Employment Law U6

C H A P T E R 15 Collective Bargaining

Employees join unions to gain some influence over their working conditions and wages; that influence is achieved through the process called collective bargaining. Section 8(d) of the National Labor Relations Act (NLRA) defines collective bargaining as [t]he performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement or any question arising thereunder. . . . This process of meeting and discussing working conditions is actually a highly stylized and heavily regulated form of economic conflict. Within the limits of conduct spelled out by the National Labor Relations Board (NLRB) under the NLRA, the parties exert pressure on each other to force some concession or agreement. The union’s economic pressure comes from its ability to withhold the services of its members—a strike. The employer’s bargaining pressure comes from its potential to lock out the employees or to permanently replace striking workers. The NLRB and the courts, through their interpretation and administra- tion of the NLRA, have limited the kinds of pressure either side may exert and how such pressure may be applied. This chapter examines the collective bargaining process and the legal limits placed on that process.

15-1 The Duty to Bargain

An employer is required to recognize a union as the exclusive bargaining representa- tive of its employees when a majority of those employees support the union. The union may demonstrate its majority support either through signed authorization cards or by winning a representation election. Once aware of the union’s majority support, the employer must recognize and bargain with the union according to the process spelled out in Section 8(d). Section 8(a)(5) makes it an unfair labor practice for an employer to refuse to bargain with the representative of its employees, and Section 8(b)(3) makes it an unfair practice for a union representing a group of employees to refuse to bargain with their employer. Although the NLRA imposes an obligation to bargain collectively upon both employer and union, it does not control the results of the bargaining process. Section 8(d) makes it clear that the obligation to bargain “does not compel either party to agree to a proposal or require the making of a concession.” The act thus reflects an ambivalence regarding the duty to bargain in good faith. The parties, to promote industrial relations harmony, are required to come together and negotiate, but in deference to the principle of freedom of contract, they are not required to reach an agreement. This tension between the goal of promoting industrial peace and the principle of freedom of contract underlies the various NLRB and court decisions dealing with the duty to bargain. The accommodation of these conflicting ideas makes the area a difficult and interesting aspect of labor relations law. If the parties are required to negotiate, yet are not required to reach an agreement or even to make a concession, how can the Board determine whether either side is bargaining in good faith? Section 8(d) requires that the parties meet at reasonable times to discuss wages, hours, and terms and conditions of employment. It also requires that any agree- ment reached must be put in writing if either party so requests. But Section 8(d) does not speak to bargaining tactics. Is either side free to insist upon its proposal as a “take-it-or- leave-it” proposition? Can either side refuse to make any proposal? These questions must be addressed in determining what constitutes bargaining in good faith. 15-1a Bargaining in Good Faith Section 8(a)(5) requires that the employer bargain with a union that is the represen- tative of its employees according to Section 9(a). Section 9(a) states that a union that has the support of a majority of employees in a bargaining unit becomes the exclusive bargaining representative of all employees in the unit. That section also states that the employer may address the grievances of individual employees as long as it is done in a manner consistent with the collective agreement and the union has been given an oppor- tunity to be present at such adjustment. That provision raises the question of how far the employer can go in dealing with individuals rather than the union. In J. I. Case Co. v. NLRB,1 the Supreme Court held that contracts of employment made with individual employees were not impediments to negotiating a collective agreement with the union. J. I. Case had made it a practice to sign yearly individual contracts of employment with its employees. When the union, which won a representation election, requested bargaining over working conditions, the company refused. The employer argued that the individual contracts covered those issues and no bargaining could take place until those individual contracts had expired. The Supreme Court held that the individual contracts must give way to allow the negotiation of a collective agreement. Once the union is certified as the exclusive bargaining representative of the employees, the employer cannot deal with the individual employees in a manner inconsistent with the union’s status as exclusive repre- sentative. To allow individual contracts of employment to prevent collective bargaining would undercut the union’s position. What about the situation in which individual employees attempt to discuss their griev- ances with the employer in a manner inconsistent with the union’s role as exclusive repre- sentative? How far does the Section 9(a) proviso go to allow such discussion? That question is addressed in the following Supreme Court decision.

CASE 15.1 Emporium CapwEll Co. v. wEstErn addition Community organization 420 U.S. 50 (1975)

