Company Ordered to Disclose Proprietary Information to Union

By Allen Smith Jan 10, 2013
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Customer lists and market studies are the type of proprietary information that companies typically hold close to the vest. But a company was held to have unlawfully refused to disclose precisely this information to a union during collective bargaining negotiations, according to an opinion by the U.S. Circuit Court of Appeals for the D.C. Circuit.

When KLB Industries in Bellefontaine, Ohio, entered bargaining negotiations 10 days before an old agreement expired in 2007, it called for substantial wage concessions, citing competitive pressures. The company said it was facing increased competition from Asian manufacturers, rising production costs and decreased productivity. It also expressed concern about retaining customers.

Union’s Information Request

Wanting to verify these claims, the union, which was seeking wage increases, asked the company to provide the following information:

--A list of all current customers.

--A copy of all price quotes that the company had provided over the past five years and an indication of which of those quotes had been awarded.

--A list of all projects outsourced over the past five years that had been handled by bargaining unit employees.

--A list of all customers who had ceased purchasing from the company during the last five years.

--A complete list of prices for the company’s products.

--Market studies about the company’s products.

--A complete calculation of the company’s projected savings from its wage proposal, including an estimate of overtime.

The company refused to hand over the information, saying its “desire to remain competitive in both global and domestic markets is no different from the desire of any business conducting operations similar to this company.” It did give estimated annual wage savings, but did not provide its underlying calculations or a prediction of overtime hours. The company informed the union that a lockout would begin. The lockout began soon thereafter and the company hired replacement workers.

Unfair Labor Practices

The union filed unfair labor practice charges, arguing that the company’s information withholding and lockout violated the National Labor Relations Act (NLRA), and an administrative law judge agreed. The lockout was ruled in violation of the law, also.

The board agreed, as did the D.C. Circuit on appeal on Dec. 4, 2012. The requested information needed only to be relevant to the union in its negotiations in order for the company to be required to hand it over, the court determined.

“The board reasonably concluded that the company’s competitive disadvantage claims could have been substantiated by examining price quotes, lost customers and marketing strategies,” the court stated, characterizing the union’s information request as narrow. “The Top 20 customer sales chart could have demonstrated that KLB acquired a new customer worth $1 million in revenue in 2006 only to lose that customer in 2007.”

Furthermore, the court observed, “A list of prices could have helped the union with accomplishing its stated goal of comparing the prices of competitors. Not only was this information relevant to whether KLB faced an increasingly competitive business atmosphere, but the union’s contemporaneously proffered reasons for needing the information—double-checking the company’s competitiveness claim—satisfies the minimum standard of relevance” (KLB Industries v. NLRB, No. 11-1280).

Dissent

Writing in dissent, Judge Karen LeCraft Henderson said the NLRA was not violated.

“Although broad, the relevance standard is not meaningless,” she wrote. “Nothing in the record of the parties’ negotiations demonstrates that KLB made anything other than a generic competitive disadvantage claim; a mere ‘truisim’ indicating an unwillingness to pay.” A company’s assertion that there is an inability to pay means it must open its books to the union for a full financial audit.

“Likewise, nothing manifests that the union met its burden by demonstrating the relevance of the competitive information at the time it sought that information,” she concluded.

Allen Smith, J.D., is manager, workplace law content, for SHRM.

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