Caterpillar, Inc.

National Labor Relations Board - Administrative Judge Opinions

Feb 2, 2007

13-CA-043506 (N.L.R.B. Feb. 2, 2007)

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Joliet, IL
UNITED STATES OF AMERICA
BEFORE THE NATIONAL LABOR RELATIONS BOARD
DIVISION OF JUDGES
CATERPILLAR, INC.
and Case 13-CA-43506
INTERNATIONAL ASSOCIATION OF
MACHINISTS AND AEROSPACE
WORKERS, LOCAL LODGE NO. 851,
AFL-CIO
Denise Jackson-Riley, Esq., of Chicago, IL,
for the General Counsel.
Cristina Nedrow, of Naperville, IL,
for the Charging Party.
Joseph J. Torres, Esq., and Kevin M. Cloutier, Esq.,
of Chicago, IL, for the Respondent-Employer.
DECISION
Statement of the Case
Bruce D. Rosenstein, Administrative Law Judge. This case was tried before me on
November 30, 20061, in Chicago, Illinois, pursuant to a Complaint and Notice of Hearing in the
subject case (complaint) issued on October 13, by the Regional Director for Region 13 of the
National Labor Relations Board (the Board). The underlying charge was filed on July 19, by
International Association of Machinists and Aerospace Workers, Local Lodge No. 851, AFL-CIO
(the Charging Party or Union) alleging that Caterpillar, Inc. (the Respondent or Employer), has
engaged in certain violations of Section 8(a)(1) and (5) of the National Labor Relations Act (the
Act). The Respondent filed a timely answer to the complaint denying that it had committed any
violations of the Act.
Issues
The complaint alleges that the Respondent, about May 5, announced that the
prescription drug plan of employees in the bargaining unit would be changed beginning on

1 All dates are in 2006 unless otherwise indicated.
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September 1, without prior notice to the Union and without affording the Union an opportunity to
bargain with Respondent with respect to this conduct.
On the entire record, including my observation of the demeanor of the witnesses, and
after considering the brief filed by the Respondent, I make the following
Findings of Fact
I. Jurisdiction
The Respondent is a corporation engaged in the business of manufacturing
construction and mining equipment, diesel and natural gas engines and industrial gas turbines
in Joliet, Illinois, where in the past twelve months it purchased and received at its facility goods
valued in excess of $50,000 from points directly outside the State of Illinois. The Respondent
admits and I find that it is an employer engaged in commerce within the meaning of Section
2(2), (6), and (7) of the Act and that the Union is a labor organization within the meaning of
Section 2(5) of the Act.
II. Alleged Unfair Labor Practices
A. Background
The Union has represented the Respondent’s employees for collective
bargaining purposes since its certification by the Board on May 18, 1951. That recognition has
been embodied in successive collective-bargaining agreements, the most recent of which is
effective from May 2, 2005 to May 1, 2012 (Jt Exh. 7).2
Coextensive with the parties’ collective-bargaining agreement, they negotiated and
agreed to a successor Insurance Plan Agreement (Jt Exh. 2) which succeeded their 1999 Plan
(Jt Exh. 3). Subject to the Insurance Plan Agreement, the parties’ agreed to continue to
maintain the Group Insurance Plan which is the exclusive plan for insurance and other benefits
for death, sickness, accident, hospitalization, surgical or other medical services for eligible
employees of Respondent.
Included in the 2005 Group Insurance Plan are specific procedures for review of
disputed claims.3 Also contained therein is the right of the Respondent to administer the Group
Insurance Plan (Jt Exh. 2, Section 9.3).

