July 7, 2009: A Bronx, N.Y., bakery whose 134 employees went on strike in August 2008 must reinstate them under the terms of their expired contract and pay them wages dating back to May 6, 2009, when they offered to return to work, a National Labor Relations Board administrative law judge ruled June 30 (Stella D'Oro Biscuit Co., NLRB ALJ, No. 2-CA-38960, 6/30/09).

In his opinion, ALJ Steven Davis found that Stella D'Oro Biscuit Co. engaged in unfair labor practices within the meaning of Section 8(a)(5) of the National Labor Relations Act by refusing to provide the workers' union with relevant financial documents during contract negotiations and by unilaterally imposing new employment terms after the strike began.

“What prevented progress in the negotiations was the Union's inability to present a copy of the Employer's financial statement to the Union's accountant and attorney for their examination,” the ALJ said. Because Stella D'Oro requested wage and benefit concessions on its claim “that its sales were declining and that it lost money in 2007,” Davis reasoned, “the Union was justified in seeking documentation in order to decide whether it should agree to those concessions.” If the union's experts determined that Stella D'Oro's financial situation justified the concessions, “the Union's bargaining position may have been altered, agreement reached and a strike avoided,” the ALJ said.

Stella D'Oro was owned by Brynwood Partners, an investment firm that specializes in acquiring companies and then selling them at a profit five to 10 years later. Brynwood invested $3.1 million in automated equipment to reduce labor costs at the bakery, whose employees were represented by the Bakery, Confectionery, Tobacco Workers, and Grain Millers.

At a series of contract bargaining sessions that began May 30, 2008, Stella D'Oro told the union that the company lost $1.5 million in fiscal year 2007 and that annual sales had declined by $5 million since Brynwood bought the company two years earlier. Company representatives told union officials that the company would “not be going forward with the business” unless it could reduce its labor costs. Stella D'Oro sought wage and benefit concessions for the new contract.

No Copies Allowed

When union representatives asked for financial documentation, company officials allowed them to read and take notes from Stella D'Oro's 19-page audited 2007 financial statement but not to keep it or photocopy it. The union representatives requested a copy so they could consult with their accountant, but the company would not give them a copy of the statement, expressing concern that information could leak to its competitors, vendors, and customers. The union representatives offered to sign a confidentiality agreement, but the company still refused to allow them to keep a copy.

The parties extended the collective bargaining agreement from June 29, 2008, to July 31, 2008, but failed to agree on a new contract. The employees went out on strike Aug. 14, 2008. On Aug. 27, 2008, the company notified the union and the employees that it was changing the terms of employment consistent with its last contract offer. The company later allowed the union's lawyer and accountant to view and take notes from its 2007 financial statement but not to keep or photocopy it.

On May 1, 2009, the union offered to have the employees return to work under the terms of the expired contract. On May 6, Stella D'Oro responded that an impasse had occurred in the negotiations and the contract had expired.

The ALJ began his analysis by explaining that when an employer claims an inability to pay the amounts demanded by a union during contract bargaining, “the duty to bargain in good faith requires it to provide requested financial information to substantiate its claim.”

ALJ Davis acknowledged that the bakery never explicitly expressed an inability to pay but he reasoned that Stella D'Oro's assertion that the union's rejection of its proposed concessions could lead to the closing of the business “effectively claimed a present inability to pay the wages and benefits that the Union was requesting.” Stella D'Oro therefore “made a direct connection between its need for significant labor-cost concessions and its immediate financial condition,” according to the ALJ.

Because Stella D'Oro made its financial condition a central issue in the negotiations, Davis said, it must produce the documents supporting that condition. “Financial documentation related to the economic condition of the company was relevant to the bargaining process.”

Long and Complex Financial Statement

The company should have furnished a copy of its 2007 audited financial statement to the union, the ALJ concluded. “The 19 pages of detailed, complex financial figures and closely written auditor's notes were not susceptible of such easy and quick comprehension.” He pointed out that the employer failed to present a reasonable explanation as to why it rejected the union officials' offer to sign a confidentiality agreement. The ALJ also rejected the company's argument that the union waived its request for the information by proceeding with bargaining despite its failure to receive a copy of the financial statement.

The ALJ found that “no valid impasse” in bargaining occurred because Stella D'Oro failed to provide a copy of the financial statement to the union. Therefore, the employer's unilateral implementation of changes in the employee's terms and conditions of employment, as set forth in its August 27 letter, was unlawful, the opinion said.

The court rejected Stella D'Oro's argument that the strike was not in response to an unfair labor practice because flyers distributed by the union after the strike began mentioned the concessions demanded by the employer rather than its refusal to provide financial documents.

The opinion ordered Stella D'Oro to reinstate the employees immediately. The ALJ explained that an employer must reinstate unfair labor practice strikers when they make an unconditional offer to return to work. He rejected the bakery's assertion that the employees' offer to return to work was conditional because the union insisted that the returning employees work under the same wages and working conditions that were in effect when the strike began.

Unfair labor practice strikers are entitled to reinstatement under their original terms of employment, Davis said, and therefore the union's offer to have the employees return to work under the terms and conditions in the expired contract was unconditional.

The NLRB general counsel was represented by Suzanne K. Sullivan in New York. Lawrence J. Baer and Mark A. Jacoby of Weil, Gotshal & Manges LLP in New York represented Stella D'Oro. Louie Nikolaidis of Lewis, Clifton & Nikolaidis PC in New York represented the union.

Click here to read a text of the decision.