PERB: "Exploding" Offers Can Be Evidence Of Bad Faith

City of Arcadia (2019) PERB Decision No. 2648-M (Issued on 6/12/19)

This is another very long decision involving several legal issues. I am just going to focus on one issue: PERB’s holding that, ”a party cannot in good faith make an exploding proposal unless it can adequately explain a legitimate basis for doing so.” An “exploding” proposal is one that expires on a given date.

Here are the essential facts. The City of Arcadia (City) and the Arcadia Police Civilian Employees Association (Union) were parties to a Memorandum of Understanding (MOU) that expired on June 30, 2014. In September 2013, the City notified the Union that it wanted to begin successor negotiations with the goal finishing by the end of November 2013. The stated reason was that city council elections were in April 2014 and at least two incumbents could not run for re-election. By November, the City apparently had reached tentative “deal points” with other labor groups but not the Union. The City told the Union that it would close negotiations if no deal was reached by the end of November and not re-open them until the Spring. The Union objected to the City’s “need for speed” since the MOU did not expire until June 30, 2014. The Union also objected to the City’s offer of “signing bonuses” only if a deal was reached by the end of November. The City acceded that negotiations could reconvene in the Spring but confirmed that signing bonuses would likely “not be on the table” at that time. The Union then filed an unfair practice charge.

The ALJ dismissed the charge alleging bad faith bargaining relating to the “exploding” offer. The Board reversed. The Board characterized exploding offers as a form of regressive bargaining since subsequent offers become less generous. Typically, to avoid bad faith bargaining a party “must show changed economic conditions or other changed circumstances to support its regressive posture.” In addition, the Board argued that, “when a party issues an exploding offer without an adequate explanation as to why its bargaining position should become less generous on a given date in the future, it effectively imposes its own ground rule and deadline, evidences unlawful inflexibility, and manifests a take-it-or-leave-it attitude.”

As an example, the Board noted that when an employer offers a retroactive wage increase, its initial lump sum wage cost invariably escalates the longer negotiations continue. However, according to the Board, many employers in such circumstances can set aside the money needed to pay the retroactive wage increase as time goes on without a ratified contract. Therefore, an employer asserting that it cannot set aside money in this manner, or asserting a different basis for its exploding offer, “must be in a position to prove its rationale if requested to do so.”

Here, the City defended its offer because the spring city council elections could result in a new majority with different goals. However, the Board held that this explanation was insufficient because there were several months remaining between the City-imposed deadline and the spring elections and also because the possibility of a new council majority with different goals was speculative. As a result, based on the totality of the circumstances, the Board held that the City’s “exploding” offer constituted evidence of bad faith bargaining.

Comments:

I don’t have an issue with the Board’s central holding that an employer must explain why a proposal has an expiration date. My bigger concern is the Board’s apparent willingness to “second-guess” the employer’s proffered explanation. Here, the City said it wanted to get successor agreements in place before the upcoming council elections. This doesn’t seem unreasonable. A new city council could have different spending priorities. Or the existing city council may want to have a deal in place as its “legacy.” Either rationale seems legitimate to me. Admittedly, at least based on the facts set forth by PERB, there was no explanation for why a deal had to be reached by the end of November, more than four months before the spring election. The failure to explain that gap likely caused the Board not to fully credit the City’s stated rationale in this case. But the key lesson here is that PERB will examine the legitimacy of the explanation for an exploding offer.
In discussing possible legitimate reasons for an exploding offer, the Board focused primarily on economic ones. However, employers often have policy reasons for such offers. For example, some employers will offer a signing bonus to the first union that “comes in” when multiple tables are open. Getting the first union to reach agreement often times is the most difficult and has the benefit of setting a “pattern” for the rest of the unions. I would think that such an explanation would be sufficient to demonstrate that the employer is not bargaining in bad faith. However, the Board did not discuss such an example.
As another example, many employers have a policy of “no retro” salary increases. While this is not a traditional exploding offer, it has a potential “regressive” effect in that employees will not receive a salary increase for the time between expiration of a MOU and the the new one. Employers have such policies to encourage the conclusion of negotiations before the expiration of a MOU, which helps avoid strikes and avoids the disruption of being in a “status quo” period. Are these explanations sufficient to demonstrate that the employer is not bargaining in bad faith? I would think so but unfortunately the Board didn’t discuss such situations.