2 Article 4.1, Step 3 (Grievance Procedure) states in pertinent part: Disputes whose basic
issue is the interpretation, application or alleged violation of the terms of the Group Insurance
Plan Agreement between the parties shall not be subject to the grievance procedure. Such
disputes shall be processed in accordance with the review procedure for disputed claims in the
appropriate Group Insurance Plan Agreement.
3 Section 8 states in pertinent part: To afford employees a means by which they can seek
review and possible reconsideration of a disputed disability, medical, dental, vision, catastrophic
medical expense, or a hearing aid claim or a life insurance, or accidental death or
dismemberment benefit claim which is denied the following procedure will apply. Thereafter,
there are four steps that must be followed when submitting a disputed claim (Jt Exh. 2, page 2).
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B. The 8(a)(1) and (5) Allegation
The General Counsel alleges in paragraph 5 of the complaint that the Respondent,
about May 5, announced that the prescription drug plan of employees in the bargaining unit
would be changed beginning September 1, without prior notice to the Union and without
affording the Union an opportunity to bargain with Respondent with respect to this conduct.
1. Facts
By letter dated April 24, Respondent’s physician Dr. Richard Luetkemeyer furnished
local physicians that service employee/members prescription drug needs, information about the
use of drug claim data. In pertinent part, Dr. Luetkemeyer noted that 95% of individuals covered
under the prescription drug plan choose a generic drug when one is available and pointed out
that there is a small group of employees who are choosing the brand drug even though the
prescribing physician has stated substitution with the generic equivalent is acceptable.
Accordingly, the Respondent determined that effective September 1, it would implement
a “generic first” program. When a direct generic is available for a given drug, the
employee/member may still choose the brand, but will pay full retail price for the brand drug,
unless the brand drug is specified by the treating physician. The Respondent will no longer pay
any portion of the cost of a brand drug with a direct generic equivalent, unless the prescribing
physician has ordered “no substitution” for the brand drug (Jt Exh. 6).
By letter dated May 5, Respondent notified all prescription drug plan employee/members
of the above changes to be effective September 1 (Jt Exh. 4).4
By letter dated May 8, Respondent sent a similar letter to specific employee/members
who recently chose at least one brand drug when there are less costly, high quality alternative
drugs available and notified them that beginning September 1, a generic step therapy program
will be implemented (Jt Exh. 5).
On May 10, the Union filed a Step 3 grievance under the parties’ collective bargaining
agreement alleging that an improper change was made to their prescription drug plan and
requested that the drug benefits be applied as provided in the benefit book (Jt Exh. 8). The
Respondent, on or about May 30, denied the grievance relying on Article 4, Section 4.1, Step 3,
of the grievance procedure that such disputes must be processed in accordance with the review
procedure for disputed claims in the Group Insurance Plan.
On or about June 20, prior to a meeting with the Labor Relations Manager, the Union
orally requested to negotiate over the May 5 announced change in the prescription drug plan.

