Opinion ID: 794344
Heading Depth: 2
Heading Rank: 2

Heading: Whether the Company Disavowed Its Claim of Inability to Pay

Text: 41 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. 7 See Lakeland II, 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, 76 S.Ct. 753. 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. 42 A company must make it unmistakably clear to a union that it has abandoned its plea of poverty. Id. at 963. 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 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, 76 S.Ct. 753 (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. 43 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. 44 The Board majority's opinion that those statements withdrew the Company's claim of an inability to pay is not 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. 45 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 was poor, the rent rolls were down, and the profits were less than they had been. Id. 46 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. 47 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 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. 48 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, 76 S.Ct. 753. 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. 49 Petition GRANTED.