Author: Scott Horton

Scott has been practicing Labor & Employment law in New York for almost 20 years. He has represented over 400 employers and authored 100s of articles and presentations and wrote the book New York Management Law: The Practical Guide to Employment Law for Business Owners and Managers. Nothing on this blog can be considered legal advice. If you want legal advice, you need to retain an attorney.

September 17, 2025

Negotiating Union Contracts in a High-Inflation Economy

Although inflation has cooled from its 2022–23 peak, it remains a defining factor at the bargaining table. Workers feel the cumulative effects of rising prices over the past several years. At the same time, employers face higher labor costs, escalating healthcare expenses, and demands for greater flexibility around where and how employees work. For employers with unionized workforces, these challenges are amplified. Negotiating union contracts is no longer just about splitting the difference on wage percentages—it is about balancing long-term financial stability with short-term employee expectations, preserving operational control while accommodating workplace changes, and finding creative ways to deliver value without locking in commitments that may become unsustainable if the economy shifts again.

This article offers employers practical strategies for negotiating union contracts in a high-inflation environment, focusing on three of the most contentious issues: wages, healthcare costs, and remote-work arrangements.

Inflation and Collective Bargaining

Inflation directly drives bargaining pressure. When the cost of groceries, housing, and transportation goes up, employees expect their wages to rise at least enough to maintain their standard of living. Unions will highlight members’ real-wage erosion and push for agreements that provide protection against continued volatility.

Employers have been here before. During the late 1970s and early 1980s, when inflation often hit double digits, cost-of-living adjustment (COLA) clauses became widespread in union contracts. As inflation moderated in the 1990s and 2000s, most employers phased out automatic COLAs, viewing them as too unpredictable and costly to maintain. Now, with inflation stabilizing but still running above the Federal Reserve’s 2-percent target, unions are again pressing for some form of inflation protection.

When preparing economic proposals, employers should:

Model affordability over the life of the agreement: Do not just budget year-to-year; understand what a multi-year wage pattern will cost when layered with healthcare, overtime, pensions, and roll-up effects.
Benchmark against industry peers: Unions will bring comparables to the table. Employers should know where they stand and avoid commitments that dramatically exceed local or industry norms.
Avoid long-term overcommitments: Be cautious with front-loaded increases or open-ended COLA clauses. What feels manageable today can become a liability if the economy slows and competitors are not living with similar terms.

Structuring Wage Increases

There is no one “right” way to build wage proposals, but employers should consider the following tools when negotiating union contracts:

Multi-year structures: Contracts can front-load or back-load increases. Front-loading provides workers with immediate relief but may leave employers paying above-market wages if inflation falls. Back-loading defers costs but risks resentment if inflation stays elevated. Many employers blend the two approaches, offering a strong first-year increase followed by smaller annual raises.
COLA triggers with caps: Rather than reinstating open-ended COLA provisions, employers can negotiate limited formulas. For example, wages could increase by a fraction of CPI, subject to a maximum percentage each year. This acknowledges inflation without handing over full control of wage growth to external forces.
Lump-sum bonuses: One-time payments can provide meaningful cash to employees without permanently raising base wages or compounding overtime, pension, and other benefit costs. Employers should, however, expect pushback from unions that prefer base-building increases for long-term earnings stability.
Tiered or differentiated increases: Wage increases can depend on seniority, skill level, or job classification. This can be a way to reward critical skills or long-service employees while moderating costs elsewhere. But employers should watch for morale issues and potential legal risks if disparities are too wide.

In every case, employers must ensure compliance with wage-and-hour rules, including minimum wage and overtime requirements under federal and state law. A wage package that looks good on paper can create compliance problems if it doesn’t account for legal requirements.

Managing Healthcare Costs When Negotiating Union Contracts

Healthcare costs are a perennial concern, and they are often one of the toughest issues in negotiating union contracts, especially in today’s environment of rising claims and specialty drug expenses. Employers are projecting annual cost increases well above general inflation. Unions know this and will often resist cost-shifting measures, framing them as benefit reductions rather than necessary adjustments.

Practical approaches include:

Employee cost sharing: Adjusting premium contributions, deductibles, or copays spreads costs more evenly. Employers should pair these adjustments with clear messaging that changes are designed to preserve overall benefit levels, not cut them.
Plan design changes: Options such as high-deductible plans, spousal surcharges, or dependent eligibility audits can provide meaningful savings. These changes, however, must be bargained carefully and communicated clearly to avoid perceptions of unilateral takeaways.
Wellness and preventive programs: Initiatives that encourage healthier lifestyles can reduce utilization over time. Framed correctly, these programs can be seen as joint investments in employee well-being.
Reserve funds or cost-sharing formulas: Some employers negotiate contract language that sets aside reserves or defines how future spikes will be shared. This can reduce conflict down the road when costs inevitably rise.

