NLRB clarifies Employers cannot make unilateral changes during negotiations, unless strict conditions are met

On August 26, 2023, the NLRB issued Wendt Corporation overruling Raytheon Network Centric Systems, in which the Trump Board broke with decades of established precedent by drastically reinterpreting the rule established by the Supreme Court in NLRB v. Katz. Four days later, the NLRB announced Technocap LLC, 372 NLRB No. 136, which overrules the aspects of Raytheon that Wendt did not address.  The NLRB’s restoration of the Katz rule eliminates a major employer-friendly loophole and represents a significant victory for organized labor.

In Katz, the Supreme Court explained the limits of an employer’s ability to take unilateral actions during ongoing contract negotiations.  Although such actions “will rarely be justified,” the Katz Court nevertheless held an employer’s actions are lawful where they are (1) “in line with the company’s long-standing practice” and (2) are not discretionary.

In Wendt, the employer laid off bargaining unit members while the parties were engaged in negotiations for their first collective-bargaining agreement.  The employer argued that its actions were lawful because they were in conformity with its past practice of instituting layoffs during downturns in business.  The employer had instituted layoffs five times in the previous eighteen years, all of which were prior to the Union’s certification.

First applying the Raytheon standard, the NLRB found that the employer had failed to establish that it had implemented layoffs with sufficient frequency and regularity for its unilateral action to constitute a continuation of the status quo.  The Board then found that Raytheon misapplied Katz.  By giving employers more latitude to make unilateral changes during CBA negotiations, Raytheon was contrary to the Board’s statutory mandate to encourage collective bargaining.  Given the well-established harm that unilateral changes pose to collective bargaining and the Board’s obligation to abide by controlling Supreme Court precedent, the Board overturned Raytheon and reaffirmed the Katz standard for past practice defenses.

In Technocap, the Board considered the same issue where the employer’s past practice was developed pursuant to an expired CBA’s management rights clause.  The Board again concluded that Raytheon’s holding undermined and destabilized collective bargaining by providing employers with free license to make unilateral changes to the terms and conditions of employment during negotiations and forcing unions to bargain to regain terms of employment lost as a result of these post-expiration changes.  The Board held that such past practices do not make an employer’s unilateral action during ongoing collective bargaining lawful, overruling the final aspect of Raytheon remaining after Wendt.

The reinstatement of the Katz rule has significant implications for the labor movement. By restricting an employer’s ability to take unilateral action during collective bargaining negotiations, Wendt and Technocap preserve the preexisting terms and conditions of employment, and allow unions and workers to focus their efforts on bargaining.

For further questions regarding status quo changes during bargaining, contact your labor law counsel.