This National Labor Relations Board (NLRB) decision, issued on December 30, 1994, addresses the unilateral discontinuation of annual merit wage increases by The Daily News of Los Angeles (the Respondent) for editorial department employees represented by the Los Angeles Newspaper Guild. The Board, in a supplemental decision, reaffirmed its prior finding that this action violated Sections 8(a)(5) and (1) of the National Labor Relations Act (the Act), despite a previous remand from the United States Court of Appeals for the District of Columbia Circuit.

The core legal issue revolved around the interpretation of NLRB v. Katz and its application to the unilateral discontinuance of discretionary merit increases during contract negotiations. The Administrative Law Judge (ALJ) had initially found the Respondent in violation, a decision affirmed by the Board in August 1991. The Board's initial ruling was based on the principle established in Katz and further elaborated in Oneita Knitting Mills, which held that an employer with an established practice of granting merit raises, even if discretionary in amount but fixed in timing, cannot discontinue this practice without bargaining to agreement or impasse with the union.

The Respondent petitioned for review, and the D.C. Circuit, in December 1992, found the Board's holding inconsistent with its own precedent and not compelled by Katz. The court specifically noted that Katz addressed the unilateral continuation of discretionary increases, not their discontinuance, and remanded the case for the Board to reconcile this conflict and consider whether Katz bound employers to continue entirely discretionary merit raise programs.

Upon remand, the Board, while acknowledging the court's opinion as the law of the case regarding the interpretation of Katz, ultimately reaffirmed its finding of a violation. The Board’s legal analysis hinged on its interpretation of Katz and subsequent Board and court decisions. The Board clarified that the fundamental principle derived from Katz is that unilateral action by an employer that effectuates a change in a mandatory term and condition of employment during negotiations, without prior bargaining to impasse or agreement, violates Section 8(a)(5). The Board asserted that subsequent interpretations of Katz have not been limited to its specific facts but have been applied broadly to various unilateral changes, including the discontinuance of established practices.

The Board emphasized that the merit review program, despite the discretion in determining the exact amount of the increase, constituted an established practice and a term and condition of employment. This was evidenced by the fact that since 1986, the Respondent had annually evaluated all employees, considering them for merit increases, and granted them to a vast majority (over 80 percent). When the Union was certified and negotiations began, the Respondent continued this practice for unrepresented employees but unilaterally ceased granting merit increases to the represented editorial employees.

The Board countered the court’s specific concern by citing numerous cases, including decisions from the Sixth and Eighth Circuits, and notably the D.C. Circuit itself in Auto Workers (Udylite Corp.) v. NLRB, where unilaterally discontinued merit raises were found unlawful under Katz. The Board argued that these cases demonstrate a consistent application of Katz to both the continuance and discontinuance of discretionary merit increases, as the critical factor is the unilateral change in an established condition of employment, regardless of whether the change is an increase or a decrease, or a continuance or discontinuance. The Board further distinguished cases like American Packaging Corp. and Stone Container Corp., explaining that in those instances, the absence of raises stemmed from the application of the existing merit review program, not from a unilateral decision to withhold raises altogether. The Board also overruled its prior decision in Anaconda Ericcson Inc., finding it irreconcilable with its established precedent on this issue.

In addition to addressing the Katz issue, the Board considered two further points raised by the court on remand: fashioning an appropriate remedy and the question of economic bargaining weapons. Regarding the remedy, the Board maintained that it could devise a backpay award to make employees whole, even for discretionary increases. It reasoned that the Respondent’s continued practice of granting merit increases to unrepresented employees, along with data from prior years, would provide a sufficient basis for the General Counsel to construct a formula for a close approximation of the lost wages during the compliance proceeding.

Concerning the economic bargaining weapon argument, the Board rejected the notion that unilateral discontinuance of merit wages is a lawful economic weapon akin to lockouts or harassing tactics approved in NLRB v. Insurance Agents' International Union and American Ship Building Co. v. NLRB. The Board distinguished these cases by emphasizing that the lawful use of economic weapons presupposes the party employing them is simultaneously engaged in lawful bargaining. In this case, the Respondent's unilateral action was deemed a refusal to negotiate in good faith, directly contravening the principle of Katz that such unilateral conduct obstructs bargaining and violates Section 8(a)(5). The Board clarified that while parties may exert economic pressure, this is permissible only when coupled with good-faith bargaining, which unilateral changes without negotiation or impasse inherently undermine.

Concurring members, while agreeing with the ultimate outcome, offered a slightly different reasoning regarding the bargaining obligation when a scheduled annual event falls during negotiations. They posited that if an employer provides reasonable advance notice and an opportunity to bargain regarding such a scheduled event, it can implement its final proposal for that specific year even without reaching an impasse. However, for permanent changes affecting future years, impasse would still be required. In this specific case, they found the Respondent’s conduct unlawful because it changed the practice for the current year without reasonable notice and opportunity to bargain and made a permanent change without reaching impasse.

Ultimately, the Board reaffirmed its original decision, finding that the unilateral discontinuance of merit wage increases violated Section 8(a)(5) and (1) of the Act, based on a reasonable interpretation of Katz and consistent Board and court precedent.

Significant Cases Cited

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