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The National Labor Relations Board recently held in Bath Iron Works, 345 NLRB No. 33 (Aug. 27, 2005), that an employer did not violate the National Labor Relations Act (NLRA) by merging its pension plan into the larger pension plan of its corporate parent without the consent of the three affected unions. The board reasoned that under a reasonable interpretation of the collective bargaining agreements (CBAs) and the plan documents, the employer had the authority to implement the merger without the unions’ consent. It rejected the contention that the merger was unlawful because the unions had not “clearly and unmistakably waived” their right to bargain over the merger, finding this “clear and unmistakable” standard inappropriate for contract-modification cases. Unilateral changes and contract modifications Section 8(d) of the NLRA contains various bargaining obligations, one of which is to meet and bargain in good faith about terms and conditions of employment. A unilateral change is inconsistent with that duty. A separate � 8(d) obligation is the duty to continue in full force and effect the terms and conditions of an existing contract. A modification of the contract is inconsistent with that obligation. In “unilateral change” cases, when all that is alleged is that a union had a statutory right to bargain before an employer’s proposed change, the board has considered whether the union has clearly and unmistakably waived its right to bargain over the change. See, e.g., Regal Cinemas v. NLRB, 317 F.3d 300, 314 (D.C. Cir. 2003), enforcing 334 NLRB 304 (2001); Trojan Yacht, 319 NLRB 741 (1995). In contract-modification cases, by contrast, the board ordinarily will not find a violation when the employer has a “sound arguable basis” for its interpretation of a contract. See, e.g., NCR Corp., 271 NLRB 1212, 1213 (1984). The unilateral-change case and the contract-modification case differ in terms of principle, possible defenses and remedy. In terms of principle, the unilateral-change case does not require the showing of a contract provision; it requires showing only that there is an employment practice concerning a mandatory bargaining subject, and that the employer has made a significant change to it without bargaining. By contrast, in the contract-modification case, a contractual provision must be identified and it must be shown that the employer has modified that provision. In terms of defenses, a defense to a unilateral change can be that the union has waived its right to bargain. A defense to the contract-modification case can be that the union has consented to the change. As to remedy, a remedy for an unlawful unilateral change is to bargain; thus the remedy for a unilateral change permits the restoration of the change after bargaining to impasse. The remedy for a contract modification is to honor the contract for its term, a more severe remedy. Also, the victim of the alleged contract modification has the option of proceeding to arbitration and pursuing an action under � 301 of the Labor-Management Relations Act, 29 U.S.C. 183, which provides that mere proof of breach of contract will permit the victim to prevail. The facts behind the ‘Bath Iron Works’ holding The employer in Bath Iron Works had CBAs with four different unions, three of which were charging parties in the case. Two of the charging party unions negotiated a new CBA with the employer in 1997, and the third negotiated a new CBA with the employer in March 1998. During negotiations with this union, the employer disclosed that it was contemplating merging its pension plan with its corporate parent’s pension plan. This union then requested that the parties bargain over the pension benefits based on the merged assets, but was told by the employer that the merger was merely speculative at that point. One month later, the employer received permission from the government and its parent to merge the pension plans. The employer discussed the merger with the unions, while maintaining that it did not need their consent in order to implement it. No agreement was reached on the merger, and the employer implemented it without the unions’ consent. Each of the CBAs with the respective unions referred to the plan documents. One CBA listed the benefit plans, including pension, and provided “these plans are [Employee Retirement Income Security Act] Plans and the terms and conditions are governed by Plan Documents.” Another CBA had similar language (“all of the terms and conditions [of the employee benefit program] in their entirety are governed by Plan Documents”). The employer cited two articles in the plan documents as the source of its authority to implement the merger. The first of these provided that the employer “reserve[d] the right to make any changes as it deems appropriate to the Plan” for tax reasons. The second article stated that “the right is reserved at any time and from time to time to modify or amend, in whole or in part, any or all of the provisions of the Plan.” The administrative law judge’s decision The administrative law judge found that the merger was a mandatory subject of bargaining and that it was a modification of the CBAs because those agreements did not confer upon the employer the right to effect the merger. The judge found that the plan documents, with their language concerning the right to “modify or amend,” were not part of the CBAs because the CBA did not expressly use the word “incorporate” or similar “clear language,” which the judge believed necessary to indicate that the unions had clearly and unmistakably waived their right to bargain over a mandatory subject of bargaining. Indeed, the judge found that even if they were part of the CBAs, the plan documents did not clearly give the employer authority to implement the merger. Moreover, the judge found that the employer’s position with the third union- that it would not negotiate pension benefits on the basis of merged assets because the merger was too speculative- undermined its position after the merger that the union had clearly and unmistakably waived its right to bargain over the merger. The National Labor Relations Board’s reversal A board majority (Robert J. Battista and Peter C. Schaumber) found that the judge erroneously used the unilateral-change standard. The majority stated that in contract-modification cases, it is limited to determining whether the employer has altered the terms of a contract without the consent of the other party. Thus, the principal question was not whether the union clearly and unmistakably waived its right to bargain over the merger, but whether the merger in fact modified the CBAs. The majority found that the issue of whether the contract had been modified turned on the resolution of two conflicting interpretations of the respective CBAs and the plan documents. The majority found the employer’s argument that the plan documents were part of the CBA and that they gave the employer the right to amend the plan had a “sound arguable basis” because each CBA incorporated by reference the plan documents, which allowed the employer to “modify or amend” the plan, and the right to “modify and amend” included the right to merge the plan as well. The majority further found the contrary interpretation, that the plan documents were not part of the CBA and did not contain a right to merge the plan, was reasonable as well, but “no more so than the [employer's].” Member Wilma B. Liebman dissented, contending that the majority erred in rejecting the traditional “clear and unmistakable waiver” approach. She further contended the employer lacked even a “sound arguable basis” for its unilateral action because she interpreted the three CBAs at issue as prohibiting the employer from unilaterally merging its pension plan into the larger plan of its corporate parent. The effects of the ‘Bath Iron Works’ ruling The board decision in Bath Iron Works is consistent with the long-standing federal policy favoring arbitration of labor disputes and minimizes the board’s role in resolving contract disputes. When an employer has a sound arguable basis for ascribing a particular meaning to its contract and its action is in accordance with the terms of the contract as the employer construes it, the board arguably should not enter the dispute to serve the function of arbitrator in determining which party’s interpretation is correct. This same rationale can be applied in unilateral-change cases. However, the Bath Iron Works holding is limited to contract-modification cases and expressly does not resolve the issue that has divided the board and several circuit courts of appeals in recent years, namely the unilateral-change case in which the employer defends on the basis of a contractual provision. The board has historically taken the position that the contractual provision must clearly and unmistakably waive the right to bargain; otherwise a violation exists. On the other hand, various courts have taken the position that it is sufficient if the contract covers the subject matter. If it does, the court will determine whether the employer was privileged to make the change without further bargaining.

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