Employers should remember that health benefits are a mandatory subject of bargaining. Unilateral changes—even well-intended—can lead to grievances or unfair labor practice charges.

Remote Work and Flexibility

Remote work has emerged as one of the most complex bargaining issues since the pandemic. For many employees in relevant positions, the ability to work from home is now viewed as a standard benefit, not a temporary privilege. Unions may seek to embed remote-work guarantees in contracts.

Employers, however, must think carefully before committing. Remote work implicates productivity, supervision, safety, and even cybersecurity. Once written into a CBA, these arrangements can be hard to adjust.

Strategies for handling remote-work demands while negotiating union contracts include:

Pilots with sunset clauses: Agree to trial programs with defined end dates. This allows both sides to evaluate productivity and employee satisfaction without permanent commitments.
Clear management-rights language: Preserve employer discretion over work locations. Where possible, limit contract language to procedures (such as how requests will be considered) rather than entitlements.
Distinguish accommodations from entitlements: ADA or state law may require remote work as a disability accommodation in some cases. Those obligations should be addressed separately, not written into the collective agreement as universal rights.

Handled carefully, remote-work provisions can be structured in a way that provides employees with flexibility while ensuring employers retain control over core operational decisions.

Leaving Room to Adapt

In high-inflation environments, union proposals tend to be more ambitious. Employers need mechanisms that provide flexibility over time:

Side letters or MOUs: Use these for experimental provisions. They provide flexibility to test new ideas without locking them into the core agreement.
Reopener clauses: Tie reopeners to inflation thresholds, healthcare cost increases, or legislative changes. This ensures that both sides can revisit the contract if conditions change dramatically.
Strong management-rights clauses: Explicitly protect employer discretion on operations, staffing, technology, and scheduling. These clauses become especially valuable when economic conditions shift mid-contract.
Non-economic benefits: Consider creative alternatives—training, scheduling input, vacation flexibility—that can be highly valued by employees without carrying heavy ongoing costs.

Employers should also pay close attention to past practice and industry comparables. Arbitrators frequently rely on these benchmarks when interpreting disputed contract terms.

Practical Approaches to Negotiating Union Contracts at the Table

The bargaining process itself can shape outcomes as much as the proposals on the table. Employers should:

Be transparent but strategic: Share enough financial context to build credibility, but avoid “opening the books” in ways that limit flexibility later.
Prepare detailed costing models: Understand the true cost of each proposal, including wage roll-ups, overtime, and pension implications. A one-percent wage increase often costs far more than one percent once these effects are included.
Use interest-based bargaining where appropriate: Focusing on mutual interests—such as stability, recruitment, and sustainability—can sometimes open the door to creative solutions that meet both parties’ needs.
Stay consistent and credible: Bargaining is as much about trust as economics. If management develops a reputation for following through on commitments and maintaining consistent positions, unions are more likely to engage constructively.

For employers, negotiating union contracts during high inflation requires not only careful costing but also a clear communication strategy that builds credibility with both union leaders and employees.

Conclusion

High inflation creates challenges for both sides of the bargaining table when negotiating union contracts. Unions want to protect members’ purchasing power; employers must guard against unsustainable cost growth. But with careful planning, creativity, and a willingness to use flexible tools, employers can negotiate agreements that provide meaningful improvements without jeopardizing financial stability.

The most effective strategies combine structured wage proposals, proactive healthcare cost management, cautious approaches to remote work (where applicable), and adaptive bargaining mechanisms such as side letters and reopeners. Employers who enter negotiations prepared, consistent, and transparent are best positioned not only to reach agreements in this inflationary environment, but also to build stronger long-term labor relationships.

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September 15, 2025

New York Tries to Expand State Labor Relations Jurisdiction

On September 5, 2025, Governor Kathy Hochul signed off on a potentially monumental change in New York’s labor law. The amendment to the New York State Labor Relations Act purports to give the New York Public Employment Relations Board (PERB) broad jurisdiction over private employers. As its name suggests, PERB historically focuses on public sector labor relations issues. The National Labor Relations Board (NLRB), a federal agency, governs most private-sector labor relations throughout the country, including New York. Can New York step in and take over this historically federal role?

