Keeping Big Issues Off the Table: The Supreme Court on Entrepreneurial Discretion and the Duty to Bargain

Over the past decade a number of major American industries have declined or radically restructured in the face of foreign competition. In 1982, for example, more than 1.2 million American workers were either temporarily or permanently laid off as companies curtailed operations or moved abroad. Two hundred thousand people lost their jobs in 1982 due to plant shutdowns. In recent times the steel and auto industries have provided the most visible examples of massive cutbacks in employment, but jobs have also disappeared in other industries such as electrical manufacturing, machine manufacturing and textiles. Although much public debate and disagreement exists concerning the causes of America's industrial decline, very few doubt the tragic consequences for people when their jobs move abroad or simply cease to exist. It is not surprising that when an employer is considering whether to shutdown part of its business, labor unions have sought to bargain about the decision. The union's legal theory in such a case is that an employer's decision which results in the loss of jobs is a matter which affects "terms and conditions of employment" and therefore is literally within the duty to bargain as defined in the National Labor Relations Act (NLRA). Some employers have disagreed. In management's view there is no duty to bargain about decisions which go to the basic scope or direction of a business. Such matters should be considered within a managerial prerogative and outside of the obligation to bargain under the NLRA. In 1981, in First National Maintenance Corp. v. NLRB, the United States Supreme Court endorsed an employer's basic premise that there exists a class of entrepreneurial decisions which are not subject to the duty to bargain under the NLRA even though such decisions may terminate the employment of workers. The Court held that on the facts of the case the employer was under no duty to bargain about his decision to shut down part of his business where the employer's decision was economically motivated. As the law of bargaining has developed over the past three decades, the Supreme Court has distinguished between what it has labeled "mandatory subjects" and "non-mandatory subjects" of bargaining. When the Court declares a particular issue to be mandatory, it thereby obligates an employer or a union to bargain about the issue at the other party's request. Each side may use the economic weapons it possesses under the NLRA in support of its bargaining position on a mandatory subject. When the Court declares an issue to be non-mandatory, there is no obligation to bargain about that issue. Furthermore, neither party can insist upon bargaining about the issue. A union therefore cannot legally strike to force discussion of a non-mandatory issue.