NLRB v. Icwuc ( 2006 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
INTERNATIONAL CHEMICAL WORKERS 
UNION COUNCIL OF THE UNITED
FOOD & COMMERCIAL WORKERS
No. 04-72270
INTERNATIONAL AND ITS LOCAL 1C,
Petitioner,
 NLRB No.
31-CA-25761
v.
OPINION
NATIONAL LABOR RELATIONS
BOARD,
Respondent.

On Petition for Review of an Order of the
National Labor Relations Board
Submitted December 8, 2005*
Pasadena, California
Filed April 28, 2006
Before: Harry Pregerson, Robert E. Cowen,** and
Sidney R. Thomas, Circuit Judges.
Opinion by Judge Pregerson
*This panel unanimously finds this case suitable for decision without
oral argument. See Fed. R. App. P. 34(a)(2).
**The Honorable Robert E. Cowen, Senior United States Circuit Judge
for the Third Circuit, sitting by designation.
4853
INT’L CHEMICAL WORKERS UNION v. NLRB 4857
COUNSEL
Randall Vehar, Trial Counsel, and Robert W. Lowrey,
ICWUC/UFCW Legal Department, Akron, Ohio, for the peti-
tioner.
Aileen A. Armstrong, Deputy Associate General Counsel,
NLRB, Washington, D.C., for the respondent.
OPINION
PREGERSON, Circuit Judge:
Petitioner International Chemical Workers Union Council
of the United Food and Commercial Workers International
and Its Local 1C (“Union”) petitions this court for review of
a decision by the National Labor Relations Board (“Board”).
This case arises out of events that took place while the Union
and American Polystyrene Corporation (“Company”) were in
negotiations for a successor collective bargaining agreement.
Applying the rule announced by the Supreme Court in NLRB
v. Truitt Mfg. Co., 351 U.S. 149 (1956), the Board held that
the Company bargained in good faith, even though it refused
a request by the Union to turn over its financial documents.
Am. Polystyrene Corp., 341 N.L.R.B. No. 67, 2004-2005
NLRB Dec. ¶ 16,656 (Mar. 30, 2004). We hold that substan-
tial evidence does not support the Board’s conclusion that the
Company bargained in good faith. The Company clearly
asserted an inability to pay that, under Truitt, required it to
disclose corroborative documents to the Union. Furthermore
the Company never effectively retracted its claim that it could
not afford to pay for the Union’s proposals. We have jurisdic-
tion pursuant to 29 U.S.C. § 160(f), and we grant the petition
for review.
I. Factual Background
The Company manufactures plastics at its Torrance, Cali-
fornia facility. During the relevant period, the Union repre-
4858 INT’L CHEMICAL WORKERS UNION v. NLRB
sented the Company’s eight-person production and
maintenance unit and was party to a 1999-2002 collective bar-
gaining agreement covering those employees.
On April 22, 2002, the Company and the Union held their
first meeting to negotiate a successor collective-bargaining
agreement. Union representative Jeffrey Ferro (“Ferro”) pre-
sented the Union’s proposals, which included increases in
wages and company contributions to employee 401(k) plans.
In response, at the April 23rd bargaining session, Company
General Manager Carolyn Tan (“Tan”) proposed smaller
wage increases, discontinuation of company 401(k) contribu-
tions for an unspecified period, and the elimination of
company-provided meals.
At the April 29th bargaining session, the Company pro-
posed to discontinue its 401(k) fund matching for one-year.
After a discussion of the Company’s counterproposals, Ferro
asked if “things were really that bad” that the Company could
not continue to match the 401(k) plans, provide meals, or pro-
vide a meaningful wage increase. Tan replied that “things are
tough.” Ferro asked, “Are you saying that you can’t afford the
Union’s proposals?” Tan replied, “No, I can’t. I’d go broke.”
At the end of the April 29th session, Ferro composed the
following letter on his laptop computer and hand delivered it
to Tan:
Based on your responses on April 23 and today to
Union Proposals . . . and the fact that you claim that
things are tough and the Company cannot afford
these items, the Union demands access to review the
Company’s books. Please let us know when they
will be available for our review, so we can make
arrangements for our accountant[’]s schedule.
On April 30th, in a hand-delivered letter to the Union, Tan
responded:
INT’L CHEMICAL WORKERS UNION v. NLRB 4859
I am in receipt of your letter dated April 29, 2002,
in which you request access to the Company’s
books. I am rejecting this request. While I have told
you that we are a small company and times are
tough, at no time have I ever told you we cannot
afford your proposals. Rather, in these uncertain eco-
nomic times, we believe that we need to take a more
cautious approach than what you propose. I hope this
clears up any confusion that you have regarding our
responses to your proposals.