Read here for more on the scope of NLRB’s jurisdiction.

NYS Labor Relations Act Amendment

The amendment to Labor Law § 715 purports to expand PERB’s jurisdiction to private employers in a novel way. Specifically, the statute now provides that PERB has jurisdiction over private-sector labor relations unless the NLRB “successfully asserts jurisdiction over any employer, employees, trades, or industries pursuant to an order by the federal district court established under article three of the United States constitution.”

If you’re not sure what that means, you’re not alone. The wording appears to be ambiguous in multiple respects. But we do at least know what the NY Legislature wants it to mean.

State Senator Ramos sponsored the legislation in the NY Senate. Her introducer’s memorandum explains the goal: to prevent a gap in labor law enforcement during periods when the NLRB cannot act, such as when the Board lacks a quorum. In other words, “This bill intends to give New York the power to protect employees if the National Labor Relations Board is not fulfilling its duty.”

The amendment took effect immediately upon signing.

Federal Preemption

The NY Legislature knows that this amendment will face preemption challenges. The Sponsor’s memo acknowledges that “[u]nder current law the National Labor Relations Act preempts any attempt to take up these cases at the state level.”

The Supreme Court has long held that the NLRA preempts most state regulation of private-sector labor relations:

Garmon preemption blocks state action in areas “arguably protected or prohibited” by the NLRA.
Machinists preemption blocks states from regulating areas Congress intended to leave to the “free play of economic forces.”

The Sponsor’s memo asserts that “The National Labor Relations Act simply remaining in place does not guarantee that the provisions will successfully protect employees.” Thus, the Legislature’s theory seems to be that by amending state law as they have, PERB can assert jurisdiction unless the NLRB stops it from doing so. However, that reasoning still appears to be at odds with established preemption case law.

The Garmon and Machinists preemption doctrines don’t shut off just because the NLRB is not acting. Federal law still governs, even if enforcement is delayed.

There are two narrow exceptions where states can act:

When the NLRB formally declines jurisdiction over entire categories of employers under NLRA § 14(c)(2) (e.g., very small local businesses).
When the NLRB cedes jurisdiction to a state agency under NLRA § 10(a).

New York’s amendment doesn’t fit either exception. Instead, it aims directly at the NLRB’s core jurisdiction, effectively daring federal courts to enforce existing preemption standards.

On September 12, 2025, the NLRB sued the State of New York and its PERB seeking to enjoin the enforcement of the amendment. If the NLRB (which is not itself an employer subject to the NYS law) is deemed to lack standing, then private parties may need to take up the litigation fight.

How New York’s State Labor Relations Act Differs from the NLRA

One reason the recent amendment is so consequential is that New York’s own Labor Relations Act is not just a copy of the NLRA. The differences are significant.

Devalues Employer Interests

Most importantly, the New York law is written as a one-sided protection for employees. The NLRA recognizes both employee rights and certain employer rights. The New York state labor relations statute does not include that balancing language. Its focus is on ensuring employees’ right to organize.

Certification procedures under the state law are also potentially more favorable to unions. While the NLRB strongly favors secret-ballot elections, the NY State Labor Relations Act permits certification based on alternative showings of majority support. In practice, that could mean greater reliance on card-check recognition and fewer opportunities for employers to communicate with their employees before a union is installed.

Lacks Relevant Precedent

The NLRA has nearly 90 years of precedent guiding questions like: What is an appropriate bargaining unit? When is an election necessary? What counts as unlawful conduct during a campaign? PERB has far less (essentially zero) precedent in the private-sector setting, and the State Labor Relations Act does not replicate all the more detailed parameters found in federal law. In essence, PERB would be starting from scratch in this area.

Broader Remedies

Finally, remedies under the state law are not identical to those under the NLRA. At the federal level, remedies are historically limited: reinstatement, back pay, and cease-and-desist orders. The New York statute authorizes PERB to fashion remedies for unfair labor practices with little guidance on limits. Without decades of judicial gloss, employers could face new uncertainty about what remedies PERB might impose.

In short, if PERB were to exercise jurisdiction broadly under this amendment, employers would not simply be dealing with the familiar NLRA system transplanted to Albany. They would be operating under a different statute—one that is more protective of employees, less protective of employers, and far less developed in terms of jurisprudence.

What Employers Should Do

Stay alert to petitions. If a union files at PERB citing the new law, you may need to respond quickly with a preemption defense.
Know your thresholds. If you are in one of the small categories where the NLRB has formally declined jurisdiction, PERB jurisdiction is nothing new—it already applied.
Prepare for litigation. Expect forum fights. Legal battles are inevitable—effectively invited by the amendment. The question is which employers will be the ones stuck in the crosshairs and forced to take up the fight.

