Caterpillar, Inc.

National Labor Relations Board - Board Decisions

Aug 17, 2010

355 N.L.R.B. 521 (N.L.R.B. 2010)

CATERPILLAR, INC.
355 NLRB No. 91
521
Caterpillar, Inc. and International Association of Ma-
chinists and Aerospace Workers, Local Lodge
No. 851, AFL–CIO. Case 13–CA–43506
August 17, 2010
DECISION AND ORDER
BY CHAIRMAN LIEBMAN AND MEMBERS BECKER
AND PEARCE
The single issue in this case is whether the Respondent
violated Section 8(a)(5) and (1) of the Act by announcing
and implementing a “generic first” prescription drug
program without providing the Union notice and an op-
portunity to bargain.1 The judge found no violation and
dismissed the complaint.
The National Labor Relations Board has delegated its
authority in this proceeding to a three-member panel.
The Board has considered the decision and the record
in light of the exceptions and brief and has decided, for
the reasons set forth below, to reverse the judge’s deci-
sion and find that the Respondent’s unilateral announce-
ment and implementation of the “generic first” program
violated Section 8(a)(5) and (1) of the Act.
I. BACKGROUND
The International Association of Machinists and Aero-
space Workers, Local Lodge No. 851, AFL–CIO (the
Union) has been the bargaining representative for a unit
of the Respondent’s employees at its Joliet, Illinois plant
since 1951. The parties’ current collective-bargaining
agreement runs from May 2, 2005, to May 1, 2012. On
April 28, 2005, the parties executed two insurance plan
agreements with appended group insurance plans, under
which unit employees are provided, among other things,
prescription drug benefits.2
Under the group insurance plans, employees were free
to choose either brand-name prescription drugs or their
generic equivalents. Employees choosing generic pre-
scription drugs were responsible for a copayment of $5.
Employees choosing brand-name prescription drugs were
responsible for a copayment of $20 or $35 for preferred
and nonpreferred drugs, respectively. These copay
amounts were contractually specified in the group insur-
ance plans themselves.

1 On February 2, 2007, Administrative Law Judge Bruce D. Rosen-
stein issued the attached decision. The General Counsel filed excep-
tions and a supporting brief. The Board denied the Respondent’s mo-
tion to untimely file cross-exceptions, a supporting brief, and an an-
swering brief.
2 One insurance plan agreement and appended group insurance plan
applies to employees hired before May 2, 2005; the other, to employees
hired on or after that date. The two sets of documents are identical in
all respects material to this case. These two agreements superseded the
parties’ 1999 insurance plan agreement/group insurance plan.
By letter dated May 5, 2006,3 the Respondent fur-
nished the following notice to employees enrolled in its
prescription drug plan:

According to our data, there is still a small group
of members who are choosing brand names when
they have less costly, high-quality generic equiva-
lents.
For that 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 ge-
neric equivalent . . . the brand can be filled at the
regular Caterpillar co-pay amount. . . .

The Respondent did not give the Union notice and an op-
portunity to bargain prior to sending this announcement to
employees.
Dave Stevens, the Respondent’s senior labor relations
consultant, testified that, in his view, the Respondent had
no duty to bargain concerning the “generic first” program
because it “was not a substantive change in the plan it-
self. It was simply an administrative change in how the
prescription drugs were administered.” Stevens likened
the change to past drug-benefit changes that he also char-
acterized as administrative. In 1998, for example, the
Respondent began requiring preauthorization for certain
prescriptions. In 1999 and after, pursuant to Food and
Drug Administration (FDA) guidelines, it instituted
quantity limits on prescriptions for certain drugs. And,
on several occasions after 1998, the Respondent put in
place “step therapies” for certain families of drugs, under
which an individual would first try an over-the-counter
medication and then proceed to related generic and
name-brand drugs only if the previous step proved inef-
fective. The 1999 group insurance plan was silent as to
preauthorization requirements, drug quantity limits, and
step therapies; the 2005 group insurance plans were
likewise silent as to step therapies, but they expressly
gave the Respondent the right to impose preauthorization
requirements and quantity limits.
Notwithstanding the Respondent’s characterization, in
its May 5 notice to employees, of “generic first” as a
“step therapy program,” Stevens acknowledged that “ge-
neric first” is not a step therapy. Stevens explained that
“generic first” applied “across the board . . . wherever
there was a generic equivalent for a brand name,”