[Emporium Capwell Co. operates a department store in San Francisco. The company had a collective bargaining agree- ment with the Department Store Employees Union. The agreement, among other things, included a prohibition of employment discrimination because of race, color, reli- gion, national origin, age, or sex. The agreement also set up a grievance and arbitration process to resolve any claimed violation of the agreement, including a violation of the nondiscrimination clause.] Marshall, J. This litigation presents the question whether, in light of the national policy against racial discrimination in employment, the National Labor Relations Act protects concerted activity by a group of minority employees to bargain with their employer over issues of employment discrimination. . . . On April 3, 1968, a group of Company employees covered by the agreement met with the Secretary-Treasurer of the Union, Walter Johnson, to present a list of grievances including a claim that the Company was discriminating on the basis of race in making assignments and promotions. The Union official agreed to take certain of the grievances and to investigate the charge of racial discrimination. He appointed an investigating committee and prepared a report on the employees’ grievances, which he submitted to the Retailer’s Council and which the Council in turn referred to the Company. The report described “the possibility of racial discrimination” as perhaps the most important issue raised by the employees and termed the situation at the Company as potentially explosive if corrective action were not taken. It offered as an example of the problem the Company’s failure to promote a Negro stock employee regarded by other employees as an outstanding candidate but a victim of racial discrimination. Shortly after receiving the report, the Company’s labor relations director met with Union representatives and agreed to “look into the matter” of discrimination and see what needed to be done. Apparently unsatisfied with these representations, the Union held a meeting in September attended by Union officials, Company employees, and representatives of the California Fair Employment Practices Committee (FEPC) and the local antipoverty agency. The Secretary-Treasurer of the Union announced that the Union had concluded that the Company was discriminating, and that it would process every such grievance through to arbitration if necessary. Testimony about the Company’s practices was taken and transcribed by a court reporter, and the next day the Union notified the Company of its formal charge and demanded that the joint union-management Adjustment Board be convened “to hear the entire case.” At the September meeting some of the Company’s employees had expressed their view that the contract proce- dures were inadequate to handle a systemic grievance of this sort; they suggested that the Union instead begin picketing the store in protest. Johnson explained that the collective agreement bound the Union to its processes and expressed his view that successful grievants would be helping not only themselves but all others who might be the victims of invidious discrimination as well. The FEPC and antipoverty agency representatives offered the same advice. Nonetheless, when the Adjustment Board meeting convened on October 16, James Joseph Hollins, Tom Hawkins, and two other employees whose testimony the Union had intended to elicit refused to participate in the grievance procedure. Instead, Hollins read a statement objecting to reliance on correction of individual inequities as an approach to the problem of discrimination at the store and demanding that the president of the Company meet with the four protes- tants to work out a broader agreement for dealing with the issue as they saw it. The four employees then walked out of the hearing. Hollins attempted to discuss the question of racial discrimination with the Company president shortly after the incidents of October 16. The president refused to be drawn into such a discussion but suggested to Hollins that he see the personnel director about the matter. Hollins, who had spoken to the personnel director before, made no effort to do so again. Rather, he and Hawkins and several other dissident employees held a press conference on October 22 at which they denounced the store’s employment policy as racist, reiterated their desire to deal directly with “the top management” of the Company over minority employment conditions, and announced their intention to picket and institute a boycott of the store. On Saturday, November 2,Hollins, Hawkins, and at least two other employees pick- eted the store throughout the day and distributed at the entrance handbills urging consumers not to patronize the store. Johnson encountered the picketing employees, again urged them to rely on the grievance process, and warned that they might be fired for their activities. The picketers, however, were not dissuaded, and they continued to press their demand to deal directly with the Company president. On November 7, Hollins and Hawkins were given written warnings that a repetition of the picketing or public statements about the Company could lead to their discharge. When the conduct was repeated the following Saturday, the two employees were fired. Respondent Western Addition Community Organization, a local civil rights association of which Hollins and Hawkins were members, filed a charge against the Company with the National Labor Relations Board. After a hearing the NLRB Trial Examiner found that the discharged employees had believed in good faith that the Company was discriminating against minority employees, and that they had resorted to concerted activity on the basis of that belief. He concluded, however, that their activity was not protected by Section 7 of the Act and that their discharges did not, therefore, violate Section 8(a)(1). The Board, after oral argument, adopted the findings and conclusions of its Trial Examiner and dismissed the complaint. Among the findings adopted by the Board was that the discharged employees’ course of conduct: . . . was no mere presentation of a grievance, but nothing short of a demand that the [Company] bargain with the picketing employees for the entire group of minority employees. Central to the policy of fostering collective bargaining, where the employees elect that course, is the principle of majority rule. If the majority of a unit chooses union representation, the NLRA permits them to bargain with their employer to make union membership a condition of employment, thereby imposing their choice upon the minority. . . . In establishing a regime of majority rule, Congress sought to secure to all members of the unit the benefits of their collective strength and bargaining power, in full awareness that the superior strength of some indi- viduals or groups might be subordinated to the interest of the majority. In vesting the representatives of the majority with this broad power Congress did not, of course, authorize a tyranny of the majority over minority interests. . . . we have held, by the very nature of the exclusive bargaining representa- tive’s status as representative of all unit employees, Congress implicitly imposed upon [the union] a duty fairly and in good faith to represent the interests of minorities within the unit. And the Board has taken the position that a union’s refusal to process grievances against racial discrimination, in violation of that duty, is an unfair labor practice. . . . Plainly, national labor policy embodies the principles of nondiscrimination as a matter of highest priority . . . These general principles do not aid respondent, however, as it is far from clear that separate bargaining is necessary to help eliminate discrimination. Indeed, as the facts of this case demonstrate, the proposed remedy might have just the opposite effect. The collective bargaining agree- ment in this case prohibited without qualification all manner of invidious discrimination and made any claimed violation a grievable issue. The grievance procedure is directed precisely at determining whether discrimination has occurred. That orderly determination, if affirmative, could lead to an arbitral award enforceable in court. Nor is there any reason to believe that the processing of griev- ances is inherently limited to the correction of individual cases of discrimination. The decision by a handful of employees to bypass the grievance procedure in favor of attempting to bargain with their employer, by contrast, may or may not be predicated upon the actual existence of discrimination. An employer confronted with bargaining demands from each of several minority groups would not necessarily, or even probably, be able to agree to reme- dial steps satisfactory to all at once. Competing claims on the employer’s ability to accommodate each group’s demands, e.g., for reassignments and promotions to a limited number of positions, could only set one group against the other even if it is not the employer’s inten- tion to divide and overcome them. Having divided them- selves, the minority employees will not be in position to advance their cause unless it be by recourse seriatim to economic coercion, which can only have the effect of further dividing them along racial or other lines. Nor is the situation materially different where, as apparently happened here, self-designated representatives purport to speak for all groups that might consider themselves to be victims of discrimination. Even if in actual bargaining the various groups did not perceive their interests as divergent and further subdivide themselves, the employer would be bound to bargain with them in a field largely preempted by the current collective bargaining agreement with the elected bargaining representatives. . . .The policy of industrial self-determination as expressed in Section 7 does not require fragmentation of the bargaining unit along racial or other lines in order to consist with the national labor policy against discrimination. And in the face of such fragmentation, whatever its effect on discriminatory practices, the bargaining process that the principle of exclusive representation is meant to lubricate could not endure unhampered. . . . Respondent objects that reliance on the remedies provided by Title VII is inadequate effectively to secure the rights conferred by Title VII. . . . Whatever its factual merit, this argument is prop- erly addressed to the Congress and not to this Court or the NLRB. In order to hold that employer conduct violates Section 8(a)(1) of the NLRA because it violates Section 704(a) of Title VII, we would have to override a host of consciously made decisions well within the exclusive competence of the Legislature. This obviously, we cannot do. Reversed. Case Questions 1. What were the complaints of the minority employees against the company? How did the union respond to their complaints? 2. Why did the employees reject using the procedures under the collective bargaining agreement? What hap- pened to them when they insisted on picketing the store to publicize their complaints? 3. Did the NLRB hold that their conduct was protected under Section 7? Why? Did the Supreme Court protect their conduct? Why?

