New Jersey Company Must Provide Back Pay To Laid-off Employees After Failure To Engage In Effects Bargaining

Mathew Moldawer
Mathew Moldawer

In general, when an employer subject to a collective bargaining agreement (CBA) closes a facility or shuts down a business, the employer should inform the union of its plans – failure to do so could cost the company.   The concept is referred to as “affects bargaining,” and is the subject of a recent National Labor Relations Board (NLRB) decision, Tec-Cast, Inc. (NLRB June 21, 2023). 

Tec-Cast is a New Jersey corporation that produces wax patterns for aluminum castings used in the aerospace and commercial industry.  Tec-Cast employees were part of a union subject to a CBA that expired in 2020.  No new CBA had been negotiated, but both Tec-Cast and the union continued to abide by the covenants within the most recent CBA into 2021. 

Tec-Cast was not on solid financial footing.  It sold one of its facilities in 2019 to Integra-Cast, and a competitor, Atlantic, was attempting to purchase its remaining facility in New Jersey.   As a result of the 2019 sale, the pouring of aluminum liquid was no longer performed at the facility.  The facility continued to operate their injection department and finishing department.  During this period of uncertainty, employees began to defect to Integra-Cast and Atlantic.  

The threat of being purchased by a competitor coincided with attempts to bargain with the union over a new CBA.  The employer and union spoke several times.  In a January 2021 telephone conversation, the employer informed the union it was providing the required 7-day notice to terminate the contract.  It is disputed whether the employer informed the union that the Tec-Cast facility might be closing.

After January 2021, work continued, albeit in a limited capacity.  However, sometime between January and June, the employer held a meeting with the 12 remaining employees to inform them that the facility would be closing.  It offered to bring anyone who wished to continue with the company to a new facility in Massachusetts, or assist anyone who wanted to work for Integra-Cast.  The employer did not provide an exact date of the facility’s closure but told the employees it would occur when the dismantling and shipping of the equipment was complete.

The Administrative Law Judge (ALJ) found that the employer violated Section 8(a)(5) and (1) of the National Labor Relations Act (NLRA), and the decision was affirmed by a three-member panel at the Board.  Specifically, the ALJ found that the union was never adequately notified in advance by the employer of the intent to lay off employees.  It is well established that the employer has a duty to give pre-implementation notice sufficiently in advance to allow for effects bargaining to be conducted in a meaningful manner and at a meaningful time.  What is meant by sufficient notice depends on all of the circumstances.

In this case, the Board found that the employer made representations that layoffs and closure of the facility would occur but did not provide a date to permit meaningful effects bargaining.  By the time the union was informed of layoffs, it was too late for meaningful discussions to take place.  Due to the failure to provide an opportunity to bargain, the employer was ordered to provide back pay for the employees that were laid off and to help the employees avoid the tax burdens from the lump sum payment.

This is an important reminder that the obligations of the employer do not end merely because there is a plan to shut down a facility or lay off employees.  As with this case, this may activate the need for effects bargaining to find alternatives to avoid or reduce the impact of the decision to shutter a facility.  Keep in mind, however, that the responsibility lies not only with the employer to provide a meaningful opportunity to bargain, but the union must pursue its bargaining rights.  In other words, a union must act on the opportunity to bargain over the effects.

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