Key Takeaways

  • Good faith bargaining requires parties to negotiate honestly, share relevant information, and make genuine efforts to reach an agreement.
  • Bad faith negotiation occurs when one party obstructs or manipulates the negotiation process without intent to reach a deal.
  • Common signs of bad faith include refusing to meet, withholding necessary documents, making unreasonable demands, or bypassing the other party’s representative.
  • Labor law under the NLRA imposes a duty to bargain in good faith, and violations can lead to unfair labor practice charges.
  • In legal disputes or settlement negotiations, bad faith conduct can result in penalties, contract rescission, or damage awards.

Good faith bargaining typically refers to a party's duty to meet and negotiate at reasonable times with another party. Parties should be willing to reach an agreement, although neither party is required to agree to any proposal or make concessions.

About Good Faith

Good faith refers to the requirement for an individual to behave in an honest manner and to uphold promises while not holding someone to an impossible standard or taking unfair advantage.

A number of situations rely on the concept of good faith, including:

  • Business dealings
  • Contract negotiations
  • Mediation
  • Settlement negotiations
  • Arbitration

Business law also requires parties to act in good faith. The directors and officers of a business are required to deal in good faith to anyone — including its own shareholders — when they act on the company's behalf. Most courts consider one of two standards to determine whether a defendant acted in good faith.

The first standard considers reasonableness. A defendant may be held liable for dealing in bad faith if it refuses to fulfill its end of a bargain or uphold its end in a contract for no reason or a reason unrelated to the actual situation.

The second standard considers reasonableness, but it also considers intent. Using this standard, a defendant may be held liable for bad faith dealing if it didn't behave reasonably and had good reason to know it had no reasonable basis for its actions.

Understanding Bad Faith Negotiation

While “good faith” reflects honesty, fairness, and a genuine intent to reach agreement, bad faith negotiation represents the opposite — conduct that undermines or manipulates the bargaining process. In legal terms, it refers to deceptive, obstructive, or insincere actions taken by one party during negotiations, often with no real intention of finalizing a deal.

Examples of bad faith negotiation include:

  • Refusing to meet or respond to proposals in a timely manner.
  • Presenting demands that are clearly unreasonable or impossible.
  • Withholding critical information necessary for meaningful negotiation.
  • Making last-minute changes to previously agreed terms to derail progress.
  • Intentionally bypassing the other party’s legal representative to negotiate directly.

Courts and regulatory bodies often consider both behavior and intent in determining whether a party acted in bad faith. Even if a party participates in meetings or responds to proposals, a pattern of obstruction, delay, or manipulation may still constitute bad faith. This is particularly important in labor relations, where the National Labor Relations Act (NLRA) requires employers and unions to negotiate sincerely over wages, hours, and working conditions.

Duty to Bargain in Good Faith

As an example of good versus bad faith bargaining, consider union negotiations, where each side has a duty to bargain in good faith. This is considered an obligation on both sides for the purpose of reaching an agreement. In negotiations, good faith bargaining means to meet at reasonable times and to confer in good faith with respect to hours, wages, and other conditions of employment. Remember, neither side has to agree to any proposals.

Total conduct is considered when judging the quality of negotiations, so an employer shouldn't be judged only based on its behavior during negotiations but by its words and actions overall. Companies should obtain as much bargaining knowledge as possible to negotiate the most satisfactory contract.

It's expected to have a give-and-take atmosphere in good faith bargaining. If a company isn't used to that, it should consult a labor relations attorney to avoid breaching its good faith bargaining duty.

While good faith bargaining sounds straightforward, sometimes labor unions use it during negotiations to get what they want from an employer. Some unions have filed charges for unfair labor practices before negotiations even start when parties can't agree on things like location, time, and dates.

For example, a union may want to meet at the employer's place of business but the employer doesn't. The employer may decline the union's offer to meet in the union hall. In other cases, unions may refuse to split the cost if employers want to pay to meet in a neutral spot, such as an airport, community center, or hotel conference room.

