Health Plan Change at Impasse Lawful Despite Plan’s Reservations of Extensive Employer Discretion; Employer Agreed not to Exercise Discretion without Bargaining with Union: NLRB General Counsel's Office | Practical Law

Health Plan Change at Impasse Lawful Despite Plan’s Reservations of Extensive Employer Discretion; Employer Agreed not to Exercise Discretion without Bargaining with Union: NLRB General Counsel's Office | Practical Law

The Office of the General Counsel of the National Labor Relations Board (NLRB) released an advice memorandum concluding that Columbia Sussex Corporation d/b/a Anchorage Hilton lawfully unilaterally implemented a new health plan following an impasse in collective bargaining. Under McClatchey Newspapers, Inc., an employer may not implement its last offer when parties reach an impasse in collective bargaining if that last offer includes terms that grant the employer extensive discretion to make unilateral changes to terms subject to mandatory bargaining. However, because the employer in this case expressly indicated that it would hold back on making any discretionary changes to the plan absent collective bargaining, the NLRB's Division of Advice concluded that the McClatchey exception did not apply and the unilateral change was lawful.

Health Plan Change at Impasse Lawful Despite Plan’s Reservations of Extensive Employer Discretion; Employer Agreed not to Exercise Discretion without Bargaining with Union: NLRB General Counsel's Office

by Practical Law Labor & Employment
Published on 10 Feb 2015 • USA (National/Federal)
The Office of the General Counsel of the National Labor Relations Board (NLRB) released an advice memorandum concluding that Columbia Sussex Corporation d/b/a Anchorage Hilton lawfully unilaterally implemented a new health plan following an impasse in collective bargaining. Under McClatchey Newspapers, Inc., an employer may not implement its last offer when parties reach an impasse in collective bargaining if that last offer includes terms that grant the employer extensive discretion to make unilateral changes to terms subject to mandatory bargaining. However, because the employer in this case expressly indicated that it would hold back on making any discretionary changes to the plan absent collective bargaining, the NLRB's Division of Advice concluded that the McClatchey exception did not apply and the unilateral change was lawful.
On January 30, 2015, the Division of Advice at the NLRB's Office of the General Counsel released an advice memorandum dated December 19, 2014, recommending that an NLRB regional office dismiss an unfair labor practice (ULP) charge against Columbia Sussex Corporation d/b/a Anchorage Hilton. The Division of Advice found that Anchorage Hilton did not violate Section 8(a)(5) of the NLRA when it unilaterally implemented a new health plan following an impasse in collective bargaining. Under McClatchey Newspapers, Inc., an employer may implement its last offer when parties reach an impasse in collective bargaining unless that last offer includes terms that grant the employer extensive discretion to make unilateral changes to terms subject to mandatory bargaining (321 N.L.R.B. 1386 (1996)). However, because the employer in this case expressly indicated that it would hold back on making any discretionary changes to the plan (or exercise rights reserved to it under the plan) absent collective bargaining, the Division of Advice concluded that the McClatchey exception did not apply and the unilateral change of health plans was lawful.
Anchorage Hilton had operated the hotel of the same name since 2005. A collective bargaining agreement with the UNITE HERE Local 878 expired in 2008. Since then, Anchorage Hilton and the union have engaged in various rounds of collective bargaining, including a proposal by Anchorage Hilton to move employees from their existing health plan to Anchorage Hilton's company health and benefit plan.
In September of 2013, after Anchorage Hilton notified the union that it would implement its proposal to move employees to its plan on October 1, 2013, the union filed an unfair labor practice charge alleging that Anchorage Hilton failed to bargain about this mandatory subject when it imposed the unilateral change. Anchorage Hilton promptly agreed not to follow through with its plan without bargaining with the union.
Anchorage Hilton soon issued a new health and benefits plan proposal that again provided coverage for employees, with a plan administrator having broad powers in administering the plan. After fruitless negotiations, Anchorage Hilton informed the union in February of 2014 that due to the clear impasse, it planned to implement its health and benefit plan proposal on April 1. Although the union disputed that the parties were at an impasse, Anchorage Hilton moved forward with enrolling employees in its company health and benefit plan. However, it also informed the union in June of 2014 that it would not make any unilateral changes to the new health plan without notifying and bargaining with the union. Since implementing the plan, Anchorage Hilton has not made any changes to the plan, or exercised any discretion reserved to it under the plan.
Region 19 of the NLRB sought the Division of Advice's opinion on the union's ULP charge, recognizing that:
  • An employer may generally implement its last proposal when parties reach an impasse in collective bargaining.
  • Under the McClatchey exception to the general rule, if the employer’s last proposal includes terms that grant the employer extensive discretion to make unilateral changes in a mandatory bargaining area (for example, wages or health benefits) that would effectively nullify the union’s ability to bargain, it may not unilaterally impose that proposal.
The Division of Advice concluded that:
  • Anchorage Hilton did not violate Section 8(a)(5) when it unilaterally implemented its health and benefit proposal.
  • Anchorage Hilton's action did not fall within the McClatchey exception because Anchorage Hilton agreed not to make changes to the Plan before engaging in collective bargaining.
In instructing the region to dismiss the charge, the Division of Advice noted that:
  • A genuine impasse had been reached that permitted the unilateral implementation of new employment terms absent an agreement.
  • Anchorage Hilton's unilateral changes were reasonably comprehended prior the impasse.
  • The McClatchey exception, which arose in a case where an employer's proposal gave it extensive discretion about wage rates, could have applied if Anchorage Hilton had unilaterally implemented a health plan that reserved broad discretionary powers for itself (KSM Indus., 336 N.L.R.B. 133 (2001)).
  • Unlike in KSM Industries, where the employer later changed the health benefits from those set out in its proposal, Anchorage Hilton did not implement any discretionary changes to the health plan or exercise any discretion under the plan that would make the McClatchey exception apply.
Therefore, the Division of Advice found that Anchorage Hilton did not violate Section 8(a)(5) by unilaterally implementing the health and benefit plan proposal. The Division of Advice recommended that the charge be dismissed, absent withdrawal.

Practical Implications

Advice memoranda are not binding precedent on the panel (Board) heading the judicial functions of the NLRB. However, this advice memorandum provides guidance to employers dealing with complexities of:
  • Negotiating exits from union-affiliated health and welfare plans.
  • Implementing a new employer-sponsored health insurance plan, which often reserves rights to the employer, as plan administrator, to modify or amend contribution and benefit terms periodically.
Employers should note that the Division of Advice approved of the unilateral change of health insurance in part because the plan is self-insured and the employer as plan administrator could ensure that it would not exercise discretion or rights reserved to the plan administrator without first engaging in collective bargaining with the union. The Division of Advice noted that if the employer unilaterally implemented a change of health insurance plans that gave a third-party administrator similarly broad discretion to modify or amend contribution or benefit terms, that change would arguably violate the NLRA.