At the next bargaining session on May 2nd the parties dis-
cussed the Company’s financial condition again. During the
session, Ferro asked if business was really that bad. Tan
replied, “Have you seen sales lately?”
The topic of the Company’s financial health came up again
during the next bargaining session, on May 14th. Tan stated
that the Company was not taking the position that it was expe-
riencing financial hardship. Ferro asked why the Company
had proposed “all these take aways.” Tan, responding specifi-
cally to the inquiry about the Company’s meal plan, stated
that other companies were not providing meal coverage. By
hand-delivered letter to Tan dated May 14th, Ferro wrote:
We have reviewed our notes and our understanding
of what has been said by you . . . and it is clear that
you said you could not afford the Union[’]s propos-
als or to continue paying meal allowances or match-
ing money on the employee’s 401K. During one
session our notes reflect the following dialog:
Union: Are things that bad that you can’t
continue to pay meal allowances
and continue to match the 401K
plan?
Carolyn: Things are tough.
4860 INT’L CHEMICAL WORKERS UNION v. NLRB
Union: So are you saying you cannot
afford the Union[’]s proposals?
Carolyn: No I can’t. I’d go broke.
Therefore, by this statement, your proposals to
freeze 401K matches for one year, to discontinue
meal allowance and your efforts to have non-
bargaining unit employees, the Union again demands
access to review the Company’s Financial Records.
Failure to comply will result in the filing of Unfair
Labor Practice Charges with the National Labor
Relations Board.
Tan responded by letter the same day:
I am in receipt of your letter dated May 14, 2002,
that I received today in which you assert that I told
you that American Polystyrene could not afford the
union proposals. You further contend that your notes
reflect that I said, “No I can’t. I’d go broke.” I never
said these words or anything similar. As I wrote you
in my last letter, I have never stated that we could
not afford any of your proposals. The fact of the
matter is that after I informed you that times are
tough, you asked me, “Are things that bad?” I
responded, “Have you looked at sales.” Because I
have never told you that we cannot afford any of
your proposals, it would be inappropriate for me to
allow you access to our financial records, and hence,
I am denying your request.
On June 18th, the Union filed an unfair labor practice
charge with the Board alleging, in part, that the Company
refused to supply information to the Union in violation of
Section 8(a)(5) of the National Labor Relations Act (“Act”),
29 U.S.C. § 185(a)(5).
INT’L CHEMICAL WORKERS UNION v. NLRB 4861
On August 1st, Tan notified the Union that due to unim-
proved sales and rising inventories, the Company planned to
stop production and lay off some employees beginning
August 30th, for approximately ninety days. On August 30th,
the Company laid off six of the eight unit members.
On September 4th, the Union again requested access to the
Company’s financial records. By letter dated September 6th,
the Company again refused the Union’s request to see its
financial records.
II. Administrative Proceedings
A. Before the ALJ
The Administrative Law Judge (“ALJ”) found that the
Company violated Sections 8(a)(5) and (1) of the Act when
it “refus[ed] to provide the [Union] with requested informa-
tion to substantiate a claim that it [could not] afford to agree
to bargaining demands.” The ALJ held that Tan “specifically
stated during negotiations that the company could not afford
the union’s proposals”1 and then repeatedly denied making the
statement. The ALJ found that the totality of the Company’s
conduct was consistent with a claim of inability to pay: (1) the
Company had “proposed reducing contractual benefits”; (2)
the Company “said it would ‘go broke’ if it met the Union’s
proposals”; and (3) the Company “instituted an economic lay-
off of most of the unit employees.” Further, “even while
denying the ‘go broke’ statement, [Tan had] said that ‘things
are tough.’ ” Relying on Lakeland Bus Lines, Inc. (Lakeland
I), 335 N.L.R.B. 322 (2001), the ALJ found that those actions,
which followed Tan’s “No, I can’t. I’d go broke” statement,
could not constitute a retraction of the “I’d go broke” state-
ment, and thus, that the Company had not shed its duty to dis-
1
The ALJ credited Ferro’s testimony that Tan had said the Company
would “go broke” if it acceded to the Union’s demands. Neither party dis-
putes the ALJ’s finding.
4862 INT’L CHEMICAL WORKERS UNION v. NLRB
close corroborative evidence. The ALJ held that by refusing
to provide the Union with the requested financial information,
the Company committed an unfair labor practice under Sec-
tions 8(a)(5) and (1) of the Act.
B. Before the Board
On appeal, a 2-1 majority of the Board reversed the ALJ.
