 907 F.2d at 980 (citing

Harvstone Mfg. Corp., 785 F.2d at 575). This reasoning has been adopted

by many other circuits. See Torrington Extend-A-Care Employee Ass’n, 17

F.3d at 588-90; United Steelworkers of Am., AFL-CIO-CLC, Local Union

14534 v. NLRB, 983 F.2d 240, 244-45 (D.C. Cir. 1993); Graphic

Commc’ns Int’l Union, Local 508 O-K-I, AFL-CIO v. NLRB, 977 F.2d

1168, 1171 (7th Cir. 1992); see also ConAgra, Inc. v. NLRB, 117 F.3d

1435, 1438-42 (D.C. Cir. 1997) (detailing the history of the Board’s

“change of heart”). 

In the instant case, we need not address the way the law has diverged

from the rule announced in Western Wirebound Box Co.; this case does

not turn on the distinction between claims of inability to pay versus claims

of competitive disadvantage. Moreover, even if this case called for such

analysis, this panel may not overrule a prior decision of this court. See In

re Complaint of Ross Island Sand & Gravel, 226 F.3d 1015, 1018 (9th Cir.

2000). And though we cite heavily from out-of-circuit cases that recognize

the distinction, we do not intend to suggest that Western Wirebound Box

Co. was wrongly decided. Indeed, at least one judge has called the dichotomy into question. See ConAgra, Inc., 117 F.3d at 1447-50 (Wald, J., concurring) (“I believe that the Board’s Neilsen rule has weakened the

‘gravitational field of Truitt’ too severely for that opinion to retain its

vitality, and hope that the Board will see fit to reexamine its Nielsen rule

in the near future, and adopt an alternative more consistent with the spirit

of Truitt and the purposes of the Act.” (citation omitted)). 

7182 INT’L CHEMICAL WORKERS UNION v. NLRB
Here, at the April 29th bargaining session, Ferro asked, “So

are you saying you cannot afford the Union’s proposals?” Tan

responded, “No, I can’t. I’d go broke.” The Board concluded

that Tan’s “go broke” statement did not “[rise] to the level”

of an inability to pay and therefore, that the statement did not

trigger the attendant Truitt duty to disclose. We take issue

with the Board’s conclusion for two reasons. First, the Board

too quickly dismissed the fact that “I’d go broke” represented

an inability to pay. Second, the Board’s analysis was too narrow and ignored the rest of the statements made by the Company during negotiations. 

1. When Tan said, “No I can’t. I’d go broke” she

asserted an inability to pay

We disagree with the Board’s cursory analysis of Tan’s

statement. The Board limited its analysis of Tan’s “No, I

can’t. I’d go broke” comment to two isolated statements in its

decision. First, the Board stated that the comment was made

“during the heat of bargaining.” Later, the Board noted that

the statement was made “orally, during the heat of a negotiating session, not reflectively in a letter.” Based on those observations alone, the Board determined that Tan’s assertion that

the Company would “go broke” did not “[rise] to the level of

a claimed inability to pay.” 

Purporting to adhere to the Supreme Court’s warning

against automatically applying the Truitt disclosure requirement, the Board seemed to apply its own per se rule. The

Board held, in essence, that a plea of poverty made during the

“heat of bargaining” could never create an employer’s duty to

disclose corroborative financial documents. The Board misinterprets Truitt’s cautionary language, through which the Court

warned that not every employer that claimed an inability to

pay was required to disclose supporting evidence. See Truitt,

351 U.S. 153-54. The Court did not hold that oral claims of

inability to pay made during bargaining would never trigger

the Company’s duty to disclose, but that is what the Board

INT’L CHEMICAL WORKERS UNION v. NLRB 7183
seems to imply. The Supreme Court was clear that any

claimed inability to pay followed by a refusal to substantiate

that inability “may support a finding of a failure to bargain in

good faith.” Id. at 153 (emphasis added). 

Here, the Board ignored the obvious fact that Tan proclaimed the Company’s inability to pay for increased benefits.

Ferro asked, “So are you saying you cannot afford the

Union’s proposals?” In response, Tan replied, “No, I can’t.

I’d go broke.” Although “no magic words are required to

express an inability to pay,” United Paperworkers Int’l

Union, 981 F.2d at 865, the Company could not have used

simpler words to declare that its financial situation was the

cause of its refusal. 