Although the employer in J. I. Case and the employees in Emporium Capwell were held to have acted improperly, there is some room for individual discussions of working conditions and grievances. Where the collective agreement permits individual negotiation, an employer may discuss such matters with individual employees. Examples of such agree- ments are the collective agreements covering professional baseball and football players; the collective agreement sets minimum levels of conditions and compensation, while allowing the athletes to negotiate salary and other compensation on an individual basis. Procedural Requirements of the Duty to Bargain in Good Faith A union or employer seeking to bargain with the other party must notify that other party of its desire to bargain at least 60 days prior to the expiration of the existing collective agreement or, if no agreement is in effect, 60 days prior to the date it proposes the agree- ment to go into effect. Section 8(d) requires that such notice must be given at the proper time; failure to do so may make any strike by the union or lockout by the employer an unfair labor practice. Section 8(d) also requires that the parties must continue in effect any existing collective agreement for 60 days from the giving of the notice to bargain or until the agreement expires, whichever occurs later. Strikes or lockouts are prohibited during this 60-day “cooling-off” period. Employees who go on an economic strike during this period lose their status as “employees” and the protections of the act. Therefore, if the parties have given the notice to bargain later than 60 days prior to the expiration of the contract, they must wait the full 60 days to go on strike or lockout, even if the old agreement has already expired. When negotiations result in matters in dispute, the party seeking contract termina- tion must notify the Federal Mediation and Conciliation Service (FMCS) and the appro- priate state mediation agency within 30 days from giving the notice to bargain. Neither side may resort to a strike or lockout until 30 days after the FMCS and state agency have been notified. The NLRA provides for longer notice periods when the collective bargaining involves the employees of a health-care institution. In that case, the parties must give notice to bargain at least 90 days prior to the expiration of the agreement. No strike or lockout can take place for at least 90 days from the giving of the notice or the expiration of the agreement, whichever is later. Furthermore, the FMCS and state agency must be notified 60 days prior to the termination of the agreement. Finally, Section 8(g) requires that a labor organization seeking to picket or strike against a health-care institution must give both the employer and the FMCS written notice of its intention to strike or picket at least 10 days prior to taking such action. Why should a labor organization be required to give health-care institutions advance notice of any strike or picketing? As noted, Section 8(d) prohibits any strike or lockout during the notice period. Employees who go on strike during that period are deprived of the protection of the act. In Mastro Plastics Co. v. NLRB,2 the Supreme Court held that the prohibition applied only to economic strikes—strikes designed to pressure the employer to “terminate or modify” the collective agreement. Unfair labor practice strikes, which are called to protest the employer’s violation of the NLRA, are not covered by the Section 8(d) prohibition. Therefore, the employees in Mastro Plastics who went on strike during the 60-day cooling-off period to protest the illegal firing of an employee were not in violation of Section 8(d) and were not deprived of the protection of the act.

Concept Summary 15.1 The DuTy To Bargain in gooD FaiTh Procedural Requirements: Section 8(d) • The party seeking to begin negotiations must give notice of desire to bargain at least 60 days prior to the expiration of the collective agreement, or 60 days prior to the date the agreement will go into effect • Any existing agreement must be kept in effect for 60 days from giving notice, or until its expiry date (whichever occurs later) • Strikes and lockouts are prohibited during the 60-day notice period • If the negotiations result in a dispute, the party seeking contract termination must notify the FMCS and state mediation agency within 30 days from giving the notice to bargain; no strike or lockout can occur until after 30 days from giving notice to the FMCS and state agency Creation of the Duty to Bargain As has been discussed, the duty to bargain arises when the union gets the support of a majority of the employees in a bargaining unit. When a union is certified as the winner of a representation election, the employer is required by Section 8(a)(5) to bargain with it. (An employer with knowledge of a union’s majority support, independent of the union’s claim of such support, must also recognize and bargain with the union without resort to an election.) Because the NLRA does not provide a means of having a court review a certification decision by the NLRB, employers who seek to challenge a certification decision may refuse to bargain with the union, thereby forcing the union to file unfair labor practices under Section 8(a)(5). Because NLRB unfair labor practice decisions are subject to judicial review by the federal courts of appeals, the employer can then raise the issue of the union’s improper certification as a defense to the charge of refusing to bargain in good faith with the union. When an employer is approached by two unions, each claiming to represent a majority of the employees, how should the employer respond? One way would be to refuse to recog- nize either union (provided, of course, that the employer had no independent knowledge of either union’s majority support) and to insist on an election. Can the employer recognize voluntarily one of the two unions claiming to represent the employees? In Bruckner Nursing Home,3 the NLRB held that an employer may recognize a union that claims to have majority support of the employees in the bargaining unit even though another union is also engaged in an organizing campaign, as long as the second union has not filed a petition for a representation election. The Board reasoned that the rival union, unable to muster even the support of 30 percent of the employees necessary to file a petition, should not be permitted to prevent the recognition of the union with majority support. If, however, a valid petition for a representation election has been filed, then the employer must refrain from recognizing either union and must wait for the outcome of the election to determine if either union has majority support. The Bruckner Nursing Home decision dealt with a situation in which the employees were not previously represented by a union. When an incumbent union’s status has been challenged by a rival union that has petitioned for a representation election, is the employer still required to negotiate with the incumbent union? In RCA del Caribe,4 the Board held that: the mere filing of a representation petition by an outside, challenging union will no longer require or permit an employer to withdraw from bargaining or executing a contract with an incumbent union. Under this rule . . . an employer will violate Section 8(a)(5) by withdrawing from bargaining based solely on the fact that a petition has been filed by an outside union. . . . If the incumbent prevails in the election held, any contract executed with the incumbent will be valid and binding. If the challenging union prevails, however, any contract executed with the incumbent will be null and void. . . . The Bruckner Nursing Home and RCA del Caribe decisions were departures from prior Board decisions, which required that an employer stay neutral in the event of rival orga- nizing campaigns or when the incumbent union faced a petition filed by a challenging union. Which approach do you think is more likely to protect the desires of the individual employees? Do Bruckner Nursing Home and RCA del Caribe make it more difficult to unseat an incumbent union? A nonincumbent union that accepts recognition from an employer while its own peti- tion for a representation election is pending violates Section 8(b)(1)(A), and the employer granting such recognition is in violation of Section 8(a)(2).5 In NLRB v. Matros Automated Electrical Construction Corp.,6 an employer was held to violate Section 8(a)(2) where it recognized a union as bargaining agent for its employees while a rival union’s challenges to the results of a representation election were still pending, and the union accepting recogni- tion was held to violate Section 8(b)(1)(A). When craft employees who had previously been included in a larger bargaining unit vote to be represented by a craft union, and a smaller craft bargaining unit is severed from the larger one, what is the effect of the agreement covering the larger unit? In American Seating Co.,7 the NLRB held that the old agreement no longer applies to the newly severed bargaining unit, and the old agreement does not prevent the employer from negotiating with the craft union on behalf of the new bargaining unit. Is this decision surprising? (Recall the J. I. Case decision discussed earlier and reexamine the wording of Section 8(d) in its entirety.) Duration of the Duty to Bargain When the union is certified as bargaining representative after winning an election, the NLRB requires that the employer recognize and bargain with the union for at least a year from certification, regardless of any doubts the employer may have about the union’s continued majority support. This one-year period applies only when no collective agree- ment has been made. When an agreement exists, the employer must bargain with the union for the term of the agreement. Unfair labor practices committed by the employer, such as refusal to bargain in good faith, may have the effect of extending the one-year period, as the Board held in Mar-Jac Poultry.8 When a union acquires bargaining rights by voluntary recognition rather than certifi- cation, the employer is required to recognize and bargain with the union only for “a reason- able period of time” if no agreement is in effect. What constitutes a reasonable period of time depends on the circumstances in each case. If an agreement has been reached after the voluntary recognition, then the employer must bargain with the union for the duration of the agreement. After the one-year period or a reasonable period of time—whichever is appropriate— has expired, and no collective agreement is in effect, the employer may refuse to bargain with the union if the employer can establish that the union has lost the support of the majority of the bargaining unit, according to Levitz Furniture Co. of the Pacific.9 The employer’s evidence to support the fact that the union has lost majority support must have a reasonable basis in fact and, in the case of a certified union, must be based only on events that occur after the expiration of the one-year period from the certification of the union, as held in Chelsea Industries.10 In a successorship situation (see Chapter 17), the incumbent union is entitled to a rebuttable presumption of continuing majority support.11 In Allentown Mack Sales and Services, Inc. v. NLRB,12 the U.S. Supreme Court upheld the NLRB’s requirement that the employer have a “good faith reasonable doubt” about the union’s majority support in order to take a poll of employees about their support of the union. The Board held in NLRB v. Flex Plastics13 that filing a decertification petition alone does not suffice to establish a reason to doubt the union’s majority support. When the employer can establish some reasonable factual basis for its claim that the union has lost majority support, it may refuse to negotiate with the union. To find a violation of Section 8(a)(5), the Board must then prove that the union in fact represented a majority of the employees on the date the employer refused to bargain. What happens if the union employees go on strike and are permanently replaced by the employer? Must the employer continue to recognize and bargain with the union? In Pioneer Flour Mills,14 the NLRB held that economic strikers must be considered members of the bargaining unit for the purpose of determining whether the union has majority support for the first 12 months of the strike. After 12 months, if they have been permanently replaced, the strikers need not be considered part of the bargaining unit by the employer. Unfair labor practice strikers may not be permanently replaced and must be considered members of the bargaining unit. Where an employer has hired replacements during an economic strike and now seeks to determine whether the union still has majority support, can the employer presume that the replacement workers oppose the union? The NLRB takes the position that it will not presume the replacements oppose the union, but rather will consider each case on its own facts: Has the employer presented sufficient objective evidence to indicate that the replace- ments do not support the union? The NLRB’s approach was upheld by the Supreme Court in NLRB v. Curtin Matheson Scientific, Inc.15 What happens if the employer agrees with the union on a contract but then tries to raise a claim that the union has lost majority support? That is the subject of the following case.