First, the Board held that Tan’s statement that the Company
would “go broke” was not necessarily a claim of inability to
pay. Moreover, the Board determined that the Company’s
response to the Union’s request for information “unequivo-
cally advised the Union that the [Company’s] ability to pay
for the Union’s bargaining proposals was not in question.”
Because, in the Board’s opinion, the Company had clarified
its bargaining position within a day of the alleged inability to
pay, the Company had absolved itself of any duty to provide
the requested financial information. Accordingly, the Board
found nothing in Tan’s denials to suggest that the Company
was bargaining in bad faith. The Union appealed.
III. Analysis
The Board “has the primary responsibility for developing
and applying national labor policy.” Glendale Assocs., Ltd. v.
NLRB, 347 F.3d 1145, 1150 (9th Cir. 2003). So long as the
Board’s interpretation is “rational and consistent” with the
Act, its rulings are afforded “considerable deference.” Id. at
1151. The Board’s order will be upheld on appeal if “its find-
ings of fact are supported by substantial evidence and if it cor-
rectly applied the law.” NLRB v. Int’l Bhd. of Elec. Workers,
Local 48, 345 F.3d 1049, 1053 (9th Cir. 2003).2
2
Citing Penasquitos Village, Inc. v. NLRB, 565 F.2d 1074 (9th Cir.
1977), the Union contends that a less deferential standard of review is
appropriate in this case. The Penasquitos Village court held that “a
reviewing court will review more critically the Board’s findings of fact if
they are contrary to the administrative law judge’s factual conclusions.”
INT’L CHEMICAL WORKERS UNION v. NLRB 4863
[1] During the course of negotiations, “[g]ood-faith bar-
gaining necessarily requires that claims made by either bar-
gainer should be honest claims.” Truitt, 351 U.S. at 152. In
Truitt, the Supreme Court held that if an employer asserts an
inability to pay for a union’s demands, “it is important enough
to require some sort of proof of its accuracy.” Id. at 152-53.
Thus, a “refusal to attempt to substantiate a claim of inability
to pay increased wages may support a finding of a failure to
bargain in good faith.” Id. at 153.
The Truitt Court explicitly limited its holding, however,
stating that
[w]e do not hold . . . that in every case in which eco-
nomic inability is raised as an argument against
increased wages it automatically follows that the
employees are entitled to substantiating evidence.
Each case must turn on its particular facts. The
inquiry must always be whether or not under the cir-
cumstances of the particular case the statutory obli-
gation to bargain in good faith has been met.
Id. at 153-54. Therefore, here we consider whether the Com-
pany’s actions as a whole satisfied its statutory obligation to
bargain in good faith.3 See NLRB v. W. Wirebound Box Co.,
Penasquitos Village, Inc., 565 F.2d at 1078 (emphasis added). Here the
Board did not explicitly or implicitly overrule any of the ALJ’s factual
findings. Indeed, Penasquitos Village recognized that the “ ‘substantial
evidence’ standard is not modified in any way when the Board and [an
ALJ] disagree.” Id. at 1076 (citation omitted). The substantial evidence
standard is appropriate in this case.
3
Cases from other circuits have stated that the Supreme Court’s caution-
ary language has a very limited effect. Those cases hold that “[a]lthough
there is language in . . . Truitt that might support [the position that a
refusal to supply properly requested financial information is not per se bad
faith bargaining], the general consensus today is that ‘for all practical pur-
poses’ a refusal to disclose alone constitutes a failure to bargain in good
4864 INT’L CHEMICAL WORKERS UNION v. NLRB
356 F.2d 88, 91 (9th Cir. 1966) (analyzing ALJ decision in
light of Truitt cautionary language); see also Lakeland Bus
Lines, Inc. v. NLRB (Lakeland II), 347 F.3d 955, 961 (D.C.
Cir. 2003); Rivera-Vega v. ConAgra, Inc., 70 F.3d 153, 159
n.5 (1st Cir. 1995); Torrington Extend-A-Care Employee
Ass’n v. NLRB, 17 F.3d 580, 588 (2d Cir. 1994).