4 In pertinent part the letter stated: For this reason, beginning September 1, 2006, Caterpillar
will implement a generic step therapy program. When a direct generic is available for a given
drug, members may still choose the brand but will pay full retail price for the brand drug, unless
a physician specifies the brand drug is required. In the event that a brand drug does not have a
direct generic equivalent, step therapy does not apply and the brand can be filled at the regular
Caterpillar co-pay amount. We are not requiring members to choose a generic if there is no
direct generic equivalent to the medication they are currently using. The letter closed by stating
that generic step therapy should have little or no impact on you and your family, however, we
want you to be aware of the new program.
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On July 19, the subject unfair labor practice was filed.
By letter dated September 26, the Union referenced the May 5 change to the
prescription drug plan and cited the denial of its grievance that protested the change.
Accordingly, the Union requested the Respondent to engage in negotiations over the change
(Jt Exh. 9).
2. Discussion and Analysis
The General Counsel and the Union argue that when the Respondent made changes to
the prescription drug plan it did so without notice and without affording the Union an opportunity
to bargain with respect to this conduct.
The Respondent presents several arguments in support of its position that its conduct in
changing the prescription drug plan did not violate the Act. First, the Respondent states that its
actions were taken in accordance with the terms of the applicable Insurance Plan Agreement
and Group Insurance Plan which were negotiated by the parties. Second, the Respondent
contends that the underlying dispute must be submitted to the applicable dispute resolution
procedure that is set forth in the Group Insurance Plan. Third, the Respondent argues that any
change that occurred was an administrative rather then a substantive change and therefore did
not trigger a notice or bargaining obligation with the Union. In this regard, the Respondent
asserts that the program merely changed a procedural aspect of “how” prescription drugs were
administered; it did not alter language in the Group Insurance Plan or otherwise substantively
modify actual benefits. Finally, the Respondent opines that even if there was a substantive
change in the prescription drug plan any impact on bargaining unit employees was not greater
than de minimis.
In considering the first two arguments presented by the Respondent, I note that Section
8 of the Group Insurance Plan excludes the prescription drug plan as one of the procedures for
the review of disputed claims (Jt Exh. 2, page 2). Likewise, the procedure specifically states
that it is to afford employees a forum to seek review and reconsideration of a claim that has
been denied. There is no reference to the Union as an independent party with a right to file a
claim or fully participate in the review procedure. While a local union insurance representative
is mentioned in Steps 1-4 of Section 8, that individual is only permitted to represent the
employee’s interest in a previously denied claim and no provision is made for the Union to
independently file a grievance or a refusal to negotiate allegation in this forum.
For all of these reasons, I reject Respondent’s first two arguments that the procedures
set forth in the Group Insurance Plan should be followed, and the subject complaint allegations
should be dismissed. I also reject the Respondent’s arguments in its post hearing brief that the
present dispute is solely one of contract interpretation warranting that the subject change in the
prescription drug plan be dismissed. Based on the above discussion, and particularly noting
that the prescription drug plan is excluded from the dispute resolution procedure in the Group
Insurance Plan, I do not find that there are equally plausible contract interpretation questions to
be resolved. Westinghouse Electric Corporation, 313 NLRB 452 (1993).
With respect to the Respondent’s third defense, they first contend that the Group
Insurance Plans provisions reserve to it the exclusive right to administer the Plan. The
Respondent does not disagree with its obligation to notify the Union if a substantive change is
made to the Insurance Plan Agreement. For example, if the Plan’s section for preventive
benefits did not include diagnostic tests and the Respondent wanted to add these to the Plan,
such a substantive change would trigger a notification and a bargaining obligation with the
Union. On the other hand, the Respondent has a consistent established past practice of not
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notifying the Union when it makes administrative changes to the existing Insurance Plan
Agreement. For example, the Respondent has an established practice of requiring certain
drugs to be preauthorized in order to control costs and to determine whether other drugs could
treat the problem just as effectively. The Union challenged the preauthorization criteria arguing
that this was a substantive change to the Insurance Plan Agreement. Ultimately, the matter was
referred to arbitration under the parties’ 1999 collective bargaining agreement. The arbitrator
held that the Respondent’s design of the preauthorization criteria was reasonable and
appropriate, finding that it was within the Company’s right to administer the plan as a means of
controlling costs (R Exh.1).
On another occasion, the Respondent changed the Insurance Plan Agreement as it
concerned the quantity of medication that could be prescribed by a physician. This procedure