CASE 15.2 auCiEllo iron works, inC. v. nlrB 517 U.S. 781 (1996)

Facts: Auciello Iron Works had 23 production and maintenance employees, all represented by the Shopmen’s Local No. 501 of the International Association of Bridge, Structural, and Ornamental Iron Workers. When the collective bargaining agreement expired on September 25, 1988, and negotiations for a new one were unsuccessful, the employees went on strike. On November 17, 1988, Auciello presented the union with a contract proposal. The union stopped picketing the next day, and nine days later the union telegraphed its acceptance of the offer. The day after the union indicated its acceptance of the offer, Auciello told the union that it doubted that a majority of the bargaining unit’s employees supported the union. Auciello disavowed the collective bargaining agreement and denied it had any duty to continue negotiating with the union. Auciello based its doubt about the union’s majority support to knowledge acquired before the union accepted the contract offer, including the facts that nine employees had crossed the picket line, that 13 employees had given it signed forms indicating their resignation from the union, and that 16 had expressed dissatisfaction with the union. The union filed unfair labor practice charges with the NLRB. An administrative law judge found that a contract existed between the parties and that Auciello’s withdrawal from it violated Sections 8(a)(1) and (5) of the NLRA. The Board affirmed the administrative law judge’s decision. The Board treated Auciello’s claim of good faith doubt as irrelevant and ordered Auciello to reduce the collective bargaining agreement to a formal written instrument. The Court of Appeals enforced the order and Auciello appealed to the Supreme Court. Issue: Can an employer disavow a collective bargaining agreement because of a good faith doubt about a union’s majority status at the time the contract was made, when the doubt arises from facts known to the employer before its contract offer had been accepted by the union? Decision: The NLRB has adopted several presumptions about the existence of majority support for a union within a bargaining unit, required for its status of exclusive bargaining representative. The first two are conclusive presumptions: • A union “usually is entitled to a conclusive presumption of majority status for one year following” certification as such exclusive bargaining representative by the NLRB; and • a union is also entitled to a conclusive presumption of majority status during the term of any collective bargaining agreement, up to three years in length. The NLRB also has a third presumption, though it is not a conclusive one. At the end of the certification year or upon expiration of the collective bargaining agreement, the presumption of majority status becomes a rebuttable one. An employer may overcome that presumption (when, for example, defending against an unfair labor practice charge) by showing that, at the time of its refusal to bargain, either: • the union did not in fact enjoy majority support; or • the employer had a “good faith” doubt, founded on a suffi- cient objective basis, about the union’s majority support. Auciello has raised the “good faith doubt” defense after a collective bargaining contract was reached upon the union’s acceptance of an employer’s outstanding offer. The NLRB rejected Auciello’s claim of an exception for an employer with doubts arising from facts ante- dating the contract. The NLRB said that such an excep- tion would allow an employer to control the timing of its assertion of good faith doubt and thus to “‘sit’ on that doubt and . . . raise it after the offer is accepted.” The Board held that giving employers such unilateral control over a vital part of the collective bargaining process would undermine the stability of the collective bargaining rela- tionship. The NLRB presumptions generally allow companies an adequate chance to act on their preaccep- tance doubts before contract formation, just as Auciello could have acted effectively under the Board’s rule in this case. Auciello knew that the picket line had been crossed and that a number of its employees had expressed dissat- isfaction with the union at least nine days before the contract’s acceptance, and all of the resignation forms Auciello received were dated at least five days before the acceptance date. Auciello had at least three alternatives to doing nothing: • it could have withdrawn the outstanding offer and then petitioned for a representation election; • following withdrawal, it could also have refused to bargain further on the basis of its good faith doubt, leaving it to the union to charge an unfair labor practice; and • it could have withdrawn its offer to allow it time to investigate while it continued to fulfill its duty to bargain in good faith with the union. The company thus had generous opportunities to avoid the presumption before the moment of acceptance. The Supreme Court upheld the NLRB decision that an employer’s pre-contractual, good faith doubt was inad- equate to support an exception to the conclusive presump- tion that arises at the moment a collective bargaining contract offer has been accepted. The Court affirmed the judgment of the Court of Appeals for the First Circuit.