A. Whether the Company’s assertions constituted a
claim of inability to pay
We first consider whether the Company’s actions triggered
a duty that required the Company to disclose its financial
records. We must determine whether the “essential core of the
[company’s] bargaining posture as a whole, as expressed to
the Union, was grounded in assertions amounting to a claim
that it could not economically afford” to pay for the Union’s
proposals. Rivera-Vega, 70 F.3d at 160 (quoting The Shell
Co., 313 N.L.R.B. 133, 133 (1993)).4 We ascertain the Com-
(Text continued on page 4866)
faith.” NLRB v. Harvstone Mfg. Corp., 785 F.2d 570, 579 (7th Cir. 1986)
(citations omitted); see also Teleprompter Corp. v. NLRB, 570 F.2d 4, 9
n.2 (1st Cir. 1977). The Board affirmed this interpretation in 1991. See
Ameron Pipe Prods., 305 N.L.R.B. 105, 109 n.7 (1991) (“Although the
[Supreme] Court limited its holding, the case has become widely accepted
as establishing for all practical purposes such an ‘automatic’ rule.”).
Harvstone, Teleprompter, and Ameron Pipe Products have never been
overruled or criticized for using a simple, mechanical application of Truitt
when a company asserts an inability to pay. Nevertheless, this court must
adhere to the Supreme Court’s mandate and thus, should accord the rele-
vant language appropriate deference. See Mesa Verde Constr. Co. v. N.
Cal. Dist. Council of Laborers, 861 F.2d 1124, 1129-31 (9th Cir. 1988)
(en banc) (holding that circuit court should defer to Supreme Court’s inter-
pretation of the Act). Moreover, those cases are out-of-circuit authority,
which are not binding on us.
4
In Western Wirebound Box Co., this court extended the Truitt rule to
cover employer denials of wage increases based on claims of “competitive
disadvantage.” 356 F.2d at 90-91. We held that Truitt is “not confined to
cases where the employer’s claim is that he is unable to pay the wages
demanded by the union.” Id. at 90. We concluded that “[w]e see no reason
INT’L CHEMICAL WORKERS UNION v. NLRB 4865
why, under the same rationale, an employer who insistently asserts that
competitive disadvantage precludes him from acquiescing in a union wage
demand, does not have a like duty to come forward, on request, with some
substantiation.” Id. at 91.
Until 1991, the Board and other circuits generally agreed with the West-
ern Wirebound Box Co. expansion of Truitt. See, e.g., United Steelworkers
of Am., AFL-CIO, Local 5571 v. NLRB, 401 F.2d 434, 436 (D.C. Cir.
1968); Int’l Tel. & Tel. v. NLRB, 382 F.2d 366, 370-371 (3d Cir. 1967);
NLRB v. Celotex Corp., 364 F.2d 552 (5th Cir. 1966); but see Facet
Enters., Inc. v. NLRB, 907 F.2d 963, 980 (10th Cir. 1990) (citing Harv-
stone Mfg. Corp., 785 F.2d at 575) (noting that distinction exists between
claims of competitive disadvantage and claims of inability to pay). In
1991, the Board changed course in Nielsen Lithographing Co., 305
N.L.R.B. 697 (1991). There, the Board first recognized a distinction
between claims of “inability to pay,” which give rise to the disclosure
duty, and claims of “competitive disadvantage,” which do not. Id. at 701.
“The test for determining whether an employer has communicated such an
inability is whether it asserts that it ‘cannot,’ as opposed to ‘will not,’ pay
a particular wage demand.” Facet Enters., Inc., 907 F.2d at 980 (citing
Harvstone Mfg. Corp., 785 F.2d at 575). This reasoning has been adopted
by many other circuits. See Torrington Extend-A-Care Employee Ass’n, 17
F.3d at 588-90; United Steelworkers of Am., AFL-CIO-CLC, Local Union
14534 v. NLRB, 983 F.2d 240, 244-45 (D.C. Cir. 1993); Graphic
Commc’ns Int’l Union, Local 508 O-K-I, AFL-CIO v. NLRB, 977 F.2d
1168, 1171 (7th Cir. 1992); see also ConAgra, Inc. v. NLRB, 117 F.3d
1435, 1438-42 (D.C. Cir. 1997) (detailing the history of the Board’s
“change of heart”).
In the instant case, we need not address the way the law has diverged
from the rule announced in Western Wirebound Box Co.; this case does
not turn on the distinction between claims of inability to pay versus claims
of competitive disadvantage. Moreover, even if this case called for such
analysis, this panel may not overrule a prior decision of this court. See In
re Complaint of Ross Island Sand & Gravel, 226 F.3d 1015, 1018 (9th Cir.