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August 13, 2025

Employment Law Due Diligence: A Buyer’s Guide to M&A Transactions

Mergers and acquisitions (M&A) remain a critical part of corporate growth strategy, even among smaller, privately held companies. While acquirers usually devote significant resources to financial, tax and operational diligence, many deals fall apart due to unanticipated employment‐related liabilities. Employment law due diligence is not simply a box to check—it is an essential process that identifies hidden risks, informs valuation, and shapes integration strategies. For buyers in asset or stock transactions, the workforce and its associated obligations can either enhance the value of the acquisition or quickly turn it into a liability.

Deal Structure: Asset Purchases vs. Stock Purchases

The starting point for employment law diligence is understanding the type of transaction. Whether the deal is structured as a purchase of equity or as an acquisition of assets has a dramatic impact on which employees transfer, which liabilities carry over and the extent of legal flexibility for the buyer.

Stock Purchases and Mergers: Automatic Transfer of Employees

In a stock purchase or merger, the buyer acquires the target entity in its entirety. The underlying legal entity remains intact, which means that employees continue to be employed by the same company, just under new ownership. As a result, employment relationships generally transfer automatically without the need for new offer letters or acceptance processes. All existing liabilities—including past wage-and-hour violations, discrimination claims, pension obligations, and other compliance issues—remain with the acquired entity and are effectively assumed by the buyer. This continuity streamlines the transition but places a premium on thorough diligence. The buyer needs to know exactly what obligations it is inheriting.

An equity purchase also means that existing contracts and licenses usually remain intact. Benefit plans, collective bargaining agreements, and restrictive covenants stay in place unless renegotiated. Therefore, buyers must review the target’s employee handbooks, employment agreements, severance policies, bonus plans, retirement plans, and any outstanding litigation. Without proper due diligence, a buyer could assume liabilities far beyond those contemplated in the purchase price.

Asset Purchases: Selectivity and Successor Liability Risks

In an asset purchase, the buyer acquires selected assets while the target continues as a separate legal entity, even if it later dissolves. The buyer may choose which employees to hire and which liabilities to assume. This flexibility is attractive when a buyer wants to cherry-pick talent and leave behind unwanted obligations. Employees who are offered positions typically must sign new employment agreements; those not hired remain the seller’s responsibility. Benefit plans generally stay with the seller unless the buyer expressly agrees to assume them.

However, buyers must recognize that asset transactions do not insulate them from all employment liabilities. Federal common law imposes successor liability in certain circumstances. Courts or government agencies may hold a buyer liable if it had notice of potential claims and substantially continued the seller’s business operations. Language in purchase agreements about “non-assumption” of liabilities may protect the buyer contractually, but it will not override statutory successor liability. Buyers should conduct robust diligence and, where appropriate, negotiate indemnification and escrow provisions to mitigate these risks.

Core Components of Employment Law Due Diligence

Employment law due diligence is broader than reviewing a target’s headcount and payroll. It requires a systematic evaluation of regulatory compliance, contractual obligations, workforce composition, and cultural compatibility. The following topics should be covered regardless of deal structure.

1. Reviewing Existing Employment Agreements and Policies

Individual contracts and offer letters. Review all employment agreements, offer letters, and severance arrangements. Buyers need to identify terms that may require renegotiation, such as compensation, equity, bonuses, restrictive covenants, change-of-control clauses, and termination rights. States vary considerably in their enforcement of non-compete and non-solicitation provisions. For example, California effectively prohibits most post-employment restrictive covenants, while other states enforce them under specific conditions. Buyers should confirm that existing agreements comply with applicable laws and decide whether to issue new agreements upon closing.

Handbooks and policies. Analyze the target’s employee handbook, HR policies, and procedures for compliance with federal and state laws. Pay particular attention to hot-button items such as anti-harassment policies, equal employment opportunity statements, family and medical leave practices, background check procedures, and arbitration agreements. Ensuring that policies are up to date will reduce the risk of class actions or agency investigations.

Bonus and incentive plans. Determine whether bonuses are discretionary or non-discretionary. Non-discretionary bonuses must be included in the regular rate when calculating overtime for non-exempt employees; failure to do so exposes the employer to significant liability. The due diligence team should request documentation of all incentive programs and verify compliance with the Fair Labor Standards Act (FLSA) and state wage laws.