[2] An asserted inability to pay, whether made in writing or

orally, is the cornerstone of an alleged Truitt violation. Clear

statements of a company’s inability to pay cannot be cast

aside as abruptly as the Board did here. The Company’s statements of inability to pay, i.e., “No, I can’t. I’d go broke,” coupled with its refusal to substantiate, strongly, but do not

conclusively, suggest that the company bargained in bad faith,

regardless of whether the statement was made during heated

negotiations. See Lakeland I, 335 N.L.R.B. at 324-25 (holding

oral statements by company sufficient to require disclosure of

relevant financial information under Truitt); Fairhaven

Props., Inc. (Central Mgmt. Co.), 314 N.L.R.B. 763, 769

(1994) (holding that where company made statements constituting inability to pay orally at bargaining sessions, company

had duty to show its books to the union). We therefore hold

that substantial evidence does not support the Board’s conclusion that the statement — “No I can’t. I’d go broke” — itself

was not representative of an inability to pay. 

2. The Board failed to look at the “circumstances

of the particular case”

It is clear to us that when Tan said “No, I can’t. I’d go

broke,” she communicated to the Union that the Company

7184 INT’L CHEMICAL WORKERS UNION v. NLRB
was unable to pay for the Union’s proposals. Viewing that

statement in light of the Company’s subsequent letters and

actions further convinces us that the Company’s actual position was one of inability to pay. The Board looked at Tan’s

statement in isolation, and ignored the Company’s other statements, as well as the context of the negotiations. The Board

should have considered the company’s communications in full

to determine whether the company’s “refusal reasonably

interpreted [was] the result of financial inability to meet the

[Union’s] demand.” New York Printing Pressmen and Offset

Workers Union No. 51, 538 F.2d at 500; see also Truitt, 351

U.S. at 153-54 (explaining that analysis must focus on the

“circumstances of the particular case”). 

That the Company continued to plead poverty is supported

by Tan’s subsequent statements to the Union.5 These communications should be considered when determining the “context” of the Company’s bargaining position. See Lakeland II,

347 F.3d at 962-63 (criticizing Board for failing to consider

“the entire course of negotiations in determining whether the

Company was truly pleading an inability to pay”); Harvstone

Mfg. Corp., 785 F.2d at 583 (Swygert, J., concurring in part

and dissenting in part) (commenting that statements of company viewed within entire bargaining context could lead

union rationally to conclude that company was asserting

financial inability to pay). Each of the Company’s communications, whether oral, in writing, or through action, implied

that the company was economically incapable of meeting the

Union’s requests. 

[3] In her first attempt to deny that she had said “No, I

can’t. I’d go broke,” Tan stated, “times are tough . . . in these

uncertain economic times, we believe that we need to take a

more cautious approach than what you propose.” This conveyed that the Company was in a precarious position; it did

5We analyze Tan’s purported disavowal of her “I’d go broke” statement

below in Section III.B. 

INT’L CHEMICAL WORKERS UNION v. NLRB 7185
not want to be more cautious, it needed to be. Also, as Tan

later admitted, in response to the Union’s requests for

increased wages and benefits, she had asked, “Have you

looked at sales?” This question suggests that in light of the

Company’s poor sales figures, the Company could not reasonably have entertained the Union’s requests for increased

wages and benefits. Finally, Tan sent an e-mail to Ferro stating that due to “unimproved sales and rising inventories,” the

Company was planning to lay off workers. Tan was again

focusing on the severe impact its decreased sales were having

on the Company. 

[4] We also consider a company’s conduct when evaluating

the actual substance of its position. See United Paperworkers

Int’l Union, 981 F.2d at 865; see also The Shell Co., 313

N.L.R.B. at 133 (considering significant the fact that company

had expressly referred to steps taken to address its survival,

namely that it had instituted a hiring freeze and implemented

an early retirement plan). Here, two actions by the Company

merit attention. First, during bargaining, Tan proposed reducing benefits, specifically the 401(k) contributions.6

 Tan’s

stated reasons for reducing the 401(k) contributions were that

“things were tough,” and that the Company would “go broke”

which, as noted, suggest that the Company could not continue

paying for the contributions. Second, the Company threatened, and then instituted, an economic layoff of most of the

unit employees. The layoff was directly tied to the financial

instability of the Company. Thus, the Company did not only

state that it could not pay for more benefits; its actions were

those of a company that could not sustain itself if forced to

pay for the Union’s proposals. 

6The Company also proposed eliminating the employee meal plan, but

at one point justified that proposed reduction by stating that other companies were not providing the same plan. Because, in an abundance of caution, we do not rest our ultimate conclusion on any claims of competitive

disadvantage by the Company, see n.4, supra, we do not consider the meal

plan reduction proposal in determining whether the Company’s representations constituted an inability to pay. 

7186 INT’L CHEMICAL WORKERS UNION v. NLRB
[5] The obvious interpretation of the Company’s conduct

was that its financial health was to blame for its refusal to pay

for the Union’s proposals. The Company opened the door to

its plea of poverty when Tan first said “No, I can’t. I’d go

broke,” and never wavered from that position in its later communications. In our opinion, there is insufficient evidence to

support the Board’s conclusion that the Company did not

assert an inability to pay. The record shows that, as the ALJ

concluded, the Company continued to assert an inability to

pay and thus, under Truitt, should have provided corroborative evidence in support of its bargaining position. 