2000). And though we cite heavily from out-of-circuit cases that recognize
the distinction, we do not intend to suggest that Western Wirebound Box
Co. was wrongly decided. Indeed, at least one judge has called the dichot-
omy into question. See ConAgra, Inc., 117 F.3d at 1447-50 (Wald, J., con-
curring) (“I believe that the Board’s Neilsen rule has weakened the
‘gravitational field of Truitt’ too severely for that opinion to retain its
vitality, and hope that the Board will see fit to reexamine its Nielsen rule
4866 INT’L CHEMICAL WORKERS UNION v. NLRB
pany’s intent from “the substance of the employer’s bargain-
ing position, not the formal words used by the employer.” Id.
at 159. Indeed, it is often recognized that “[a]lthough no
magic words are required to express an inability to pay, the
words and conduct must be specific enough to convey such a
meaning . . . .” United Paperworkers Int’l Union v. NLRB,
981 F.2d 861, 865 (6th Cir. 1992) (quoting Harvstone Mfg.
Corp., 785 F.2d at 575); see also New York Printing Press-
men Local 51 (Milbin Printing) v. NLRB, 538 F.2d 496, 500
(2d Cir. 1976) (“So long as the Employer’s refusal reasonably
interpreted is the result of financial inability to meet the
employees’ demand rather than simple unwillingness to do so,
the exact formulation used by the Employer in conveying this
message is immaterial.”).
Here, at the April 29th bargaining session, Ferro asked, “So
are you saying you cannot afford the Union’s proposals?” Tan
responded, “No, I can’t. I’d go broke.” The Board concluded
that Tan’s “go broke” statement did not “[rise] to the level”
of an inability to pay and therefore, that the statement did not
trigger the attendant Truitt duty to disclose. We take issue
with the Board’s conclusion for two reasons. First, the Board
too quickly dismissed the fact that “I’d go broke” represented
an inability to pay. Second, the Board’s analysis was too nar-
row and ignored the rest of the statements made by the Com-
pany during negotiations.
1. When Tan said, “No I can’t. I’d go broke” she
asserted an inability to pay
We disagree with the Board’s cursory analysis of Tan’s
statement. The Board limited its analysis of Tan’s “No, I
can’t. I’d go broke” comment to two isolated statements in its
decision. First, the Board stated that the comment was made
in the near future, and adopt an alternative more consistent with the spirit
of Truitt and the purposes of the Act.” (citation omitted)).
INT’L CHEMICAL WORKERS UNION v. NLRB 4867
“during the heat of bargaining.” Later, the Board noted that
the statement was made “orally, during the heat of a negotiat-
ing session, not reflectively in a letter.” Based on those obser-
vations alone, the Board determined that Tan’s assertion that
the Company would “go broke” did not “[rise] to the level of
a claimed inability to pay.”
Purporting to adhere to the Supreme Court’s warning
against automatically applying the Truitt disclosure require-
ment, the Board seemed to apply its own per se rule. The
Board held, in essence, that a plea of poverty made during the
“heat of bargaining” could never create an employer’s duty to
disclose corroborative financial documents. The Board misin-
terprets Truitt’s cautionary language, through which the Court
warned that not every employer that claimed an inability to
pay was required to disclose supporting evidence. See Truitt,
351 U.S. 153-54. The Court did not hold that oral claims of
inability to pay made during bargaining would never trigger
the Company’s duty to disclose, but that is what the Board
seems to imply. The Supreme Court was clear that any
claimed inability to pay followed by a refusal to substantiate
that inability “may support a finding of a failure to bargain in
good faith.” Id. at 153 (emphasis added).
Here, the Board ignored the obvious fact that Tan pro-
claimed the Company’s inability to pay for increased benefits.
Ferro asked, “So are you saying you cannot afford the
Union’s proposals?” In response, Tan replied, “No, I can’t.
I’d go broke.” Although “no magic words are required to
express an inability to pay,” United Paperworkers Int’l
Union, 981 F.2d at 865, the Company could not have used
simpler words to declare that its financial situation was the
cause of its refusal.
[2] An asserted inability to pay, whether made in writing or
orally, is the cornerstone of an alleged Truitt violation. Clear
statements of a company’s inability to pay cannot be cast
aside as abruptly as the Board did here. The Company’s state-
4868 INT’L CHEMICAL WORKERS UNION v. NLRB
ments of inability to pay, i.e., “No, I can’t. I’d go broke,” cou-
pled with its refusal to substantiate, strongly, but do not
conclusively, suggest that the company bargained in bad faith,
regardless of whether the statement was made during heated
negotiations. See Lakeland I, 335 N.L.R.B. at 324-25 (holding
oral statements by company sufficient to require disclosure of
relevant financial information under Truitt); Fairhaven
Props., Inc. (Central Mgmt. Co.), 314 N.L.R.B. 763, 769
(1994) (holding that where company made statements consti-
tuting inability to pay orally at bargaining sessions, company
had duty to show its books to the union). We therefore hold
that substantial evidence does not support the Board’s conclu-
sion that the statement — “No I can’t. I’d go broke” — itself
was not representative of an inability to pay.
