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Sixth Circuit Holds CBA Proposals Not Midterm Changes to Master Agreement and Lockout Lawful, Vacating NLRB Decision
Practical Law Legal Update w-003-2241 (Approx. 7 pages)
Sixth Circuit Holds CBA Proposals Not Midterm Changes to Master Agreement and Lockout Lawful, Vacating NLRB Decision
by Practical Law Labor & Employment
| Published on 30 Aug 2016 • USA (National/Federal) |
In Kellogg Company, the US Court of Appeals for the Sixth Circuit vacated a National Labor Relations Board (NLRB) decision that found an impasse and lockout unlawful and held that a proposed change to a supplementary collective bargaining agreement (CBA) did not constitute mid-term modifications to a master agreement.
On August 19, 2016, in Kellogg Company, the US Court of Appeals for the Sixth Circuit vacated an NLRB decision that found an impasse and lockout unlawful and held that a proposed change to a supplementary collective bargaining agreement (CBA) did not constitute mid-term modifications to a master agreement because the proposals did not alter any express terms in the master agreement. In addition, the "effective modification" theory imposed by the NLRB in this case had been disclaimed in prior Board decisions. ( (6th Cir. Aug. 19, 2016).)
Background
Kellogg Company maintained cereal plants in four locations including Memphis, Tennessee. Kellogg's employment relationship with employees at these locations was governed by:
- A master CBA between Kellogg and the Bakery, Confectionery, Tobacco Workers, and Grain Millers International Union and local unions of that international union (which was due to expire in October 2015).
- Supplemental CBAs between Kellogg and each of the four local unions representing employees at the respective four plants. The Memphis supplemental CBA with Local Union 252-G (252-G Supplement) had expired in October 2013.
The master CBA provided for uniform wages, benefits, and overtime premiums for regular employees at each of the four locations. It expressly prohibited Kellogg from negotiating provisions in the supplemental CBAs that contradicted the master CBA.
The 252-G Supplement allowed Kellogg to hire "casual employees" to relieve regular employees from extended work schedules in certain situations. In September 2013, shortly before the 252-G Supplement expired, Kellogg proposed changes to the successor 252-G Supplement that were intended to expand the use of casual employees and effectively meant that all new hires in Memphis would be casual employees going forward. Specifically, Kellogg proposed to:
- Redefine the term "casual employee" to mean "any employee hired by Kellogg to perform production or any other bargaining unit work."
- Provide to casual employees many of the same professional seniority and opportunities provided to regular employees, but at lower wage rates and benefits than regular employees enjoyed.
Negotiations on these proposals continued through mid-October 2013. With the parties at impasse, Kellogg delivered its "Last/Best Offer" and informed Local 252-G that it would lock employees out if the union refused to accept its proposals. When the union rejected the proposals in writing the day after the 252-G Supplement expired, Kellogg declared an impasse and locked out all of the bargaining unit employees who worked at the Memphis facility.
The union filed unfair labor practice (ULP) charges against Kellogg for bargaining to impasse and threatening to lock out and locking out employees. After an NLRB administrative law judge (ALJ) decision to which the union and the NLRB General Counsel filed exceptions, a majority of the Board held that Kellogg:
- Violated Section 8(a)(5) and (1) of the NLRA by:
- insisting to impasse on proposals that were midterm modifications to the master CBA and, therefore, non-mandatory subjects of bargaining (Smurfit-Stone Container Enters., 357 N.L.R.B. No. 144 (Dec. 22, 2011); Chesapeake Plywood, Inc., 294 N.L.R.B. 201 (1989)); and
- threatening to lock out employees if the union did not accede to its unlawful bargaining proposals (Rangaire Co., 309 N.L.R.B. 1043 (1992)).
- Violated Section 8(a)(3) and (1) by locking out employees, as employees would reasonably view the lockout as retaliation for the union trying to engage in good-faith collective bargaining (Royal Motor Sales, 329 N.L.R.B. 760 (1999)).
For more information on the Board's decision, see Legal Update, Proposals for Local CBA Would Change Master CBA Midterm; Impasse and Lockout Were Unlawful: NLRB.
