A key litigated issue in Erie Brush & Manufacturing Corp. v. NLRB was whether the employer, Erie Brush & Manufacturing Corporation, had reached a bona fide bargaining impasse in its negotiations with the Service Employees International Union, Local 1 (union).

Erie began negotiations with the union on June 28, 2005, under an order from the NLRB and enforced by the US Court of Appeals for the Seventh Circuit. The parties agreed to negotiate noneconomic issues first, and after meeting eight times between June 28, 2005, and March 31, 2006, reached agreement on all noneconomic issues except union security and arbitration of grievances. The union insisted on including union security and arbitration clauses in the collective bargaining agreement, while Erie was opposed to arbitration and wanted an open shop. At the March 31 meeting, representatives for both parties agreed they were at an impasse on those two issues, although they mentioned the possibility of mediation in the future.

The parties continued to correspond over the next few months but ultimately did not meet. Although the union's negotiator stated he had "some give" on the arbitration issue, he declined to provide a proposal in response to Erie's request, and Erie's negotiator stated there was no point in meeting unless union security was negotiable. The union's negotiator suggested they negotiate economic issues in the meantime and return to noneconomic issues later, but Erie's negotiator felt further negotiations were pointless unless the union changed its position on those key noneconomic issues.

On June 16, the union threatened to file an unfair labor practice (ULP) charge, and the parties scheduled a meeting for July. However, before the parties could meet, Erie received a handwritten document signed by 18 of its 21 bargaining unit employees, stating that they did not want to be represented by the union. In light of the petition, Erie withdrew its recognition of the union and canceled the pending meeting.

The union brought ULP charges and the NLRB's General Counsel issued a complaint. An NLRB administrative law judge (ALJ) found that Erie had violated the NLRA by refusing to bargain with the union between May 10 and July 21, 2006, and held that since this refusal to bargain tainted the employees' decertification petition, Erie had also violated the NLRA by withdrawing its recognition of the union. Erie filed exceptions to the ALJ's findings, and the three-member panel heading the NLRB's judicial functions (Board) affirmed the ALJ's decision and ordered Erie to:

Member Hayes dissented, stating that since the parties were at a bona fide impasse on union security and arbitration, he would dismiss the General Counsel's complaint.

Erie petitioned the US Court of Appeals for the District of Columbia Circuit for review, arguing that:

The NLRB cross-petitioned for enforcement of its order.

On November 27, 2012, the DC Circuit issued an opinion overturning the Board's decision, finding it was not supported by substantial evidence in the record. The court did not reach Erie's challenge to the Board's remedy.

Although under the NLRA an employer may not refuse to bargain, the obligation to bargain is temporarily suspended when the parties reach a lawful impasse, and an impasse on a single critical issue can create an impasse on the entire agreement. Under CalMat Co., a party asserting impasse based on a single issue must show:

On the first factor, the Board held that Erie failed to establish that a good faith bargaining impasse existed before May 10, relying on the union's negotiator's statement that he would continue discussing the issues with the union and finding that the union's suggestion of mediation showed its positions on union security and arbitration were "gradually softening." The court disagreed, noting the evidence overwhelmingly showed the parties were at an impasse on March 31, since:

The Board did not dispute the second factor, that the issues involved were critical to the agreement. On the third factor, however, the Board found that even if the parties had reached an impasse, Erie failed to show that the impasse led to a breakdown in negotiations, relying again on the union's negotiator's assurance in May that he would continue to discuss the issues with the union. The Board suggested that if negotiations had continued, the union's negotiator may have received some flexibility on the union security and arbitration issues, especially with a mediator's assistance. The court disagreed, finding the Board's "rank speculation" that the parties might have reached an agreement if negotiations had continued could not form the basis of a sound administrative finding.

Finally, the Board found that even if the parties had reached a temporary impasse, it was broken before Erie agreed in June to meet with the union. The court again disagreed, finding that the union's negotiator's May 31 statement did not show circumstances had changed enough to break the impasse. Similarly, his statement in June that he had "some give" on arbitration did not show changed circumstances regarding the impasse on either union security or arbitration, since he said nothing about the former and did not offer a proposal on the latter.

The court did not reach the union's claim at oral argument that impasse could not be found if the parties have not negotiated over economic issues, although the court stated it seriously doubted the correctness of the union's contention.

The DC Circuit's decision in Erie Brush & Manufacturing Corp. v. NLRB underscores the differences between the NLRB's and the court's views of what constitutes a legitimate bargaining impasse. In light of this decision, employers should be aware that although the NLRB may find they have not reached a bona fide impasse, the DC Circuit (to which any employer, regardless of its location, may petition for review of an adverse Board decision) may reach the opposite conclusion on review (29 U.S.C. § 160(e) (2011)).