2. The Board failed to look at the “circumstances
of the particular case”
It is clear to us that when Tan said “No, I can’t. I’d go
broke,” she communicated to the Union that the Company
was unable to pay for the Union’s proposals. Viewing that
statement in light of the Company’s subsequent letters and
actions further convinces us that the Company’s actual posi-
tion was one of inability to pay. The Board looked at Tan’s
statement in isolation, and ignored the Company’s other state-
ments, as well as the context of the negotiations. The Board
should have considered the company’s communications in full
to determine whether the company’s “refusal reasonably
interpreted [was] the result of financial inability to meet the
[Union’s] demand.” New York Printing Pressmen and Offset
Workers Union No. 51, 538 F.2d at 500; see also Truitt, 351
U.S. at 153-54 (explaining that analysis must focus on the
“circumstances of the particular case”).
That the Company continued to plead poverty is supported
by Tan’s subsequent statements to the Union.5 These commu-
5
We analyze Tan’s purported disavowal of her “I’d go broke” statement
below in Section III.B.
INT’L CHEMICAL WORKERS UNION v. NLRB 4869
nications should be considered when determining the “con-
text” of the Company’s bargaining position. See Lakeland II,
347 F.3d at 962-63 (criticizing Board for failing to consider
“the entire course of negotiations in determining whether the
Company was truly pleading an inability to pay”); Harvstone
Mfg. Corp., 785 F.2d at 583 (Swygert, J., concurring in part
and dissenting in part) (commenting that statements of com-
pany viewed within entire bargaining context could lead
union rationally to conclude that company was asserting
financial inability to pay). Each of the Company’s communi-
cations, whether oral, in writing, or through action, implied
that the company was economically incapable of meeting the
Union’s requests.
[3] In her first attempt to deny that she had said “No, I
can’t. I’d go broke,” Tan stated, “times are tough . . . in these
uncertain economic times, we believe that we need to take a
more cautious approach than what you propose.” This con-
veyed that the Company was in a precarious position; it did
not want to be more cautious, it needed to be. Also, as Tan
later admitted, in response to the Union’s requests for
increased wages and benefits, she had asked, “Have you
looked at sales?” This question suggests that in light of the
Company’s poor sales figures, the Company could not reason-
ably have entertained the Union’s requests for increased
wages and benefits. Finally, Tan sent an e-mail to Ferro stat-
ing that due to “unimproved sales and rising inventories,” the
Company was planning to lay off workers. Tan was again
focusing on the severe impact its decreased sales were having
on the Company.
[4] We also consider a company’s conduct when evaluating
the actual substance of its position. See United Paperworkers
Int’l Union, 981 F.2d at 865; see also The Shell Co., 313
N.L.R.B. at 133 (considering significant the fact that company
had expressly referred to steps taken to address its survival,
namely that it had instituted a hiring freeze and implemented
an early retirement plan). Here, two actions by the Company
4870 INT’L CHEMICAL WORKERS UNION v. NLRB
merit attention. First, during bargaining, Tan proposed reduc-
ing benefits, specifically the 401(k) contributions.6 Tan’s
stated reasons for reducing the 401(k) contributions were that
“things were tough,” and that the Company would “go broke”
which, as noted, suggest that the Company could not continue
paying for the contributions. Second, the Company threat-
ened, and then instituted, an economic layoff of most of the
unit employees. The layoff was directly tied to the financial
instability of the Company. Thus, the Company did not only
state that it could not pay for more benefits; its actions were
those of a company that could not sustain itself if forced to
pay for the Union’s proposals.
[5] The obvious interpretation of the Company’s conduct
was that its financial health was to blame for its refusal to pay
for the Union’s proposals. The Company opened the door to
its plea of poverty when Tan first said “No, I can’t. I’d go
broke,” and never wavered from that position in its later com-
munications. In our opinion, there is insufficient evidence to
support the Board’s conclusion that the Company did not
assert an inability to pay. The record shows that, as the ALJ
concluded, the Company continued to assert an inability to
pay and thus, under Truitt, should have provided corrobora-
tive evidence in support of its bargaining position.
B. Whether the Company Disavowed Its Claim of
Inability to Pay
[6] The Board has recognized that a company can shed its
obligation to furnish financial information if it truthfully and
properly communicates a disavowal of its previous assertions
6
The Company also proposed eliminating the employee meal plan, but
at one point justified that proposed reduction by stating that other compa-
nies were not providing the same plan. Because, in an abundance of cau-
tion, we do not rest our ultimate conclusion on any claims of competitive
disadvantage by the Company, see n.4, supra, we do not consider the meal
plan reduction proposal in determining whether the Company’s represen-
tations constituted an inability to pay.
