EMPLOYER LIABLE FOR MILLIONS FOR FAILURE TO NOTIFY STATE AGENCIES

An interstate water company is on the hook for millions of dollars after the NLRB held that the employer had declared an impasse in contract negotiations and changed employee benefits without first informing state agencies that there was a labor dispute in progress.   The NLRB’s decision in American Water Works Co., 361 NLRB No. 3 (07/31/14), is an important reminder to employers to ensure that all statutory obligations are met throughout the bargaining process.

American Water Works has bargained with the UWUA since at least 1980, and deals with 66 employee units in 15 different states.  An agreement negotiated in 2005 was set to expire on July 31, 2010, when the company’s director of labor relations asked UWUA for early negotiations.  The parties held several preliminary meetings beginning in June, 2009, but bargaining began in earnest in May, 2010.  In August, 2010, a company official called the Federal Mediation and Conciliation Service to seek “assistance,” however, the company did not file an FMCS form, nor did they otherwise notify the federal agency in writing about the labor dispute.  The Company did it notify any state mediation agencies, either orally or in writing. 

Eventually, negotiations failed to produce an agreement and the employer gave UWUA a proposal it described as its last, best and final offer.  The company implemented the terms of the offer on January 1, 2011, which modified the terms of the existing medical, disability and retiree health plans.  As a result of this implementation, the UWUA filed an unfair labor practice charge.

The ALJ found that American Water had failed to notify mediation agencies about the labor dispute in the multiple states it operated.  The ALJ rejected the employer’s argument that notice was not required as no single state would have jurisdiction over the matter, and stated that the company’s conduct, including its push for early negotiations, showed that it was the initiating party with an obligation to give all notices under Section (8)(d)(3) of the NLRA.  While the ALJ conceded that the company’s oral notice to the FMCS was sufficient to satisfy its 8(d)(3) duty to advise the federal mediation agency, he found the employer to be in violation of its duty to notify appropriate state agencies.  The ALJ stated that the company’s only obligation was to inform a state agency of the dispute, but it failed to take any action with regard to any state agency and therefore failed to comply with Section 8(d)(3).  Thus, because of this failure to comply with the requirements of the Act, the unilateral implementation of changes in employee benefits violated the company’s duty to bargain in good faith with the UWUA.  

As a remedy, the Board ordered the company to bargain in good faith with the UWUA, to rescind its changes in employee benefits if the union requested rescission, and to make all unit employees whole for any losses suffered as a result of the changes.  The decision affects approximately 3,200 workers in 15 states, and the make-whole remedy ordered by the Board may leave American Water liable for “several million dollars.”  

This decision by the NLRB demonstrates the pitfalls that await employers who do not comply with the notice requirements of the Act.  Employers should be sure to check with their labor counsel to ensure that all requirements of the Act are met throughout the bargaining process. 

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