Finley Hospital — Beware the "Dynamic" Status Quo

12 November 2012 Labor & Employment Law Perspectives Blog

One of the bedrock and usually easily understood principles underlying the National Labor Relations Act is that once a union gets involved with your employees, your right to make and implement unilateral decisions about wages, benefits, and other terms and conditions of employment can be severely constrained. When you change the “status quo” in the context of a union organizing campaign, you invariably get an unfair labor practice charge alleging one of two things: either you granted a benefit to dissuade employees from voting for a union or you withdrew a benefit to retaliate against employees for engaging in union organizing. If your employees have voted to have a union represent them and you make unilateral changes without bargaining, you again commit an unfair labor practice by refusing to bargain in good faith, and any change implemented (typically only a “negative” one) is subject to reversal if the union decides to challenge it. What about when change is the status quo? Consider this scenario: every year since time immemorial, you have granted an across-the-board wage increase as you go into your new fiscal year that depends on business conditions. Some years, the increase may be one percent, while in other years, it may be three percent. However, there is always an across-the-board wage increase on January 1.

In June, a union starts organizing and, by September, they win an election. By October, you start bargaining a first contract. Are you obligated to provide that January 1 wage increase; or, alternatively, does the National Labor Relations Act prohibit you from providing it?

Many union-side labor lawyers — and some management-side labor lawyers — will tell you that in such a case, change is the status quo; and so you as an employer are obligated to continue to change by continuing that practice of January 1 across-the-board unilateral increases. This is the so-called dynamic status quo exception.

Employers — particularly those bargaining first contracts — need to keep their eyes on a new case decided by the NLRB on September 28, 2012 – Finley Hospital that is a bit of a game changer for this “exception.”

In Finley Hospital, the union and employer entered into a one-year first contract on June 20, 2005. In that contract, the employer and union agreed that “For the duration of this Agreement, the Hospital will adjust the pay of Nurses on his/her anniversary date. Such pay increases for Nurses not on probation, during the term of this Agreement . . . will be three (3) percent.”

As negotiations for a successor agreement following the expiration of the first agreement dragged on unsuccessfully, in reliance on the language limiting the obligation to provide anniversary increases to the term of the agreement with the union, Finley Hospital discontinued providing anniversary increases.

As a result, the union responded by filing unfair labor practice charges based on a theory that the employer was obligated to continue the “dynamic” status quo of giving three percent increases even after the contract expired. The union also contended that by agreeing that increases would be paid “for the duration” of the agreement, the union had not “clearly and mistakably” waived represented employees’ rights to continue to receive anniversary increases after the contract expired.

After convincing a board administrative law judge to rule in its favor, the union convinced a 2-1 majority of the NLRB to do so as well.

This rather startling take on the English language may not be entirely surprising in light of the current makeup of the NLRB and its current activist agenda in favor of unions and employees. It is unclear, however, whether this result — one in which the “dynamic” status quo “exception” starts to swallow the “rule” forbidding unilateral changes post-contract expiration — will survive a likely appeal.

Cases like Finley Hospital do bear close watching. Though a reversal on appeal can be expected, employers — particularly those negotiating first contracts — need to be aware of the “dynamic” status quo doctrine and the latest legal developments affecting the law in this area.

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