INT’L CHEMICAL WORKERS UNION v. NLRB 4871
of inability to pay.7 See Lakeland I, 347 F.3d at 963-64;
Fairhaven, 314 N.L.R.B. at 769. This rule fits nicely with the
Supreme Court’s instruction that the “inquiry must always be
whether or not . . . the statutory obligation to bargain in good
faith has been met.” Truitt, 351 U.S. at 153-54. Thus, if a dis-
avowal is not made “disingenuously or in bad faith,” a com-
pany is absolved of its duty to disclose its financial
documents. Lakeland II, 347 F.3d at 964.
[7] A company must make it “unmistakably clear” to a
union that it has abandoned its plea of poverty. Id. at 963.
Because the analyses are intertwined, as with an initial claim
of inability to pay, we should examine “the substance of the
employer’s bargaining position, not the formal words used by
the employer,” when deciding whether or not a retraction
occurred. Rivera-Vega, 70 F.3d at 159. Consequently, once an
inability to pay has been asserted, we must be wary about tak-
ing all of the employer’s statements at face value. Indeed,
companies may be “very aware of Board decisions that deal
with the different consequences of claiming current inability
to pay existing wages,” and that a company may “play[ ]
semantical games” in an attempt to retreat from its previous
position. The Shell Co., 313 N.L.R.B. at 138. As Truitt held,
“[g]ood-faith bargaining necessarily requires that claims made
by either bargainer should be honest claims.” Truitt, 351 U.S.
at 152 (emphasis added). Therefore, it would undercut the
policy of Truitt if we deferred to every purported “retraction”
by an employer and failed to question whether such state-
ments were honestly made.
7
For clarity, and because other courts have done so, we consider sepa-
rately whether the Company retracted its claim of inability to pay. See
Lakeland I, 347 F.3d at 963-64 (noting that Board first concluded
employer asserted an inability to pay, then considered whether there was
an adequate retraction); Fairhaven, 314 N.L.R.B. at 769. We note, how-
ever, that the relevant inquiry is simply an extension of the analysis in the
previous section of this opinion; we continue to consider the Company’s
statements in context as well as “the circumstances of [this] particular
case.” Truitt, 351 U.S. at 153.
4872 INT’L CHEMICAL WORKERS UNION v. NLRB
In this case, the Company made a number of statements in
response to the Union’s requests for financial information. In
the April 30th letter, Tan wrote: “While I have told you that
we are a small company and times are tough, at no time have
I ever told you we cannot afford your proposals. Rather, in
these uncertain economic times, we believe that we need to
take a more cautious approach than what you propose.” In her
May 14th letter, responding to the Union’s allegation that she
had claimed the Company would “go broke,” she stated, “I
never said these words or anything similar. . . . [Y]ou asked
me, ‘Are things that bad?’ I responded, ‘Have you looked at
sales.’ ” Finally, in her September 6th letter, Tan wrote: “. . .
I have already stated that I did not say the words that you had
quoted. Once again I reject your request to see financial
records for the reasons set forth in my letter dated May 14,
2002.”
[8] The Board majority’s opinion that those statements
withdrew the Company’s claim of an inability to pay is not
supported by substantial evidence. Although at first glance the
statements disavow any inability to pay, the Board failed to
evaluate the “essential core of the [company’s] bargaining
posture as a whole,” Rivera-Vega, 70 F.3d at 159, and ignored
the context of the statements. Tan’s letters purported to dis-
claim the precise words “I’d go broke,” but at the same time,
they affirmed the Company’s position that it could not pay for
the Union’s demands. While on one hand, Tan said “at no
time have I ever told you we cannot afford your proposals,”
she nevertheless maintained that “times are tough.” She
emphasized the effect that decreased sales were having on the
Company by saying, “Have you looked at sales,” and propos-
ing reduced benefits in response. The Company also threat-
ened, and then instituted, an economic layoff because of its
poor financial condition. In essence, the totality of the Com-
pany’s conduct “set the stage for negotiations by explaining
in broad strokes just what bad shape [the company] was in.”
The Shell Co., 313 N.L.R.B. at 138. It was against this back-
drop that the Company purported to disavow its initial inabil-
INT’L CHEMICAL WORKERS UNION v. NLRB 4873
ity to pay. We hold that in spite of these “disavowals,” the
thrust of the Company’s position remained unchanged — it
continued to claim it could not pay for the Union’s proposals.
