Thrifty Payless, Inc. v. Nat'l Labor Relations Bd.

• Docket Number: 22-1204,Consolidated with 22-1241
• Decision Date: 03 November 2023
• Citation: 86 F.4th 909
• Parties: THRIFTY PAYLESS, INC., d/b/a Rite Aid, Petitioner v. NATIONAL LABOR RELATIONS BOARD, Respondent United Food and Commercial Workers Local 8-Golden State, Intervenor
• Court: U.S. Court of Appeals — District of Columbia Circuit

86 F.4th 909

THRIFTY PAYLESS, INC., d/b/a Rite Aid, Petitioner v. NATIONAL LABOR RELATIONS BOARD, Respondent

United Food and Commercial Workers Local 8-Golden State, Intervenor

No. 22-1204

Consolidated with 22-1241

United States Court of Appeals, District of Columbia Circuit

Argued September 8, 2023

Decided November 3, 2023

On Petition for Review and Cross-Application for Enforcement of an Order of the National Labor Relations Board

Stephen M. Silvestri argued the cause for petitioner.With him on the briefs was Alana R. Glover.

Heather Beard, Attorney, National Labor Relations Board, argued the cause for respondent.On the brief were Jennifer Abruzzo, General Counsel, Ruth E. Burdick, Deputy Associate General Counsel, David Habenstreit, Assistant General Counsel, Milakshmi v. Rajapakse, Supervisory Attorney, and Jared D. Cantor, Senior Attorney.

Richard Treadwell was on the brief for intervenor United Food and Commercial Workers Local 8-Golden State in support of respondent.

Before: Walker and Garcia, Circuit Judges, and Randolph, Senior Circuit Judge.

Randolph, Senior Circuit Judge:

Thrifty Payless, Inc., doing business as Rite Aid, seeks judicial review of the National Labor Relations Board's decision that Rite Aid committed unfair labor practices.The Board has cross-applied for enforcement of its order.

There are three issues.

Did Rite Aid bargain to an impasse with the union regarding employee health insurance?

Did an emergency justify Rite Aid's transferring its employees' health insurance from the union-sponsored plan to a company plan?

Was the Board's remedy lawful and proper?

We are mindful that the first issue—did the negotiating parties reach an "impasse"?—poses a question well suited to a panel of social psychologists specializing in the strategy of negotiations.Many studies deal with the common negotiating refrain, "this is my final offer," when the speaker knows quite well it is not."Lying," or to put it mildly, "deception," or even more mildly, "bluffing," is an inevitable part of negotiating, whether at a rug bazaar in a Turkish market or in nuclear disarmament talks in Geneva.

Over the years the National Labor Relations Board, in its many iterations, has settled on a multi-factor "test"—which is by no means a "test"—consisting of factors it considers in determining whether the employer and the union have reached an "impasse."One key sign of an impasse may be when the employer does a lockout while the union organizes a strike.SeeNLRB v. Burns Int'l Sec. Servs., 406 U.S. 272, 287, 92 S.Ct. 1571, 32 L.Ed.2d 61(1972).Beyond that is a vale of ambiguity.

I.

The first and second issues are fact-bound.A summary of the evidence relating to those issues follows.

Rite Aid operates drug stores and pharmacies.The United Food and Commercial Workers Local 8-Golden State has long represented the company's northern California employees.These Rite Aid employees received their healthcare benefits through the United Food and Commercial Workers Northern California and Drug Employers Health and Welfare Trust Fund.Rite Aid contributed to the Fund at rates set through collective bargaining.In 2018, it was paying into the Fund $3.77 per employee hour.

In early 2018, the Fund's independent consultant, Segal Consulting, reported that the Fund was financially unstable.The Fund had suffered a loss of $6.4 million during the previous eighteen months because of heightened claim activity, cutting its reserves to $4.4 million.That amount, Segal Consulting determined, left the Fund with reserves that were barely enough to cover roughly two months of claims.

That May, Rite Aid and Local 8 met to discuss the Fund's condition.The union proposed that the company increase its contributions to the Fund.Rite Aid responded that it wanted cost-neutrality—if it were to consider raising its contributions to the Fund, adjustments to other costs had to be factored in.Rite Aid added that it wanted to achieve a long-term solution to the Fund's financial problems.

The parties maintained a dialogue regarding the Fund during the next several months.In October, Local 8 proposed that Rite Aid should increase its contributions to the Fund and that there should be modifications to employee benefits.Local 8 followed up in early January 2019 to solicit the company's response.Rite Aid did not agree to Local 8's proposal but assured the union that it would negotiate a successor collective bargaining agreement ahead of the existing contract's July 2019 expiration date.