2. Wage and Hour Compliance and Worker Classification

Misclassification of workers is one of the most common and expensive employment issues uncovered during diligence. Buyers should examine whether employees are properly classified as exempt or non-exempt under the FLSA and equivalent state statutes. Exemption status requires meeting both salary thresholds and duties tests; misclassified employees may be owed overtime and other damages. The purchaser should also review the target’s policies on overtime, meal and rest breaks, off-the-clock work, and timekeeping practices. Errors in these areas can result in agency audits and class or collective actions.

Independent contractors present another classification risk. Federal and state governments use various tests to determine whether a worker is truly an independent contractor. Misclassifying employees as contractors can result in liability for unpaid wages, taxes, benefits, unemployment, and workers’ compensation insurance. Due diligence should include an analysis of each contractor’s role, the degree of control the company exerts, and whether the worker provides services to other clients. Buyers may decide to reclassify certain contractors upon closing to mitigate future exposure.

3. Union and Collective Bargaining Agreement Issues

Buyers must identify whether the target company has a unionized workforce and whether any collective bargaining agreements contain successor clauses. The National Labor Relations Board (NLRB) applies a “successor employer” doctrine when a buyer continues the seller’s business and retains a majority of its employees. Even in an asset sale, if a majority of the buyer’s new workforce previously worked for the unionized seller, the buyer may be required to recognize and bargain with the union.

Union contracts often include provisions requiring the agreement to bind any successor or assign, limiting the buyer’s ability to change wages, benefits, or policies. Buyers should evaluate the terms of these agreements, including grievance procedures, seniority systems, job guarantees, layoff rules, and arbitration clauses. They should also determine when the collective bargaining agreement expires and whether there are pending grievances or arbitrations.

4. WARN Act and Mini-WARN Requirements

The federal Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more employees to provide 60 days’ advance written notice of a plant closing or mass layoff affecting at least 50 employees at a single site of employment. When a business is sold, the WARN Act applies notice obligations based on the timing of a plant closing or mass layoff. Generally, if the layoff occurs before or on the closing date, the seller is responsible for providing notice; if it occurs after the acquisition, the buyer must comply.

At least 20 states have their own mini-WARN laws with lower employee thresholds or longer notice periods. Buyers must analyze the workforce composition and planned workforce reductions to determine whether federal or state notice requirements apply.

5. Benefits, Pension, and ERISA Liabilities

Employee benefit plans can represent significant liabilities in an acquisition. Buyers need to review all benefit programs, including medical, dental, life insurance, disability, retirement, and other fringe benefits.

401(k) and other defined contribution plans should be reviewed for compliance and outstanding obligations. Defined benefit pension plans—though relatively rare these days—can impose substantial liabilities if underfunded. Health and welfare plans must meet ACA, COBRA, and other compliance obligations. Executive compensation arrangements should be checked for change-of-control provisions that could trigger severance or accelerated vesting.

6. Immigration and Form I-9 Compliance

If the target employs foreign nationals or sponsors work visas, immigration issues become critical. Stock buyers should review all Form I-9s for current employees to ensure they are complete and accurate. Asset purchasers typically must obtain new I-9 documentation from employees they intend to hire from the seller.

For employees on certain visas, transactions may require amended petitions or new filings depending on whether the employing entity changes.

7. OSHA and Workplace Safety

Under OSHA, employers must provide a workplace free from recognized hazards. Especially in potentially hazardous workplaces, buyers should request safety logs, review citations, and evaluate the target’s safety policies. Corrective actions may need to be implemented before or shortly after closing.

State Law Variations and Local Considerations

U.S. employment laws vary widely. Buyers should consider mini-WARN laws, non-compete enforceability, pay equity and salary history rules, paid leave mandates, and state marijuana laws, among others, when integrating a workforce. Acquiring companies without experience as employers in the target jurisdiction are especially at risk without additional scrutiny. In multi-state transactions, these variations can significantly complicate post-closing compliance.

Post-Closing Integration: Preparing for Day One and Beyond

Employment law due diligence is a critical aspect of any M&A transaction. By understanding the differences between asset and stock purchases, scrutinizing employment contracts and policies, assessing compliance, and planning for post-closing integration, buyers can better protect their investment and promote a smooth transition.

Even the most thorough diligence cannot eliminate all risks. Integration planning should begin well before closing and address onboarding, compensation alignment, communication, cultural integration, and retention of key personnel. Post-closing compliance monitoring is also crucial for addressing any issues identified during diligence.

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