15-2 The Nature of the Duty to Bargain in Good Faith

After having considered how the duty to bargain in good faith arises and how long it lasts, we now turn to exactly what it means: What is “good faith” bargaining? As we have seen, the wording of Section 8(d) states that making concessions or reaching agreement is not necessary to good faith bargaining. The imposition of such requirements would infringe upon either party’s freedom of contract and would destroy the voluntary nature of collective bargaining, which is essential to its success. What is required for good faith bargaining, according to the NLRB, is that the parties enter negotiations with “an open and fair mind” and “a sincere purpose to find a basis of agreement.” As long as the parties bargain with an intention to find a basis of agreement, the break- down or deadlock of negotiations is not a violation of the duty to bargain in good faith. When talks reach a deadlock—known as an impasse—as a result of sincere bargaining, either side may break off talks on the deadlocked issue. In determining whether an impasse exists, the Board considers the totality of circumstances: the number of times the parties have met, the likelihood of progress on the issue, the use of mediation, and so on. The Board considers that a change in the position of either party or a change in the circum- stances may break an impasse; in that case, the parties would not be able to break off all talks on the issue. When the impasse results from a party’s rigid insistence upon a particular proposal, it is not a violation of the duty to bargain if the proposal relates to wages, hours, or terms and conditions of employment. In NLRB v. American National Insurance Co.,16 the Supreme Court held that the employer’s insistence upon contract language giving it discretionary control over promotions, discipline, work scheduling, and denying arbitration on such matters was not in violation of the duty to bargain in good faith. In NLRB v. General Electric Co.,17 the Court of Appeals held that take-it-or-leave-it bargaining is not, by itself, in violation of the duty to bargain. But when an employer engages in other conduct indi- cating lack of good faith—such as refusing to sign a written agreement, attempting to deal with individual employees rather than the union, and refusing to provide the union with information regarding bargaining proposals—then the combined effect of the employer’s conduct is to violate the duty to negotiate in good faith. But hard bargaining, in and of itself, is not a violation. At some point in negotiations, either side may make a “final” offer and hold to it firmly. While negotiations are being conducted, is either side free to engage in tactics designed to pressure the other into making a concession? Is such pressure during bargaining consistent with negotiating in good faith? In NLRB v. Insurance Agents International Union,18 the U.S. Supreme Court held that the use of economic pressure such as a “work to rule” and “on the job slow-downs” is not inconsistent with the duty of bargaining in good faith; indeed, the use of economic pressure is “part and parcel” of the collective bargaining process. The duty to bargain in good faith under Section 8(d) also includes the obligation to execute a written contract incorporating any agreement, if requested by either party. An employer may not refuse to abide by the agreement because it objects to the ratification process used by the union, according to Valley Central Emergency Veterinary Hospital.19

15-3 Subject Matter of Bargaining

As the preceding cases indicate, the NLRB and the courts are reluctant to control the bargaining tactics available to either party. This reluctance reflects a philosophical aversion to government intrusion into the bargaining process. Yet some regulation of bargaining is necessary if the bargaining process is to be meaningful. Some control is required to prevent the parties from making a charade of the process by holding firmly to arbitrary or frivo- lous positions. One means of control is the distinction between mandatory and permissive subjects of bargaining. 15-3a Mandatory Bargaining Subjects Mandatory bargaining subjects, according to the Supreme Court decision in Allied Chemical & Alkali Workers v. PPG,20 are those subjects that “vitally affect the terms and conditions of employment” of the employees in the bargaining unit. The Supreme Court in PPG held that changes in medical insurance coverage of former employees who were retired were not a mandatory subject, and the company need not bargain over such changes with the union. The fact that the company had bargained over these issues in the past did not convert a permissive subject into a mandatory one; the company was free to change the insurance policy coverage unilaterally. The NLRB and the Court have broadly interpreted the matters subject to manda- tory bargaining as being related to “wages, hours, terms and conditions of employment” specified in Sections 8(d) and 9(a). Wages have been held to include all forms of employee compensation and fringe benefits, including items such as pensions, stock options, annual bonuses, employee discounts, shift differentials, and incentive plans. Hours and terms and conditions of employment have received similar broadening. The Supreme Court, in Ford Motor Co. v. NLRB,21 held that the prices of food sold in vending machines in the plant cafeteria were mandatory subjects for bargaining when the employer had some control over pricing. In California Newspapers Partnership d/b/a ANG Newspapers,22 the Board held that an employer was required to bargain over the employer’s revisions to the email use policy for employees; the employer’s unilateral implementation of the policy violated the duty to bargain in good faith under the NLRA. In Alan Ritchey, Inc.,23 the Board held that a union- ized employer must give the union notice and an opportunity to bargain before imposing discretionary disciplinary actions involving demotions, suspensions, and terminations when the applicable collective agreement does not establish a grievance-arbitration process. (Grievance arbitration will be discussed in Chapter 17.) The aspect of mandatory bargaining subjects that has attracted the most controversy has been the duty to bargain over management decisions to subcontract work or to close down a plant. In Fibreboard Paper Products v. NLRB,24 the Supreme Court held that an employer must bargain with the union over a decision to subcontract out work previously done by bargaining unit employees. Later, NLRB and Court decisions held that subcon- tracting that had never been done by bargaining unit employees was not a mandatory issue. In addition, decisions to change the corporate structure of a business or to terminate manufacturing operations were not mandatory subjects but rather were inherent manage- ment rights. Even the decision to go out of business entirely is not a mandatory subject of bargaining. But while the employer need not discuss such decisions with the union, the Board has held that the effects of such decisions upon the employees are mandatory bargaining subjects. The employer must therefore discuss the effects of such decisions with the union, including matters such as: • Severance pay • Transfer policies • Retraining • The procedure to be used for layoffs The following case illustrates the test used to determine whether a managerial decision, such as the decision to close part of the firm’s operations, is a mandatory bargaining subject.

