Mergers, acquisitions, and sales can be a common event for health systems. These types of deals involve many moving parts, from both legal and operational perspectives. Given how complex deals can become, it can be easy to overlook obligations to labor unions when they arise. One recent National Labor Relations Board (“Board”) decision illustrates a key obligation for unionized health systems, the duty to furnish information, and how entities should address that obligation during deals. Crozer Chester Medical Center, 366 N.L.R.B. No. 28 (2018).
The case arose after a health system agreed to sell its facilities and assets to a third party buyer. The health system had five different labor unions representing employees at its facilities. After the health system and buyer accepted an asset purchase agreement (“APA”), but before they closed on the sale, one of the unions requested a full copy of the APA. The health system considered the APA to be highly confidential (as almost any seller would in this situation) and had accepted a confidentiality agreement with the buyer, so it declined to disclose the APA. Nevertheless, it offered to meet with the union, discuss the matter, and consider any alternative requests that the union raised.
Most people would consider the health system to have acted reasonably under the circumstances. Unfortunately, federal labor law imposes a higher standard. At default, the National Labor Relations Act (“Act”) requires a unionized employer to furnish its union with any information that concerns employees’ terms and conditions of employment. This duty extends to documents that indirectly concern employees, such as an asset purchase agreement that describes how a buyer will address the employees.
Although the Act creates certain exceptions to this obligation, including a narrow confidentiality exception, an employer must invoke the exception in a particular way. The employer must, among other steps, promptly respond to the union, explain why the exception applies, and offer some type of accommodation. The employer also must disclose any requested information that does not fall under a referenced exception.
In the case at hand, the employer made several missteps in responding to the union’s request. According to the Board, the employer failed to explain what parts of the APA were confidential (even though the employer believed all of it was), produce any non-confidential portions, and affirmatively offer some type of accommodation. The Board took the position that it was not an “accommodation” for the employer to meet with the union and discuss other approaches. Ultimately, the Board held that the employer violated the Act, and it ordered the employer to disclose the APA in full.
This case shows the importance of understanding what the Board expects of an employer and proceeding accordingly. If the employer had appropriately responded to the union and offered a satisfactory accommodation, the employer could have avoided this harsh result, as well as significant litigation costs. In some situations, a labor violation could impede a transaction altogether. In short, even when a particular deal involves myriad moving parts and obligations, it is essential to manage the duty to furnish information to labor unions.