This case is distinguishable from Fairhaven and Lakeland
II, in which the Board and D.C. Circuit, respectively, held that
companies had effectively disclaimed their earlier pleas of
poverty. In Fairhaven, the employer claimed an inability to
pay in the second bargaining session with the union. See 314
N.L.R.B. at 768. After refusing to turn over its financial docu-
ments, at the fourth bargaining session, the company provided
a written document to the union that stated, “The Company
does not claim inability to pay.” Id. at 768-69. The Board held
that the statement communicated a retraction to the union, but
only “in light of the Union’s admission” that it was “obvious”
that the employer was no longer pleading poverty. Id. at 769
(emphasis added). The Board suggested that the retraction
would not have been sufficient absent the union’s admission,
because the employer “continued to claim that the economy
was poor, the rent rolls were down, and the profits were less
than they had been.” Id.
Lakeland II also dealt with a situation in which the union
conceded that the employer had altered its bargaining posi-
tion. There, the company made statements that it was “trying
to bring the bottom line into the black,” that acceptance of the
final offer would enable the company to “retain [the employ-
ees’] jobs and get back in the black in the short term,” and
that “[t]he future of Lakeland depends on it.” Lakeland II, 347
F.3d at 958. Denying the union’s requests for information, the
company’s attorney responded: “[T]o set the record straight,
I advised that the Company was losing money, not that the
company’s financial condition precluded it from agreeing to
the Union wage proposal. No claim of financial inability,
explicit or implicit, was made by myself or any company offi-
cial.” Id. at 963. The attorney later wrote that “[a]t no time did
I or any Company official claim a present inability to pay or
a prospective inability to pay during the life of the contract
4874 INT’L CHEMICAL WORKERS UNION v. NLRB
being negotiated.” Id. The D.C. Circuit, disagreeing with the
Board, held that those clarifying statements made it clear to
the union that the company was not pleading poverty. See id.
Moreover, the court emphasized that the union communicated
its own understanding that the company’s position had
changed — the union had circulated a leaflet to Lakeland’s
customers, stating that the company “admitted that they were
not, in fact, under any hardship from a loss of revenue, but
instead, chose not to offer any increases in wages.” Id.
The instant case is unlike Fairhaven and Lakeland II
because the Union never acknowledged that it understood the
Company’s position to be anything other than an inability to
pay. In fact, the Union maintained that, after reviewing its
records, “it [was] clear that [the Company] said [it] could not
afford the Union’s proposals . . . .” Furthermore, Fairhaven
suggests that in the absence of clear acknowledgment by a
union, a “retraction” is not effective if the employer continues
to represent its position as one of an inability to pay. See
Fairhaven, 314 N.L.R.B. at 769 (“Although Frank continued
to claim that the economy was poor, the rent rolls were down,
and the profits were less than they had been, the Union
acceded to the Respondent’s claim that it was no longer
pleading poverty.” (emphasis added)). Here, the Company
continued to say that the Company faced “uncertain economic
times,” that “times [were] tough,” and that decreased sales
were forcing the company to institute a layoff. Those repre-
sentations belied Tan’s proclamations that the Company had
never asserted an inability to pay; she not only had asserted
an inability to pay, she actually maintained that position
throughout the bargaining process. She denied that she had
ever uttered the specific words “I’d go broke,” but the remain-
der of her communications never implied a change in the sub-
stance of her position. In short, after she said “No, I can’t. I’d
go broke,” she resorted to “semantical games” in an attempt
to retreat from her previous claim of an inability to pay. The
Shell Co., 313 N.L.R.B. at 138.
INT’L CHEMICAL WORKERS UNION v. NLRB 4875
[9] In conclusion, it is clear that “[i]n the circumstances
surrounding the negotiations,” the Company’s purported dis-
avowals “amounted to nothing more than a clumsy effort to
shed a statutory responsibility to substantiate a bargaining
position . . . namely, that financially it could not meet the
Union’s contractual demands.” C-B Buick, Inc., 206 N.L.R.B.
6, 8 (1973). We conclude, therefore, that substantial evidence
does not support the Board’s holding that the Company bar-
gained in good faith because it attempted to disavow its bar-
gaining position while repeatedly reasserting that very
position. Tan’s denials that the Company was claiming an
inability to pay were not “honest claims.” Truitt, 351 U.S. at
152. Accordingly, the Company bargained in bad faith when
it asserted an inability to pay, failed to turn over the financial
documents requested by the Union, and then improperly tried
to avoid its duty to disclose.
Petition GRANTED.