B. Whether the Company Disavowed Its Claim of

Inability to Pay 

[6] The Board has recognized that a company can shed its

obligation to furnish financial information if it truthfully and

properly communicates a disavowal of its previous assertions

of inability to pay.7See Lakeland I, 347 F.3d at 963-64;

Fairhaven, 314 N.L.R.B. at 769. This rule fits nicely with the

Supreme Court’s instruction that the “inquiry must always be

whether or not . . . the statutory obligation to bargain in good

faith has been met.” Truitt, 351 U.S. at 153-54. Thus, if a disavowal is not made “disingenuously or in bad faith,” a company is absolved of its duty to disclose its financial

documents. Lakeland II, 347 F.3d at 964. 

[7] A company must make it “unmistakably clear” to a

union that it has abandoned its plea of poverty. Id. at 963.

7For clarity, and because other courts have done so, we consider separately whether the Company retracted its claim of inability to pay. See

Lakeland I, 347 F.3d at 963-64 (noting that Board first concluded

employer asserted an inability to pay, then considered whether there was

an adequate retraction); Fairhaven, 314 N.L.R.B. at 769. We note, however, that the relevant inquiry is simply an extension of the analysis in the

previous section of this opinion; we continue to consider the Company’s

statements in context as well as “the circumstances of [this] particular

case.” Truitt, 351 U.S. at 153. 

INT’L CHEMICAL WORKERS UNION v. NLRB 7187
Because the analyses are intertwined, as with an initial claim

of inability to pay, we should examine “the substance of the

employer’s bargaining position, not the formal words used by

the employer,” when deciding whether or not a retraction

occurred. Rivera-Vega, 70 F.3d at 159. Consequently, once an

inability to pay has been asserted, we must be wary about taking all of the employer’s statements at face value. Indeed,

companies may be “very aware of Board decisions that deal

with the different consequences of claiming current inability

to pay existing wages,” and that a company may “play[ ]

semantical games” in an attempt to retreat from its previous

position. The Shell Co., 313 N.L.R.B. at 138. As Truitt held,

“[g]ood-faith bargaining necessarily requires that claims made

by either bargainer should be honest claims.” Truitt, 351 U.S.

at 152 (emphasis added). Therefore, it would undercut the

policy of Truitt if we deferred to every purported “retraction”

by an employer and failed to question whether such statements were honestly made. 

In this case, the Company made a number of statements in

response to the Union’s requests for financial information. In

the April 30th letter, Tan wrote: “While I have told you that

we are a small company and times are tough, at no time have

I ever told you we cannot afford your proposals. Rather, in

these uncertain economic times, we believe that we need to

take a more cautious approach than what you propose.” In her

May 14th letter, responding to the Union’s allegation that she

had claimed the Company would “go broke,” she stated, “I

never said these words or anything similar. . . . [Y]ou asked

me, ‘Are things that bad?’ I responded, ‘Have you looked at

sales.’ ” Finally, in her September 6th letter, Tan wrote: “. . .

I have already stated that I did not say the words that you had

quoted. Once again I reject your request to see financial

records for the reasons set forth in my letter dated May 14,

2002.” 

[8] The Board majority’s opinion that those statements

withdrew the Company’s claim of an inability to pay is not

7188 INT’L CHEMICAL WORKERS UNION v. NLRB
supported by substantial evidence. Although at first glance the

statements disavow any inability to pay, the Board failed to

evaluate the “essential core of the [company’s] bargaining

posture as a whole,” Rivera-Vega, 70 F.3d at 159, and ignored

the context of the statements. Tan’s letters purported to disclaim the precise words “I’d go broke,” but at the same time,

they affirmed the Company’s position that it could not pay for

the Union’s demands. While on one hand, Tan said “at no

time have I ever told you we cannot afford your proposals,”

she nevertheless maintained that “times are tough.” She

emphasized the effect that decreased sales were having on the

Company by saying, “Have you looked at sales,” and proposing reduced benefits in response. The Company also threatened, and then instituted, an economic layoff because of its

poor financial condition. In essence, the totality of the Company’s conduct “set the stage for negotiations by explaining

in broad strokes just what bad shape [the company] was in.”

The Shell Co., 313 N.L.R.B. at 138. It was against this backdrop that the Company purported to disavow its initial inability to pay. We hold that in spite of these “disavowals,” the

thrust of the Company’s position remained unchanged — it

continued to claim it could not pay for the Union’s proposals.