started with the prescribing of Viagra and has continued more recently with Cholesterol type
drugs. Since this was an administrative change to the Insurance Plan Agreement, notification
was not provided to the Union.
Lastly, the Respondent implemented a step therapy program wherein the
employee/members of the Plan are required to start with a over-the-counter medication before
progressing to a generic prescription drug and then to a brand drug if the generic drug did not
prove effective. Because this was an administrative change to the Plan, the Union was not
notified and no negotiations occurred between the parties.
The Board has held that an employer violates Section 8(a)(1) and (5) if it makes a
unilateral change in wages, hours, or other terms and conditions of employment without first
giving the Union notice and an opportunity to bargain. See NLRB v. Katz, 369 U.S. 736, 743
(1962). On the other hand, where an employer’s action does not change existing conditions—
that is, where it does not alter the status quo—the employer does not violate Section 8(a)(1) and
(5) of the Act. See House of the Good Samaritan, 268 NLRB 236,237 (1983). An established
past practice can become part of the status quo. Indeed, the Board has previously found no
violation of Section 8(a)(1) and (5) of the Act where the employer simply followed a well-
established past practice. See, e.g. Luther Manor Nursing Home, 270 NLRB 949, 959 (1984),
affd, 772 F.2d 421 (8th Cir. 1985) (no violation of Sec. 8(a)(1) and (5) where the employer, in
accordance with past practice, paid one third of an insurance premium itself and required
employees to pay the remaining two thirds). In a subsequent case, The Post-Tribune
Company, 337 NLRB 1279 (2002), the Board applied this criteria in finding no violation of the
Act.
The Respondent argues that it has an established past practice of making administrative
changes to its prescription drug plan without notifying or bargaining with the Union. Indeed, the
record evidence shows that such a practice does exist and in the subject case the
employee/member is not adversely impacted if they select the equivalent generic medication to
the brand drug. Likewise if the employee/member is required to take the brand drug, and this is
noted on the prescription form by the treating physician, no change takes place as the
employee/member may receive the brand drug and is reimbursed by the Respondent for the
appropriate co-payment. It is only in the situation when the physician approves the use of a
generic drug or does not specify that a brand drug must be provided and the employee/member
chooses the brand drug that he or she would be required to incur the co-payment.
Under these circumstances, I am in agreement with the Employer that no substantive
change occurred on May 5, when the Respondent informed employees that the prescription
drug plan would be changed effective September 1. In this regard, the employee/member is
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permitted to receive a brand drug with total reimbursement by the Respondent as long as the
physician certifies the necessity for its use.
For all of these reasons, and particularly noting that no substantive change occurred
requiring notice and bargaining with the Union, I recommend that the complaint be dismissed in
its entirety. Bath Iron Works Corporation, 302 NLRB 898, 901, (1991); Optica Lee Borinquen,
Inc., 307 NLRB 705, 716 (1992).
Based on my above finding that no substantive change occurred to require a bargaining
obligation, the Respondent’s argument that even if a change took place the impact on
employees was not greater than de minimis is moot. However, if others disagree with my
conclusion, I would find contrary to the Respondent that the change in the prescription drug plan
on September 1 had a foreseeable impact on employees greater than de minimis. In this
regard, the record testimony indicates that as of the date of the hearing no claims filed by
employees had progressed through the pipeline to produce information whether employees had
incurred additional costs if they selected brand drugs without the authorization of there
physician. In my opinion, it is reasonable to conclude that of the 5% of employees that do not
routinely select generic drugs a percentage of them, due in part to the introduction of the new
change or the fact that certain employees have always selected brand drugs, continued to do so
after September 1. Therefore, it stands to reason that those employees who previously were
reimbursed by the Respondent for the co-payment will not receive that payment under the
change that is now in effect and will be required to pay the full price for the prescription.
Based on the above, I find that if a change did occur on September 1, the impact on
bargaining unit employees was greater than de minimis.
Conclusions of Law
1. Respondent is an employer engaged in commerce within the meaning of Section
2(2), (6) and (7) of the Act.
2. The Union is a labor organization within the meaning of Section 2(5) of the Act.
3. Respondent did not violate Section 8(a)(1) and (5) of the Act when it made
administrative changes to the parties prescription drug plan.
On these findings of fact and conclusions of law and on the entire record, I issue the
following recommended5
ORDER
The complaint is dismissed.
Dated, Washington, D.C. February 2, 2007
____________________
Bruce D. Rosenstein
Administrative Law Judge

5 If no exceptions are filed as provided by Sec. 102.46 of the Board’s Rules and
Regulations, the findings, conclusions, and recommended Order shall, as provided in Sec.
102.48 of the Rules, be adopted by the Board and all objections to them shall be deemed
waived for all purposes.
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