CASE 15.3 First national maintEnanCE Corp. v. nlrB 452 U.S. 666 (1981)

Blackmun, J. Must an employer, under its duty to bargain in good faith “with respect to wages, hours, and other terms and condi- tions of employment,” Sections 8(d) and 8(a)(5) of the National Labor Relations Act, negotiate with the certified representative of its employees over its decision to close a part of its business? In this case, the National Labor Relations Board (Board) imposed such a duty on petitioner with respect to its decision to terminate a contract with a customer, and the United States Court of Appeals, although differing over the appropriate rationale, enforced its order. Petitioner, First National Maintenance Corporation (FNM), is a New York corporation engaged in the business of providing housekeeping, cleaning maintenance, and related services for commercial customers in the New York City area. It contracts for and hires personnel separately for each customer, and it does not transfer employees between locations. During the spring of 1977, petitioner was performing maintenance work for the Greenpark Care Center, a nursing home in Brooklyn. Petitioner employed approximately 35 workers in its Greenpark operation. Petitioner’s business relationship with Greenpark, seem- ingly, was not very remunerative or smooth. In March 1977, Greenpark gave petitioner the 30 days’ written notice of cancellation specified by the contract, because of “lack of efficiency.” This cancellation did not become effective, for FNM’s work continued after the expiration of that 30-day period. Petitioner, however, became aware that it was losing money at Greenpark. On June 30, by telephone, it asked that its weekly fee be restored at the $500 figure, and, on July 6, it informed Greenpark in writing that it would discontinue its operations there on August 1 unless the increase were granted. By telegram on July 25, petitioner gave final notice of termination. While FNM was experiencing these difficulties, District 1199, National Union of Hospital and Health Care Employees, Retail, Wholesale and Department Store Union, AFLCIO (Union), was conducting an organization campaign among petitioner’s Greenpark employees. On March 31, 1977, at a Board-conducted election, a majority of the employees selected the union as their bargaining agent. Petitioner neither responded nor sought to consult with the union. On July 28, petitioner notified its Greenpark employees that they would be discharged three days later. With nothing but perfunctory further discussion, peti- tioner on July 31 discontinued its Greenpark operation and discharged the employees. The union filed an unfair labor practice charge against petitioner, alleging violations of the Act’s Section 8(a)(1) and (5). After a hearing held upon the Regional Director’s complaint, the Administrative Law Judge made findings in the union’s favor. . . . [H]e ruled that petitioner had failed to satisfy its duty to bargain concerning both the decision to terminate the Greenpark contract and the effect of that change upon the unit employees. The Administrative Law Judge recommended an order requiring petitioner to bargain in good faith with the union about its decision to terminate its Greenpark service operation and its consequent discharge of the employees, as well as the effects of the termination. He recommended, also, that petitioner be ordered to pay the discharged employees back pay from the date of discharge until the parties bargained to agreement, or the bargaining reached an impasse, or the union failed timely to request bargaining or the union failed to bargain in good faith. The National Labor Relations Board adopted the Administrative Law Judge’s findings without further anal- ysis, and additionally required petitioner, if it agreed to resume its Greenpark operations, to offer the terminated employees reinstatement to their former jobs or substantial equivalents; conversely, if agreement was not reached, peti- tioner was ordered to offer the employees equivalent posi- tions, to be made available by discharge of subsequently hired employees, if necessary, at its other operations. The United States Court of Appeals for the Second Circuit, with one judge dissenting in part, enforced the Board’s order. . . . Although parties are free to bargain about any legal subject, Congress has limited the mandate or duty to bargain to matters of “wages, hours, and other terms and condi- tions of employment.” Congress deliberately left the words “wages, hours, and other terms and conditions of employ- ment” without further definition, for it did not intend to deprive the Board of the power further to define those terms in light of specific industrial practices. Nonetheless, in establishing what issues must be submitted to the process of bargaining, Congress had no expectation that the elected union representative would become an equal partner in the running of the business enterprise in which the union’s members are employed. Some management decisions, such as choice of adver- tising and promotion, product type and design, and financing arrangements, have only an indirect and attenu- ated impact on the employment relationship. Other management decisions, such as the order of succession of layoffs and recalls, production quotas, and work rules, are almost exclusively” an aspect of the relationship” between employer and employee. The present case concerns a third type of management decision, one that had a direct impact on employment, since jobs were inexorably eliminated by the termination, but had as its focus only the economic prof- itability of the contract with Greenpark, a concern under these facts wholly apart from the employment relationship. This decision, involving a change in the scope and direc- tion of the enterprise, is akin to the decision whether to be in business at all, “not in [itself ] primarily about conditions of employment, though the effect of the decision may be necessarily to terminate employment.” At the same time this decision touches on a matter of central and pressing concern to the union and its member employees: the possibility of continued employment and the retention of the employees’ very jobs. Petitioner contends it had no duty to bargain about its decision to terminate its operations at Greenpark. This contention requires that we determine whether the deci- sion itself should be considered part of petitioner’s retained freedom to manage its affairs unrelated to employment. The aim of labeling a matter a mandatory subject of bargaining, rather than simply permitting, but not requiring, bargaining, is to “promote the fundamental purpose of the Act by bringing a problem of vital concern to labor and manage- ment within the framework established by Congress as most conducive to industrial peace.” The concept of mandatory bargaining is premised on the belief that collective discus- sions backed by the parties’ economic weapons will result in decisions that are better for both management and labor and for society as a whole. This will be true, however, only if the subject proposed for discussion is amenable to resolution through the bargaining process. Management must be free from the constraints of the bargaining process to the extent essential for the running of a profitable business. It also must have some degree of certainty beforehand as to when it may proceed to reach decisions without fear of later evaluations labeling its conduct an unfair labor practice. Congress did not explicitly state what issues of mutual concern to union and management it intended to exclude from mandatory bargaining. Nonetheless, in view of an employer’s need for unencumbered decisionmaking, bargaining over manage- ment decisions that have a substantial impact on the continued availability of employment should be required only if the benefit, for labor-management relations and the collective-bargaining process, outweighs the burden placed on the conduct of the business. Both union and management regard control of the deci- sion to shut down an operation with the utmost seriousness. As has been noted, however, the Act is not intended to serve either party’s individual interest, but to foster in a neutral manner a system in which the conflict between these inter- ests may be resolved. It seems particularly important, there- fore, to consider whether requiring bargaining over this sort of decision will advance the neutral purposes of the Act. A union’s interest in participating in the decision to close a particular facility or part of an employer’s opera- tions springs from its legitimate concern over job security. The Court has observed: “The words of [Section 8(d)] . . . plainly cover termination of employment which . . . necessarily results” from closing an operation. The union’s practical purpose in participation, however, will be largely uniform: it will seek to delay or halt the closing. No doubt it will be impelled, in seeking these ends, to offer conces- sions, information, and alternatives that might be helpful to management or forestall or prevent the termination of jobs. It is unlikely, however, that requiring bargaining over the decision itself, as well as its effects, will augment this flow of information and suggestions. There is no dispute that the union must be given a significant opportunity to bargain about these matters of job security as part of the “effects” bargaining mandated by Section 8(a)(5). A union, pursuing such bargaining rights, may achieve valuable concessions from an employer engaged in a partial closing. Management’s interest in whether it should discuss a decision of this kind is much more complex and varies with the particular circumstances. If labor costs are an impor- tant factor in a failing operation and the decision to close, management will have an incentive to confer voluntarily with the union to seek concessions that may make continuing the business profitable. At other times, management may have great need for speed, flexibility, and secrecy in meeting busi- ness opportunities and exigencies. It may face significant tax or securities consequences that hinge on confidentiality, the timing of a plant closing, or a reorganization of the corpo- rate structure. The publicity incident to the normal process of bargaining may injure the possibility of a successful tran- sition or increase the economic damage to the business. The employer also may have no feasible alternative to the closing, and even good faith bargaining over it may both be futile and cause the employer additional loss. There is an important difference, also, between permitted bargaining and mandated bargaining. Labeling this type of decision mandatory could afford a union a powerful tool for achieving delay, a power that might be used to thwart management’s intentions in a manner unrelated to any feasible solution the union might propose. We conclude that the harm likely to be done to an employer’s need to operate freely in deciding whether to shut down part of its business purely for economic reasons outweighs the incremental benefit that might be gained through the union’s participation in making the decision, and we hold that the decision itself is not part of Section 8(d)’s “terms and conditions,” over which Congress has mandated bargaining. . . . Case Questions 1. Why did First National Maintenance decide to close its operations at Greenpark? Could bargaining with the union affect those reasons? Explain your answer. 2. What test does the Supreme Court use to determine whether the decision to close operations is a manda- tory bargaining subject? How does that test apply to the facts of this case? 3. What is the significance of labeling a decision a man- datory bargaining subject? Is the employer completely prohibited from acting alone on a mandatory