3 All dates refer to 2006, unless otherwise specified.
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD

522
whereas a step therapy was “a limited focus program that
applied to a family of drugs . . . not every drug.”
On May 10, the Union grieved the unilateral imple-
mentation of “generic first.” The Respondent denied the
grievance. On June 20 and September 28, the Union
requested bargaining. The Respondent refused to bar-
gain.
II. JUDGE’S DECISION AND GENERAL COUNSEL’S
EXCEPTIONS
The judge found that the Respondent did not violate
Section 8(a)(5) when it unilaterally implemented “ge-
neric first.” Initially, he relied on the rationale that Sec-
tion 8(a)(5) is not violated “where an employer’s action
does not change existing conditions—that is, where it
does not alter the status quo.” Applying this principle,
the judge found the implementation of “generic first”
lawful as a continuation of “an established past practice.”
But having found no alteration of the status quo, the
judge went on to find no “substantive” change, citing in
support two cases—Bath Iron Works Corp.4 and Optica
Lee Borinquen, Inc.5—that the Respondent relied on to
argue that “generic first,” albeit a change, was merely an
“administrative” change and hence not material, substan-
tial, and significant.6
Excepting, the General Counsel takes issue with both
of the judge’s rationales, arguing that “generic first” did
change the status quo and that it did so materially, sub-
stantially, and significantly.
III. ANALYSIS
An employer violates Section 8(a)(5) and (1) of the
Act if it makes a unilateral change in wages, hours, or
other terms and conditions of employment,7 provided
that the change is material, substantial, and significant8
and that no claim of privilege applies.9 If, of course, the
alleged “change” actually maintains the status quo, then

4 302 NLRB 898, 901 (1991).
5 307 NLRB 705, 716 (1992), enfd. mem. 991 F.2d 786 (1st Cir.
1993).
6 See, e.g., Crittenton Hospital, 342 NLRB 686 (2004) (finding em-
ployer’s unilateral change lawful because the change was not material,
substantial, and significant).
The Respondent also argued that even if the change was more than
merely administrative, it was still not material, substantial, and signifi-
cant because its impact on unit employees was de minimis. The judge
rejected this contention, and also implicitly rejected the Respondent’s
contention that the change was privileged because the Union waived
bargaining. No timely exceptions were filed by the Respondent, and
therefore those contentions are not before us.
7 NLRB v. Katz, 369 U.S. 736, 743 (1962).
8 E.g., Crittenton Hospital, supra.
9 Pan American Grain Co., 351 NLRB 1412, 1414 fn. 9 (2007)
(holding that the burden of demonstrating that a unilateral change was
privileged rests on the employer), enfd. 558 F.3d 22 (1st Cir. 2009).
Section 8(a)(5) is not violated.10 Healthcare benefits are
mandatory subjects of collective bargaining.11 Thus, if
the Respondent’s unilateral implementation of “generic
first” changed employees’ healthcare benefits, and did so
materially, substantially, and significantly, then absent
any defense that the change was privileged, the Respon-
dent violated Section 8(a)(5).
It is not clear from the judge’s analysis whether he
found no duty to bargain because “generic first” contin-
ued a past practice and, thus, did not change the status
quo, or because it did change the status quo, but not ma-
terially, substantially, and significantly. However the
judge’s analysis is characterized, we conclude that he
erred, for the reasons that follow.
A.
To the extent the judge found that “generic first”
merely continued a past practice and, thus, did not
change the status quo, we reject that finding as having no
evidentiary support.
The burden of proof to demonstrate past practice rests
on the Respondent, who must show that the practice oc-
curred “with such regularity and frequency that employ-
ees could reasonably expect the ‘practice’ to continue or
reoccur on a regular and consistent basis.”12 The record
here falls short of such a showing.
The Respondent failed to establish the specific circum-
stances surrounding the prior changes in the prescription
drug program. The Respondent presented no evidence of
the dates on which the prior changes occurred, or the
number or the frequency of the changes. The record
merely reflects that on unspecified dates in and after
1998, the Respondent made unbargained changes in pre-
scription-drug benefits by instituting preauthorization
requirements, drug-quantity limits, and step therapies.
By failing to specify when the prior changes occurred,
the number of such changes or their frequency, the Re-
spondent necessarily failed to meet its burden of showing
regularity and frequency.
In addition, even assuming regularity and frequency,
there was no practice. Other than the fact that they each
altered the Respondent’s prescription-drug plan, there is
no thread of similarity running through and linking the
several types of change at issue here. The three types of
past change—preauthorization requirements, drug-
quantity limits, step therapies—are each dissimilar; and
the Respondent does not contend that “generic first” falls

10 E.g., Post-Tribune Co., 337 NLRB 1279, 1280–1281 (2002) (find-
ing no change where increase in employees’ health insurance costs in
absolute dollars-and-cents terms preserved unchanged the percentage of
health insurance costs allocated to employees).
11 United Hospital Medical Center, 317 NLRB 1279, 1281 (1995).
12 Sunoco, Inc., 349 NLRB 240, 244 (2007).
CATERPILLAR, INC.