This case is distinguishable from Fairhaven and Lakeland

II, in which the Board and D.C. Circuit, respectively, held that

companies had effectively disclaimed their earlier pleas of

poverty. In Fairhaven, the employer claimed an inability to

pay in the second bargaining session with the union. See 314

N.L.R.B. at 768. After refusing to turn over its financial documents, at the fourth bargaining session, the company provided

a written document to the union that stated, “The Company

does not claim inability to pay.” Id. at 768-69. The Board held

that the statement communicated a retraction to the union, but

only “in light of the Union’s admission” that it was “obvious”

that the employer was no longer pleading poverty. Id. at 769

(emphasis added). The Board suggested that the retraction

would not have been sufficient absent the union’s admission,

because the employer “continued to claim that the economy

INT’L CHEMICAL WORKERS UNION v. NLRB 7189
was poor, the rent rolls were down, and the profits were less

than they had been.” Id.

Lakeland II also dealt with a situation in which the union

conceded that the employer had altered its bargaining position. There, the company made statements that it was “trying

to bring the bottom line into the black,” that acceptance of the

final offer would enable the company to “retain [the employees’] jobs and get back in the black in the short term,” and

that “[t]he future of Lakeland depends on it.” Lakeland II, 347

F.3d at 958. Denying the union’s requests for information, the

company’s attorney responded: “[T]o set the record straight,

I advised that the Company was losing money, not that the

company’s financial condition precluded it from agreeing to

the Union wage proposal. No claim of financial inability,

explicit or implicit, was made by myself or any company official.” Id. at 963. The attorney later wrote that “[a]t no time did

I or any Company official claim a present inability to pay or

a prospective inability to pay during the life of the contract

being negotiated.” Id. The D.C. Circuit, disagreeing with the

Board, held that those clarifying statements made it clear to

the union that the company was not pleading poverty. See id.

Moreover, the court emphasized that the union communicated

its own understanding that the company’s position had

changed — the union had circulated a leaflet to Lakeland’s

customers, stating that the company “admitted that they were

not, in fact, under any hardship from a loss of revenue, but

instead, chose not to offer any increases in wages.” Id. 

The instant case is unlike Fairhaven and Lakeland II

because the Union never acknowledged that it understood the

Company’s position to be anything other than an inability to

pay. In fact, the Union maintained that, after reviewing its

records, “it [was] clear that [the Company] said [it] could not

afford the Union’s proposals . . . .” Furthermore, Fairhaven

suggests that in the absence of clear acknowledgment by a

union, a “retraction” is not effective if the employer continues

to represent its position as one of an inability to pay. See

7190 INT’L CHEMICAL WORKERS UNION v. NLRB
Fairhaven, 314 N.L.R.B. at 769 (“Although Frank continued

to claim that the economy was poor, the rent rolls were down,

and the profits were less than they had been, the Union

acceded to the Respondent’s claim that it was no longer

pleading poverty.” (emphasis added)). Here, the Company

continued to say that the Company faced “uncertain economic

times,” that “times [were] tough,” and that decreased sales

were forcing the company to institute a layoff. Those representations belied Tan’s proclamations that the Company had

never asserted an inability to pay; she not only had asserted

an inability to pay, she actually maintained that position

throughout the bargaining process. She denied that she had

ever uttered the specific words “I’d go broke,” but the remainder of her communications never implied a change in the substance of her position. In short, after she said “No, I can’t. I’d

go broke,” she resorted to “semantical games” in an attempt

to retreat from her previous claim of an inability to pay. The

Shell Co., 313 N.L.R.B. at 138. 

[9] In conclusion, it is clear that “[i]n the circumstances

surrounding the negotiations,” the Company’s purported disavowals “amounted to nothing more than a clumsy effort to

shed a statutory responsibility to substantiate a bargaining

position . . . namely, that financially it could not meet the

Union’s contractual demands.” C-B Buick, Inc., 206 N.L.R.B.

6, 8 (1973). We conclude, therefore, that substantial evidence

does not support the Board’s holding that the Company bargained in good faith because it attempted to disavow its bargaining position while repeatedly reasserting that very

position. Tan’s denials that the Company was claiming an

inability to pay were not “honest claims.” Truitt, 351 U.S. at

152. Accordingly, the Company bargained in bad faith when

it asserted an inability to pay, failed to turn over the financial

documents requested by the Union, and then improperly tried

to avoid its duty to disclose.

The Union’s petition for review is GRANTED, and the

matter is REMANDED to the National Labor Relations Board

INT’L CHEMICAL WORKERS UNION v. NLRB 7191
with directions to reinstate the ALJ’s January 24, 2003 Decision and Order. 

7192 INT’L CHEMICAL WORKERS UNION v. NLRB