Subsequent to the First National Maintenance decision, the NLRB has interpreted the “balancing test” set out by the court as focusing on whether the employer’s decision is based on labor costs. A decision to relocate production to another plant was not a mandatory subject because the decision did not turn on labor costs, according to Local 2179, United Steelworkers of America v. NLRB.25 In short, the question whether the employer must bargain with the union over a management decision such as plant closing, work relocation, or corporate reorganization is whether or not the decision is motivated by a desire to reduce labor costs or to escape the collective bargaining agreement. If the decision is based on other business considerations, apart from labor costs, then the employer’s duty to bargain is limited to the effects of the decision on the employees rather than the decision itself. What is the effect of labeling a subject as a mandatory bargaining issue upon the employer’s ability to make decisions necessary to the efficient operation of the enterprise? The Supreme Court opinion in First National Maintenance was concerned about placing burdens on the employer that would interfere with the need to act promptly. But rather than preventing employer action over mandatory subjects, the duty to bargain requires only that the employer negotiate with the union. If the union agrees or makes conces- sions, then the employer is free to act. If the union fails to agree and an impasse results from good faith bargaining, the employer is then free to implement the decision. The duty to bargain over mandatory subjects requires only that the employer bargain in good faith to the point of impasse over the issue. Once impasse has been reached, the employer is free to act unilaterally. In the case of NLRB v. Katz,26 the Supreme Court stated that an employer may institute unilateral changes on mandatory subjects after bargaining to impasse. However, when the impasse results from the employer’s failure to bargain in good faith, any unilateral changes would be an unfair labor practice in violation of Section 8(a)(5). In WKYC-TV, Inc.,27 the Board held that an employer is required to continue to deduct union dues from employees’ paychecks despite the expiration of the collective agreement that contained the dues check-off provision; the terms and effects of the old collective bargaining agreement continue in effect until the union and employer reach a new agreement, or a valid impasse allows the employer to take unilateral action. An employer that unilaterally discontinued the annual 3 percent pay raises pursuant to a collective agreement when that agreement expired was held to be in violation of Sections 8(a)(1) and 8(a)(5).28 Even if an employer has bargained to impasse over a mandatory subject and is free to implement changes, the changes made must be consistent with the proposal offered to the union. To institute changes unilaterally that are more generous than the proposals the employer was willing to offer the union is a violation of Section 8(a)(5), according to the Supreme Court decision in NLRB v. Crompton-Highland Mills.29 Thus, the employer is not free to offer replacements wages that are higher than those offered to the union before the union went on strike. In some very exceptional circumstances, when changes must be made out of business necessity, the employer may institute unilateral changes without reaching an impasse, but those changes must be consistent with the offers made to the union, as held in Raleigh Water Heating.30 The following case involves the application of the Katz decision.

CASE 15.4 visiting nursE sErviCEs oF wEstErn massaChusEtts, inC. v. nlrB 177 F.3d 52 (1st Cir. 1999), cert. denied, 528 U.S. 1074 (2000)