523
into any one of these categories of past practice. And it
does not: “generic first” is not a preauthorization re-
quirement; it has nothing to do with drug-quantity limits;
and Labor Relations Consultant Stevens expressly ac-
knowledged that it is not a step therapy.
Moreover, even assuming that the past changes were
sufficiently similar among themselves to constitute a
“practice,” the implementation of “generic first” repre-
sented a material departure from that past practice. The
past changes were limited in scope, involving only cer-
tain drugs or families of drugs. “Generic first,” by con-
trast, involved all brand-name drugs that have generic
equivalents.13 Moreover, and significantly, unlike “ge-
neric first,” the past changes did not alter express terms
of the group insurance plans. All such changes con-
cerned matters the group insurance plans either did not
address or, after April 28, 2005, expressly left to the Re-
spondent’s sole discretion. By contrast, the copay
amounts for brand-name drugs were specified in the
group insurance plans.
Finally, we reject the judge’s finding that the unilateral
implementation of “generic first” was lawful because it
continued a past practice of making “administrative”
changes. As defined by the Respondent, an “administra-
tive” change is procedural, as opposed to a substantive
modification in plan benefits. But there is no principle
that exempts a “procedural” change from the duty to bar-
gain, provided that the change is material, substantial,
and significant (as “generic first” was, for reasons ex-
plained below).
Further, making a series of disparate changes without
bargaining does not establish a “past practice” excusing
bargaining over future changes. Rather, it shows merely
that, on several past occasions, the Union waived its right
to bargain. It is well settled, however, that a “union’s
acquiescence in previous unilateral changes does not
operate as a waiver of its right to bargain over such
changes for all time.”14 Moreover, as stated above, how-
ever characterized, “administrative” changes that do not
alter express contract terms are fundamentally unlike an
“administrative” change that does.
In sum, the record does not permit a finding that “ge-
neric first” continued an established past practice and did
not alter the status quo.

13 The Respondent did not present evidence regarding how many
drugs or families of drugs were involved in the past changes. At the
hearing, Stevens was asked how many drugs were involved in the step
therapy program, and he testified that he “would not hazard a guess”
but that it was “more than one.” He acknowledged, however, that
“generic first” applied “across the board . . . wherever there was a ge-
neric equivalent for a brand name.”
14 Owens-Corning Fiberglas, 282 NLRB 609 (1987).
B.
To the extent the judge found that the unilateral im-
plementation of “generic first” was lawful because it was
not a material, substantial, and significant change, we
disagree with that analysis as well.
The Board has found unilateral changes to be material,
substantial, and significant where, among other things,
those changes impair employee choice or discretion re-
lated to employee benefits15 or change the costs to em-
ployees of such benefits.16 Both of these grounds apply
in this case. Prior to the implementation of “generic
first,” employees had the discretion to choose between
generic drugs ($5 copayment) or brand-name drugs ($20
or $35 copayment) as they saw fit. The only conse-
quence of choosing a brand-name drug was a higher co-
payment. Under the new program, employees no longer
have discretion to choose brand-name over generic
drugs. If an employee chooses a brand-name drug with-
out physician approval, the employee must pay the full
retail price. The elimination of employee discretion in
this area and the increase in the cost of brand-name drugs
when not specified by a physician constitute material,
substantial, and significant changes. Palm Court Nurs-
ing Home, supra; Flambeau Airmold, supra.17
Bath Iron Works, supra, and Optica Lee Borinquen,
supra, cited by the judge, are distinguishable. Applying
the Spielberg/Olin18 deferral standard, the Board in Bath
Iron Works upheld as not clearly repugnant to the pur-
poses and policies of the Act an arbitral award finding
that an employer permissibly instituted drug testing
where the testing was “logically encompassed” in “estab-
lished rules” that “set forth the [employer’s] authority” to
do so. 302 NLRB at 901. Here, by contrast, “generic