Those negotiations—the ones that generated the dispute now before us—kicked off in June 2019.Local 8 presented a proposal that included benefit modifications and an increase in Rite Aid's contributions to $5.72 per employee hour.In the meantime, because the parties' existing agreement was slated to expire on July 13, Local 8 proposed extending that agreement through the end of August, during which time Rite Aid would pay the $5.72 contribution rate contained in the union's proposal.Rite Aid agreed to the extension on July 1.

In August, Rite Aid and Local 8 met to bargain two more times.Rite Aid presented a list of suggested changes, but the union rejected it, claiming that the changes shifted costs onto employees without raising Rite Aid's contributions or accounting for rising healthcare costs.A few days later, Rite Aid proposed an alternative to the Fund: switching to an employer-sponsored healthcare plan.The parties agreed to extend their existing agreement for another month, through September 30, and to maintain Rite Aid's contributions at the increased level.

In the fall, tensions grew as the parties fleshed out their positions.At a September meeting, Local 8 proposed extending the existing agreement for one year, during which Rite Aid would continue making Fund contributions at the $5.72 rate.Rite Aid suggested instead transferring the employees' health insurance to a company-sponsored plan that it claimed would be less expensive.When Local 8 later pressed Rite Aid on its position regarding the union's offer, Rite Aid wrote that a further extension was a non-starter because of its "draconian" cost but that Rite Aid remained "interested in continuing to bargain."

After the second extension agreement expired, Local 8 initiated boycott actions against Rite Aid.When the parties met again in late October, the union blamed Rite Aid for allowing the agreement to lapse and putting the union "in a position where we've declared war."Rite Aid expressed displeasure regarding the boycotts.¹Local 8 reiterated its offer to roll over the existing deal with Rite Aid continuing to make the increased contributions.

Rite Aid revealed its economic proposal in a letter it sent a few days after the meeting.Its plan would move employees from the Fund to a Rite Aid-sponsored healthcare plan.It would also provide for greater wage increases as a result of the savings reaped from switching plans.Rite Aid stated that it would not renew the extension agreement and that, because the union had failed to show any movement in its position, "there is nothing to talk about."Even so, it offered to meet "if you [i.e., the union] feel differently."

At the next meeting in November, Local 8's representative announced that the union wanted to understand the two sides' positions to enable it to draft an appropriate proposal.Rite Aid's representative replied that the company would need to enroll employees in a Rite Aid-sponsored plan soon in order to have a January 1 launch but insisted that Rite Aid "d[id]n't care whose name is on" the plan.The company's representative then declared that the parties were "at impasse."Local 8's representative rejected that characterization and promised to come up with a "comprehensive proposal" that would be the "best we think we can do."After the meeting, the union received information from Rite Aid about the healthcare costs of its proposal.

The parties last came together on December 5.They first reviewed the details of Rite Aid's October proposal.Local 8 then presented its counterproposal, which was meant to come "close to what [the union] perceive[d][Rite Aid's] budget to be."The plan marked a $19.3 million decrease in costs from the union's June proposal, achieved through reduced Rite Aid contributions as well as cuts to employee wage and healthcare offerings.

After two weeks of silence following the meeting, Rite Aid sent a letter on December 20 rejecting the union's proposal as "not a responsible or realistic" way to ensure the Fund's long-term stability.Because Local 8 refused to entertain having employees leave the Fund, Rite Aid again declared that the parties were "at impasse" and stated it would implement its final offer from October on January 1, 2020.The union pushed back, decrying the claim of impasse as "inaccurate" and maintaining that its proposal "greatly enhances the viability" of the Fund.

Further back-and-forth over email did not prove productive, so on January 1 Rite Aid, as promised, implemented its proposal to move employees to an employer-sponsored plan.(The record does not reveal the Fund's fate or its current financial shape—if it still exists.)Later that month, Local 8 filed unfair labor practice charges with the Board.

An Administrative Law Judge concluded that Rite Aid had committed unfair labor practices in violation of the National Labor Relations Act when it unilaterally implemented its proposal.The ALJ determined that Rite Aid violated its duty to bargain in good faith because it took unilateral action even though the parties had not yet reached an impasse.The ALJ also found that the Fund's financial situation did not give rise to an economic exigency justifying an immediate response.

The Board in August 2022 affirmed the ALJ's findings and conclusions.Thrifty Payless, Inc.d/b/a Rite Aid, 371 N.L.R.B. No. 124, 2022 WL 3356576(Aug. 11, 2022).The Board ordered Rite Aid to cease and desist its unilateral actions...