Hunton Employment & Labor Perspectives

Raytheon Network Centric Systems, 365 NLRB No. 161 (Dec. 15, 2017) (“Raytheon”), is one of several decisions issued this month by the National Labor Relations Board’s (the “Board”) new Republican majority which reverse Obama-era precedent.  Raytheon overrules the Board’s decision E.I. du Pont de Nemours, 364 NLRB No. 113 (2016) (“DuPont”), which limited the changes employers can make unilaterally in a union environment.  Raytheon clarifies the degree to which employers may rely on past practice to make unilateral changes to terms of employment once a collective bargaining agreement has expired, and, more specifically, offers welcome guidance to employers with regard to continuation of health benefits under those circumstances.

As the United States Supreme Court held many years ago in NLRB v. Katz, 369 U.S. 736 (1962), and as the Board consistently has reinforced, employers may not unilaterally change terms and conditions of employment that are mandatory subjects of bargaining.  In DuPont, a collective bargaining agreement expired, and the employer made several changes to employee health benefits before a new contract was in effect, believing it was authorized to do so pursuant to the management-rights clause in the expired agreement, which was part of the “status quo.” The Board in DuPont concluded that the employer had violated the NLRA by failing to bargain over the health care modifications. It held that, in the context of an expired agreement, any change which involves the employer’s exercise of discretion is unlawful (requiring notice and the opportunity for bargaining), as is any change based on past practices.

At issue in Raytheon was the company’s practice of making annual changes to the medical benefits it offered to union and non-union workers alike.  Collective bargaining agreements covering the years 2000-2012 allowed the company to amend the terms of the health benefit plan. Consequently, over that period, the medical plan changed in some respect each year: increased premiums, different medical options, changes in deductibles and co-payments.  The union did not object to, or seek to bargain over, any of these changes.

The union sought to change this practice at the end of the 2009-2012 contract term.  It proposed that health benefits remain fixed throughout the four-year term of the contract, rather than being modified annually, as in the past.  The company would not agree, and the contract expired in April 2012 while the parties still were negotiating.  Bargaining unit employees continued to work under the status quo terms and conditions of employment.

In the fall of 2012, following its usual practice, the company unrolled its new medical benefit plan, which (as in previous years) differed from the prior year’s plan in several respects.  Relying on DuPont, the union filed an unfair labor practice charge alleging a failure to bargain under Section 8(a)(5) of the National Labor Relations Act (“the Act”). It argued that, in the absence of a collective bargaining agreement, the company’s modification of medical benefits was a mandatory subject of bargaining, even if the company had a well-established pattern of making these changes over the years.

The Board overruled the DuPont decision, which it characterized as “fundamentally flawed” and inconsistent with the Board’s longstanding precedent in this area.  While an employer may not unilaterally change the status quo as to a mandatory subject of bargaining, “actions constitute a “change” only if they materially differ from what has occurred in the past.” 365 NLRB No. 161, p. 10.  An established past practice – whether or not derived from the management rights clause last in effect -- may become part of the status quo. The Board in Raytheon also rejected the notion that any action involving an employer’s discretion will always constitute a change in terms and conditions of employment.  The relevant consideration is whether the particular challenged action constitutes a substantial departure from past practice, regardless of how that past practice developed.

Employers may not evade their duty to bargain under Sections 8(d) and 8(a)(5) of the Act if the union requests bargaining on a mandatory subject; this duty to bargain “is not affected by an employer’s past practice.” Id. p. 11.  Thus, a company cannot ignore a union’s request to bargain over a change in past practice, but it will not violate the Act by acting consistently with that past practice pending the outcome of such bargaining.