15 United Rentals, 349 NLRB 853, 863 (2007) (finding the em-
ployer’s unilateral discontinuation of its long-settled practice of allow-
ing employees to take unpaid days off without using sick leave or vaca-
tion time unlawful because “the freedom to [do so] cannot be labeled as
insignificant”); Flambeau Airmold Corp., 334 NLRB 165, 166 (2001)
(finding the employer’s unilateral changes unlawful because those
changes “impaired the employees’ discretion and ability to use their
sick leave benefit as they saw fit”), modified on other grounds 337
NLRB 1025 (2002).
16 See, e.g., Palm Court Nursing Home N.H., L.L.C., 341 NLRB 813,
819–820 (2004) (finding the employer’s unilateral implementation of
changes in health benefits unlawful in part because these changes in-
creased employee copayments for prescription drugs).
17 The fact that this change impacts only those few employees who
choose brand-name over generic drugs does not make it insubstantial.
See, e.g., Ivy Steel & Wire, 346 NLRB 404, 419 (2007) (“The fact that
the unilateral change . . . may have affected only one unit employee,
and not other members of the bargaining unit, does [not] render the
change inconsequential or insubstantial.”); Carpenters Local 1031, 321
NLRB 30, 32 (1996).
18 Spielberg Mfg. Co., 112 NLRB 1080 (1955); Olin Corp., 268
NLRB 573 (1984).
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD

524
first” was not “logically encompassed” in the established
copay rules. Rather, the rules themselves were changed.
In Optica Lee Borinquen, the Board considered the
bargainability of several changes and found no violation
where they “amounted merely to language adjustments
which either codif[ied] previously announced proce-
dures, eliminate[d] ambiguity, or articulate[d] procedures
undeclared, but implicit in an existing body of rules or
restrictions.” 307 NLRB at 716. Significantly, however,
a violation of Section 8(a)(5) was found for the unilateral
change most similar to the “generic first” program: a
reduction of the employee discount on purchases of sun-
glasses and contact lenses. Id. at 716–717. Like that
change, the one at issue here increased costs for employ-
ees who chose to purchase certain products.
For these reasons, we reverse the judge’s decision and
find that the Respondent’s unilateral announcement and
implementation of the “generic first” program violated
Section 8(a)(5).
REMEDY
Having found that the Respondent has violated Section
8(a)(5) of the Act by failing to notify and bargain with
the Union concerning the announcement and implemen-
tation of its “generic first” program, we shall order the
Respondent to cease and desist therefrom and to take
certain affirmative action necessary to effectuate the
policies of the Act. Specifically, we shall order the Re-
spondent to rescind its “generic first” program and to
bargain with the Union before implementing further
changes in unit employees’ wages, hours, or terms and
conditions of employment. We shall also order the Re-
spondent to make whole employees adversely affected
by unilateral implementation of the “generic first” pro-
gram, with interest as computed in New Horizons for the
Retarded, 283 NLRB 1173 (1987).
ORDER
The National Labor Relations Board orders that the
Respondent, Caterpillar, Inc., Joliet, Illinois, its officers,
agents, successors, and assigns, shall
1. Cease and desist from
(a) Unilaterally announcing and implementing the
“generic first” program.
(b) Making material, substantial, and significant
changes to the prescription drug program of unit employ-
ees without first notifying the Union and affording it an
opportunity to bargain concerning such changes and their
effects.
(c) In any like or related manner interfering with, re-
straining, or coercing employees in the exercise of the
rights guaranteed them by Section 7 of the Act.
2. Take the following affirmative action necessary to
effectuate the policies of the Act.
(a) Rescind the “generic first” program implemented
on September 1, 2006.
(b) Before implementing any changes in wages, hours,
or other terms and conditions of employment of unit em-
ployees, notify and, on request, bargain with the Union
as the exclusive collective-bargaining representative of
employees in the following bargaining unit:

All production and maintenance employees of the
Company’s Joliet Plant, excluding salaried office cleri-
cal employees, plant protection employees, profes-
sional and supervisory employees as defined in the Act.