Outcome
The Sixth Circuit vacated the Board's decision, granted Kellogg's petition for review, and denied the cross-application for enforcement, concluding that:
- Kellogg's proposal to alter the supplementary agreement did not directly modify the express terms of the Master Agreement.
- The Board's prior decision, Milwaukee Spring, disclaimed the "effective modification" theory imposed by the Board in this case (under this theory, a proposal to modify a supplementary CBA can effectively modify the master agreement even if there is no direct modification of a master agreement) (268 N.L.R.B. 601 (1984)).
The Sixth Circuit noted that:
- It interprets CBAs like contracts, looking first at the plain language for the parties' clear intent (Moore v. Menasha Corp., 690 F.3d 444, 451 (6th Cir. 2012)).
- Parties are not obligated to bargain over modifications of an unexpired CBA. Insisting on collectively bargaining in such circumstances is unlawful.
- Attempting to alter an unexpired master agreement by modifying the terms of a supplemental local agreement violates the NLRA.
- The Board previously ruled, in Milwaukee Spring, that:
- unless wages or benefits are directly discussed in the proposed new contract terms, the terms cannot be implied to effectively address the wages and benefits;
- if an employer wanted to draft a provision requiring work to remain in a particular facility, it would have done so; and
- there can be no effective modification under Section 8(d) of the NLRA.
- Other Board decisions have also required that the Board find a specific contract term modified by the proposal and prohibited the Board implying a term into the agreement (see FMC Corp, 290 N.L.R.B. 483, 484–85 (1988); Ad-Art, Inc., 290 N.L.R.B. 590, 607-08 (1988); Suburban Transit Corp., 276 N.L.R.B. 15, 18 (1985)).
- Many cases that the Board referenced on appeal were:
- inapplicable to the effective modification theory because they included express terms that were directly, not effectively, modified by an employer proposal (see St. Vincent Hosp., 320 N.L.R.B. 42, 42-45 (1995); E.G. & G. Rocky Flats, Inc., 314 N.L.R.B. 489, 493, 497 (1994)); or
- inapposite because they did not deal with the issues that were raised in Kellogg (see Don Lee Distributor, Inc. v. NLRB, 145 F.3d 834, 843-44 (6th Cir. 1998); Stroehmann Bakeries, Inc., 287 N.L.R.B. 17, 19 (1987)).
The Sixth Circuit found that:
- There was no specific term in the Master Agreement modified by Kellogg's proposal, and the proposal applied only to the supplemental Memphis Agreement. In addition, preceding Board decisions have disclaimed effective modification theory.
- The Board erred in concluding that Kellogg's proposal would erase the Master Agreement's distinction between regular and casual employees. Aside from the limited purpose of wages, the Master Agreement did not define a distinction between the two types of employees.
- While the Board argued that Milwaukee Spring was distinguishable from Kellogg and did not reference Milwaukee Spring in its decision, the Board was required to consider and explain its departure from its own precedent and failed to do so.
Practical Implications
The Sixth Circuit's decision in Kellogg provides guidance to parties engaging in bargaining on local agreements that supplement national/master agreements. The decision clarifies that a proposal to alter a local CBA does not modify the master CBA unless it directly proposes alterations to the terms of the master agreement. Employers should still avoid making or insisting on proposals that expressly contradict the master agreement or that may be interpreted as modifying the master agreement in the middle of its term. However, the Sixth Circuit found that it was not unlawful for an employer to insist to impasse or impose a lockout to support proposals for a supplemental agreement that did not directly modify the master agreement.
To see a summary of a sample Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) CBA and compare it with other unions' CBAs, visit the What's Market Collective Bargaining Agreements Database.
Update: On October 26, 2016, in Kellogg Company, the Sixth Circuit released an Amended Opinion granting enforcement of the Board's petition and affirming its decision as to the information-request violations, due to Kellogg's failure to contest the Board's finding that Kellogg violated Section 8(a)(5) and (1) of the NLRA by refusing to provide the union with specific information requests ( (6th Cir. Oct. 26, 2016)).