NLRB Considers Employer’s Obligation to Maintain Terms of Employment When One Union Replaces Another

In Cofire Paving Corporation v. Local 175 United Plant & Production Workers, 359 NLRB No. 10 (Sept. 28, 2012), a group of employees were represented by Local 1175, Laborers International Union of North America, AFL-CIO (Local 1175) for many years. The collective bargaining agreement between Local 1175 and the employer, Cofire Paving Corporation (Cofire), required that Cofire make payments to welfare, pension, and annuity funds sponsored by Local 1175. Upon the expiration of the collective bargaining agreement, Cofire ceased making payments to the benefit funds.

Approximately one month after the expiration of the collective bargaining agreement, an election was held in which Local 1175 and Local 175 United Plant & Production Workers Union (Local 175) were on the ballot. Following the election, Local 175 was certified as the exclusive bargaining representative for the represented Cofire employees, replacing Local 1175.

Following the certification, Local 175 sent a proposed memorandum of understanding to Cofire and requested bargaining. The proposed memorandum of understanding stated that the terms of the expired collective bargaining agreement with Local 1175 would remain in effect until a new agreement was reached with Local 175. Cofire’s president refused to sign the proposed memorandum of understanding on two grounds. First, he did not believe that Cofire could legally contribute to the benefit funds sponsored by Local 175, which were not yet operational. Second, he did not believe that it was economically feasible to continue operating the company under the terms of the expired collective bargaining agreement.

However, to ensure that the represented employees had health insurance pending the parties reaching a new collective bargaining agreement, Cofire’s president offered to enroll them in Cofire’s health insurance plan for non-unionized employees. Although Local 175 proposed that Cofire contribute to the union’s welfare fund at the same rate it had contributed to Local 1175’s fund, Cofire’s president did not accept this proposal, fearing the contribution was too low to provide the coverage that the union promised. The represented employees ultimately accepted Cofire’s offer under protest, arguing that although the plan cost Cofire more money, it was inferior to Local 1175’s plan in terms of coverage and out-of-pocket expenses.

The General Counsel of the National Labor Relations Board (NLRB or Board) ultimately filed a complaint alleging that Cofire committed various unfair labor practices while bargaining with Local 175, including most significantly, failing to maintain existing terms and conditions of employment pending the new collective bargaining agreement. On September 28, 2012, the Board majority (Chairman Pearce and Member Griffin) agreed, finding that Cofire unlawfully failed to maintain existing contribution levels until it had fulfilled its bargaining obligation. Specifically, the majority reasoned that even though Cofire could no longer contribute to Local 1175’s funds, Cofire was required to continue calculating the contributions according to formulas established by the previous collective bargaining agreement and set aside those contributions for the benefit of the employees, pending the new collective bargaining agreement. The majority held that by failing to set aside these contributions, Cofire enriched itself at the expense of the employees.

Board Member Hayes disagreed with that finding. First, Hayes noted that the majority’s decision was improper because the NRLB General Counsel had not argued that Cofire unlawfully failed to set aside contributions on the employees’ behalf. Second, Hayes pointed out that Cofire was precluded from continuing to contribute to Local 1175’s funds after the represented employees elected a new union. Accordingly, it was impossible for Cofire to maintain the status quo with respect to those contributions.

Employers need to be mindful that a change in employee representation does not necessarily mean an immediate change in employer contributions. The practical advice from Cofire Paving is that employers should set aside contributions based on formulas utilized under the previous collective bargaining agreement, even if that collective bargaining agreement was reached with another union.