(c) Make whole all employees adversely affected by
the unlawful implementation of the “generic first” pro-
gram, with interest as set forth in the remedy section of
this decision.
(d) Preserve and, within 14 days of a request, or such
additional time as the Regional Director may allow for
good cause shown, provide at a reasonable place desig-
nated by the Board or its agents, all payroll records, so-
cial security payment records, timecards, personnel re-
cords and reports, and all other records, including an
electronic copy of such records if stored in electronic
form, necessary to analyze the amount of reimbursement
to the unit employees due under the terms of this Order.
(e) Within 14 days after service by the Region, post at
its facility in Joliet, Illinois, copies of the attached notice
marked “Appendix.”19 Copies of the notice, on forms
provided by the Regional Director for Region 13, after
being signed by the Respondent’s authorized representa-
tive, shall be posted by the Respondent and maintained
for 60 consecutive days in conspicuous places, including
all places where notices to employees are customarily
posted. Reasonable steps shall be taken by the Respon-
dent to ensure that the notices are not altered, defaced, or
covered by any other material. In the event that, during
the pendency of these proceedings, the Respondent has
gone out of business or closed the facility involved in
these proceedings, the Respondent shall duplicate and
mail, at its own expense, a copy of the notice to all cur-
rent employees and former employees employed by the
Respondent at any time since May 5, 2006.
(f) Within 21 days after service by the Region, file
with the Regional Director a sworn certification of a re-

19 If this Order is enforced by a judgment of a United States court of
appeals, the words in the notice reading “Posted by Order of the Na-
tional Labor Relations Board” shall read “Posted Pursuant to a Judg-
ment of the United States Court of Appeals Enforcing an Order of the
National Labor Relations Board.”
CATERPILLAR, INC.

525
sponsible official on a form provided by the Region at-
testing to the steps the Respondent has taken to comply.
APPENDIX
NOTICE TO EMPLOYEES
POSTED BY ORDER OF THE
NATIONAL LABOR RELATIONS BOARD
An Agency of the United States Government

The National Labor Relations Board has found that we vio-
lated Federal labor law and has ordered us to post and obey
this notice.
FEDERAL LAW GIVES YOU THE RIGHT TO
Form, join, or assist a union
Choose representatives to bargain with us on
your behalf
Act together with other employees for your bene-
fit and protection
Choose not to engage in any of these protected
activities.

WE WILL NOT unilaterally implement the “generic
first” prescription drug program for employees in the
bargaining unit set forth below.
WE WILL NOT unilaterally make material, substantial,
and significant changes in unit employees’ prescription
drug benefits without first notifying International Asso-
ciation of Machinists and Aerospace Workers, Local
Lodge No. 851, AFL–CIO (the Union) and affording it
an opportunity to bargain concerning such changes and
their effects.
WE WILL NOT in any like or related manner interfere
with, restrain, or coerce employees in the exercise of the
rights set forth above, which are guaranteed them by Sec-
tion 7 of the Act.
WE WILL rescind the “generic first” program imple-
mented on September 1, 2006.
WE WILL, before implementing any changes in wages,
hours, or other terms and conditions of employment of
unit employees, notify and, on request, bargain with the
Union as the exclusive collective-bargaining representa-
tive of our employees in the following bargaining unit:

All production and maintenance employees of the
Company’s Joliet Plant, excluding salaried office cleri-
cal employees, plant protection employees, profes-
sional and supervisory employees as defined in the Act.

WE WILL make whole, with interest, all employees ad-
versely affected by our unlawful implementation of the
“generic first” program.

CATERPILLAR, INC.

Denise Jackson-Riley, Esq., for the General Counsel.
Joseph J. Torres, Esq. and Kevin M. Cloutier, Esq., of Chicago,
Illinois, for the Respondent-Employer.
Cristina Nedrow, of Naperville, Illinois, for the Charging Party.
DECISION
STATEMENT OF THE CASE
BRUCE D. ROSENSTEIN, Administrative Law Judge. This case
was tried before me on November 30, 2006,1 in Chicago, Illi-
nois, pursuant to a complaint and notice of hearing in the sub-
ject case (the 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 Work-
ers, Local Lodge No. 851, AFL–CIO (the Charging Party or the
Union), alleging that Caterpillar, Inc. (the Respondent or the
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, an-
nounced that the prescription drug plan of employees in the
bargaining unit would be changed beginning on 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 de-
meanor 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, Illi-
nois, where in the past 12 months it purchased and received at
its facility goods valued in excess of $50,000 from points di-
rectly 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

1 All dates are in 2006, unless otherwise indicated.
2 Art. 4.1, step 3 (grievance procedure) states in pertinent part: Dis-
putes whose basic issue is the interpretation, application or alleged
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD

526
Coextensive with the parties’ collective-bargaining agree-
ment, 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 pro-
cedures for review of disputed claims.3 Also contained therein
is the right of the Respondent to administer the group insurance
plan (Jt. Exh. 2, sec. 9.3).
B. The 8(a)(1) and (5) Allegations
The General Counsel alleges in paragraph 5 of the complaint
that the Respondent, about May 5, announced that the prescrip-
tion 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 bar-
gain with Respondent with respect to this conduct.
1. Facts
By letter dated April 24, Respondent’s physician, Dr. Rich-
ard Luetkemeyer, furnished local physicians that service em-
ployee/members prescription drug needs, information about the
use of drug claim data. In pertinent part, Dr. Luetkemeyer
noted that 95 percent of individuals covered under the prescrip-
tion 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 Sep-
tember 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 equiva-
lent, unless the prescribing physician has ordered “no substitu-
tion” 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 effec-
tive September 1 (Jt. Exh. 4).4

violation of the terms of the group insurance plan agreement between
the parties shall not be subject to the grievance procedure. Such dis-
putes shall be processed in accordance with the review procedure for
disputed claims in the appropriate group insurance plan agreement.
3 Sec. 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 dismem-
berment 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, p. 2).
4 In pertinent part the letter stated: For this reason, beginning Sep-
tember 1, 2006, Caterpillar will implement a generic step therapy pro-
gram. 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
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 par-
ties’ 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 griev-
ance procedure that such disputes must be processed in accor-
dance with the review procedure for disputed claims in the
group insurance plan.
On or about June 20, prior to a meeting with the labor rela-
tions manager, the Union orally requested to negotiate over the
May 5 announced change in the prescription drug plan.
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 Re-
spondent 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 applica-
ble insurance plan agreement and group insurance plan which
were negotiated by the parties. Second, the Respondent con-
tends that the underlying dispute must be submitted to the ap-
plicable 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 sub-
stantive change and therefore did not trigger a notice or bar-
gaining obligation with the Union. In this regard, the Respon-
dent asserts that the program merely changed a procedural as-
pect of “how” prescription drugs were administered; it did not
alter language in the group insurance plan or otherwise substan-
tively 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 Re-
spondent, I note that section 8 of the group insurance plan ex-
cludes the prescription drug plan as one of the procedures for

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 Cater-
pillar copay amount. We are not requiring members to choose a ge-
neric 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.
CATERPILLAR, INC.

527
the review of disputed claims (Jt. Exh. 2, p. 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 inde-
pendent party with a right to file a claim or fully participate in
the review procedure. While a local union insurance represen-
tative is mentioned in steps 1–4 of section 8, that individual is
only permitted to represent the employee’s interest in a previ-
ously denied claim and no provision is made for the Union to
independently file a grievance or a refusal to negotiate allega-
tion in this forum.
For all of these reasons, I reject Respondent’s first two ar-
guments 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 posthearing 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 dis-
cussion, 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 Corp., 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 notifying the Union when it makes administra-
tive changes to the existing insurance plan agreement. For
example, the Respondent has an established practice of requir-
ing 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 insur-
ance plan agreement. Ultimately, the matter was referred to
arbitration under the parties’ 1999 collective-bargaining agree-
ment. The arbitrator held that the Respondent’s design of the
preauthorization criteria was reasonable and appropriate, find-
ing 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 an 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 administra-
tive change to the plan, the Union was not notified and no ne-
gotiations 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 em-
ployer’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, Post-Tribune Co., 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 prac-
tice 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 im-
pacted 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 em-
ployee/member may receive the brand drug and is reimbursed
by the Respondent for the appropriate copayment. 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 copayment.
Under these circumstances, I am in agreement with the Em-
ployer 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 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 sub-
stantive change occurred requiring notice and bargaining with
the Union, I recommend that the complaint be dismissed in its
entirety. Bath Iron Works Corp., 302 NLRB 898, 901 (1991);
Optica Lee Borinquen, Inc., 307 NLRB 705, 716 (1992).
Based on my above finding that no substantive change oc-
curred to require a bargaining obligation, the Respondent’s
argument that even if a change took place the impact on em-
ployees 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
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD

528
had progressed through the pipeline to produce information
whether employees had incurred additional costs if they se-
lected brand drugs without the authorization of their physician.
In my opinion, it is reasonable to conclude that of the 5 percent
of employees that do not routinely select generic drugs a per-
centage 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 copayment will not re-
ceive 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 Sep-
tember 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 pre-
scription drug plan.
[Recommended Order for dismissal omitted from publica-
tion.]