When a stalemate occurs, unions may file charges that the employer isn't acting in good faith. Employers may then have to defend these charges or meet at an undesirable location.

There's also the problem of when to meet. Employers prefer to meet when negotiations cause little disruption to the workday. Unions, on the other hand, prefer to meet during the day so that workers' personal time isn't affected.

There are also documents that fall into a gray area concerning what must be turned over and what doesn't have to be. When one side doesn't turn over these requested documents, the other may levy charges of bad faith bargaining.

Another major concept in good versus bad faith bargaining is negotiation pay. Unless a prior collective bargaining agreement specifies it or the parties agree, employers don't have to pay workers for this time. Unions state that not paying employees during negotiations isn't bargaining in good faith since employers are forcing workers to either attend negotiations and not get paid or to work and get paid.

Being honest in business dealings should be standard practice. Knowing they may be upheld to certain good faith standards may be added incentive for individuals and companies.

Strategies to Avoid Bad Faith Accusations

Both employers and unions — as well as parties in commercial negotiations — should adopt best practices to avoid allegations of bad faith, such as:

  • Documenting all communications to demonstrate a consistent effort to negotiate.
  • Engaging in regular meetings and responding promptly to proposals.
  • Explaining reasons for rejecting terms or making counteroffers.
  • Sharing relevant data that supports negotiation positions.
  • Seeking legal guidance to ensure compliance with statutory obligations.

Maintaining a collaborative, transparent approach helps reduce the risk of disputes escalating into legal action and ensures negotiations remain focused on mutually beneficial outcomes.

Consequences of Bad Faith Negotiation

The legal and financial consequences of bad faith negotiation can be severe. In labor disputes, the National Labor Relations Board (NLRB) may issue unfair labor practice charges, compel parties to return to the bargaining table, and require corrective actions such as reinstating previous employment terms.

In commercial or settlement contexts, courts may impose:

  • Contract rescission: Nullifying an agreement reached under deceptive or coercive conditions.
  • Damages: Requiring compensation for losses caused by bad faith conduct.
  • Sanctions: Penalizing parties or their attorneys for abusing the negotiation process.

For example, in insurance or settlement negotiations, a party that delays proceedings without justification or refuses to make a fair offer may face liability for bad faith settlement practices, potentially leading to punitive damages. In some cases, repeated patterns of bad faith conduct can also harm a party’s credibility in future legal proceedings.

Legal Standards and Obligations

Under Section 8(d) of the NLRA, both employers and unions are legally required to meet and confer in good faith. This includes:

  • Attending meetings at reasonable times and intervals.
  • Negotiating over mandatory subjects such as pay, hours, and working conditions.
  • Providing relevant information necessary to support bargaining positions.
  • Refraining from unilateral changes to terms and conditions of employment during negotiations.

An employer violates this duty if it attempts to bypass the union and negotiate directly with employees, makes significant changes without consultation, or refuses to sign a validly reached agreement. Similarly, unions may act in bad faith by stalling negotiations, insisting on nonmandatory terms as a condition of agreement, or filing premature charges to gain leverage.

Frequently Asked Questions

  1. What is considered bad faith negotiation in labor law?
    Bad faith occurs when a party obstructs, delays, or manipulates bargaining without genuine intent to reach an agreement — for example, refusing meetings, withholding information, or bypassing a union.
  2. Can bad faith negotiation invalidate a contract?
    Yes. Courts may rescind agreements reached through deception, coercion, or manipulation and may also award damages for losses caused by such conduct.
  3. How do regulators determine bad faith?
    They examine the totality of conduct — including behavior, communications, and intent — to determine whether a party made a sincere effort to negotiate.
  4. What should an employer do if accused of bad faith bargaining?
    Employers should consult legal counsel, document their negotiation efforts, and continue engaging with the union to demonstrate compliance with NLRA obligations.
  5. Can individuals sue for bad faith settlement negotiations?
    Yes. In some cases, parties can file lawsuits seeking damages, especially when bad faith conduct results in financial harm or breaches legal duties.

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