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Plan Your Changes before Changing Your Plans

There’s a comically profound scene in the second “Madagascar” movie. Penguin (management) and monkey (union) committees are negotiating a labor contract. After the monkeys seem to have secured what they want, they add a demand: maternity leave. The chief penguin looks under the table, then shouts at his counterpart: “Maternity leave?  You’re all male!”

An employer reading IRS Letter 226J and accompanying Form 14765 (recently mailed to notify employers of proposed 2015 employer mandate tax assessments) may realize that a group health plan change is needed to reduce or eliminate an employer mandate tax exposure not previously recognized. The change may be so obviously beneficial to union-represented employees that the employer can’t imagine collateral demands being made as a price of union agreement.  Imagine it.  Plan on it.

Before making any material change to a group health plan, or to plan administration affecting union-represented employees, an employer covered by the National Labor Relations Act must give the union notice and an opportunity to bargain about the proposed change. That duty and opportunity is subject to some exceptions. Two are frequent troublemakers.  An employer may think that a union has waived that right and given the employer liberty to make changes, but the National Labor Relations Board recognizes only waivers that are “clear and unmistakable,”  such as specific, express terms of a current, written labor contract. And if the current contract lacks such a waiver, but includes a “zipper clause,” the union may have the right to postpone bargaining until the next contract opening, perhaps years in the future. If you want immediate discussions, there may be a price for the union’s waiver of the zipper clause.

If an employer makes material group health plan changes without respecting these and other applicable NLRB rules, the Board’s regional office may commence administrative litigation leading to a range of costly remedies. For example, the NLRB might require the employer to restore the prior plan terms and/or bear uninsured costs that were covered before the employer made the unlawful changes. You may have insurance for other employment claims, but unless you know that it covers NLRB matters, assume that it doesn’t, and add 100% of your defense expenses to the price you might pay for this mistake. Such litigation can take years and run up huge expenses even if no employee suffered any actual harm from the NLRA violation.

What the penguin said.