Employer Turned Union Work Stoppage into a Lockout by Changing the “Status Quo”
An economic strike is challenging for any employer. The likelihood, however, that it will achieve its bargaining goals will be substantially reduced if its striking employers can substitute unemployment compensation benefits for their lost wages. Section 402(d) of Pennsylvania’s Unemployment Compensation Act provides that employees engaged in a labor dispute are not eligible for unemployment benefits unless the work stoppage is the result of a lockout by the employer.
In ATI Flat Rolled Products, LLC v. Unemployment Compensation Board of Review, 2025 Pa. Commw. LEXIS 42; 2025 WL 714289 (Decided, March 6, 2025), the Commonwealth Court held that 27 striking workers should receive unemployment compensation benefits during a four-month work stoppage because their employer, ATI, refused to allow striking members of the United Steelworkers to take loans against their 401(k) retirement accounts. ATI claimed it had never allowed employees on unpaid leaves of absence to borrow against their 401(k) accounts. The Commonwealth Court, however, upheld the Unemployment Compensation Board of Review’s decision, reversing the Unemployment Compensation Referee, that the employer had unilaterally changed the “status quo” existing before the strike. This converted the union’s voluntary economic strike into an employer “lockout,” making the strikers eligible for unemployment compensation benefits.
The Commonwealth Court’s comprehensive opinion applied standards outlined by the Pennsylvania Supreme Court 65 years ago in Erie Forge & Steel Corp (Vrotney) v. Unemployment Compensation Board of Review, 400 Pa. 440, 163 A.2d. 91 (Pa. 1960). The Court’s opinion outlined two critical steps that an employer must follow to avoid inadvertently converting the employees’ voluntary strike into a lockout.
- The critical first step in avoiding a “lockout” is for the employer to agree it will “permit work to continue… under the pre-existing terms and conditions of employment,” that is, that it will maintain the status quo after the labor contract expires. Employers should clearly make that guarantee at the bargaining table when an impasse is reached and should confirm that commitment in writing.
- Secondly, in order to maintain the status quo, the employer must adhere to the pre-existing terms and conditions of employment that are “imbedded in the expired agreement.” The employer cannot rely on “past practices” beyond the express terms of the collective bargaining agreement.
Applying these principles in the context of the ATI case, the Commonwealth Court reasoned that the 401(k) Plan document, which was incorporated into the collective bargaining agreement, stated only that former employees who had retired or been terminated were ineligible for 401(k) loans. None of the express terms of the Plan or the collective bargaining agreement allowed the Plan Administrator to deny loans to employees simply because they did not have an “income stream” as a result of an unpaid leave of absence, a strike, or any other reason. The legal rules governing work stoppages vary widely between public and private employers and even among various industries. The principles outlined by the Commonwealth Court, however, have broad application to all legal economic strikes and should be carefully followed by employers to avoid undermining their bargaining strategy and goals.