Facts: VNS is a corporation that provides home-based nursing services. The collective bargaining agreement between VNS and the union representing its employees expired on October 31, 1992. Negotiations for a new agreement continued through March 1997. VNS proposed a 2 percent wage increase and to change from a weekly to a biweekly payroll system, to become effective on November 6, 1995. The union rejected the proposal but expressed a willingness to bargain about various proposed changes to the job classifications for the firm’s nurses. VNS presented a substantially identical proposal on December 6, 1995, but this proposal also granted VNS the sole and unqualified right to designate job classifications as it deemed necessary based on operational needs. On February 29, 1996, VNS again offered the union a 2 percent wage increase, effective retroactively to November 6, 1995, in return for the union’s agreement to its proposals for a biweekly payroll system and the job classification changes. The union again rejected the proposal. Nevertheless, on March 21, 1996, VNS notified the union that it intended to implement both the wage increase and the biweekly pay proposals. The union replied that it opposed the unilat- eral implementation of the biweekly payroll system. VNS implemented the wage increase on April 7, 1996, and the biweekly payroll system on May 3, 1996. On June 18, 1996, VNS presented another proposal that included the proposed job classification changes and a second 2 percent wage increase, and two new provi- sions: on transforming three holidays into “floating” holidays to be taken at a time requested by the employee, and the implementation of a “clinical ladders” program. VNS also proposed a smaller, alternative package (the “mini package”) that also included a second 2 percent wage increase along with the proposals on floating holi- days and the clinical ladders program. The parties did not reach an agreement on either proposal, but VNS advised the union that it was contemplating implementing the “mini package.” The union again informed VNS that it opposed the unilateral implementation of these proposals. VNS then sent a memo to the employees (but not to the union) informing them that it had implemented the mini package with the wage increase to be applied retroactively to July 7, 1996. Ten days later, VNS notified the union that the wage increase had already been implemented and that the floating holidays and clinical ladders were “already in process.” The union filed unfair labor practice charges with the NLRB, which ultimately found that VNS violated Sections 8(a)(1) and (5) of the NLRA by unilaterally implementing: • a bi-weekly payroll system on or about May 3, 1996; • changes in holidays on or about September 6, 1996; • a clinical ladder program on or about September 6, 1996; and • changes in job classifications at some time subsequent to May 3, 1996. VNS made these changes to mandatory subjects while it was still bargaining with the union and had not yet reached an impasse. VNS then sought review of the NLRB decision with the U.S. Court of Appeals for the First Circuit. Issue: Did VNS’s unilateral changes to mandatory bargaining subjects violate Sections 8(a)(1) and 8(a)(5) of the NLRA? Decision: Before the NLRB, VNS argued that once it had given the union notice of its position on a particular issue and an opportunity to respond, it was free to unilaterally declare impasse on specific issues and to take action. The NLRB held when parties are engaged in negotiations for a collective bargaining agreement, an employer has the obligation to refrain from unilateral changes in the absence of an impasse. There are two limited exceptions to that general rule: • • when a union, in response to an employer’s diligent and earnest efforts to engage in bargaining, insists on continually avoiding or delaying bargaining; or when economic exigencies or business emergencies compel prompt action by the employer. The NLRB found that neither exception applied. The Supreme Court decision in NLRB v. Katz held that an employer must bargain to impasse before making unilat- eral changes to mandatory bargaining subjects. In Litton Financial Printing Div. v. NLRB, the Court reaffirmed that “an employer commits an unfair labor practice if, without bargaining to impasse, it effects a unilateral change of an existing term or condition of employment.” The Court of Appeals rejected VNS’s argument that parties are at impasse when the union rejects or does not accept the employer’s position on a particular issue. Whether there is an impasse is an intensely fact-driven question, with the initial determination to be made by the NLRB. The Court of Appeals’ role is to review the NLRB’s factual determinations to determine whether they are supported by substantial evidence in the record as a whole. An impasse occurs when, after good faith bargaining, the parties are deadlocked so that any further bargaining would be futile. Collective bargaining involves give and take on a number of issues, and the effect of VNS’s position would be to permit the employer to remove, one by one, issues from the table and impair the ability to reach an overall agreement through compromise on particular items. In addition, it would undercut the role of the union as the collective bargaining representa- tive, effectively communicating that the union lacked the power to keep issues at the table. The Court of Appeals enforced the NLRB’s order.

15-3b Permissive Bargaining Subjects The previous discussion dealt with mandatory bargaining subjects; the Supreme Court in NLRB v. Wooster Div. of Borg-Warner Corp.31 also recognized that there are permissive subjects and prohibited subjects. Permissive bargaining subjects are those matters not directly related to wages, hours, or terms and conditions of employment, and not prohib- ited. Either party may raise permissive items in bargaining, but such matters cannot be insisted upon to the point of impasse. If the other party refuses the permissive-item proposal, it must be dropped. Borg-Warner held that insisting upon permissive items to impasse and conditioning agreement on mandatory subjects upon agreement to permissive items was a violation of the duty to bargain in good faith. An interest arbitration clause in the collective bargaining agreement, which would require that all future contract disputes be settled by an arbitrator rather than by a strike or lockout, was held to be a permissive bargaining subject. The employer’s insistence that the union agree to the interest arbitra- tion clause as a condition of the employer signing the collective bargaining agreement was a violation of Section 8(a)(5), according to Laidlaw Transit, Inc.32 Other examples of permis- sive items are proposals regarding: • Union procedure for ratifying contracts • Attempts to modify the union certification • Strike settlement agreements • Corporate social or charitable activities • Requiring a transcript of all bargaining sessions • Employer participation in an industry-wide promotion campaign Matters that are “inherent management rights” or “inherent union rights” are also permis- sive subjects. An employer is under no duty to bargain over changes in permissive subjects; according to the Supreme Court opinion in Allied Chemical & Alkalai Workers v. PPG, cited earlier, and unilateral changes on permissive subjects are not unfair practices.

15-3c Prohibited Bargaining Subjects Prohibited bargaining subjects are proposals that involve violations of the NLRA or other laws. Examples would be a union attempt to negotiate a closed shop provision or to require an employer to agree to a “hot cargo clause” prohibited by Section 8(e) of the act. Any attempt to bargain over a prohibited subject may violate Section 8(a)(5) or Section 8(b)(3); any agreement reached on such items is null and void. It should be clear that prohibited subjects may not be used to precipitate an impasse.

15-3d Modification of Collective Agreements Section 8(d) of the act prohibits any modifications or changes in a collective agreement’s provisions relating to mandatory bargaining subjects during the term of the agreement unless both parties to the agreement consent to such changes. (When the agreement has expired, either party may implement changes in the mandatory subjects covered by the agreement after having first bargained, in good faith, to impasse.) In Milwaukee Spring Div. of Illinois Coil Spring,33 the question before the NLRB was whether the employer’s action to transfer its assembly operations from its unionized Milwaukee Spring facility to its nonunion operations in Illinois during the term of a collective agreement was a violation of Sections 8(a)(1), 8(a)(3), and 8(a)(5). The transfer of operations was made because of the higher labor costs of the unionized operations. As a result of the transfer, the employees at Milwaukee Spring were laid off. Prior to the decision to relocate operations, the employer had advised the union that it needed reductions in wages and benefit costs because it had lost a major customer, but the union had rejected any concessions. The employer had also proposed terms upon which it would retain operations in Milwaukee, but again, the union had rejected the proposals and declined to bargain further over alternatives to transfer. The NLRB had initially held that the actions constituted a violation of Sections 8(a)(1), 8(a)(3), and 8(a)(5); but on rehearing, the Board reversed the prior decision and found no violation. The majority of the Board reasoned that the decision to transfer operations did not constitute a unilateral modification of the collective

agreement in violation of Section 8(d) because no term of the agreement required the operations to remain at the Milwaukee Spring facility. Had there been a work-preservation clause stating that the functions the bargaining unit employees performed must remain at the Milwaukee plant, the employer would have been guilty of a unilateral modification of the collective agreement, in violation of Section 8(d). The employer’s offers to discuss concessions and the terms upon which it would retain operations in Milwaukee satisfied the employer’s duty to bargain under Section 8(a)(5). The majority also held that the layoff of the unionized employees after the operations were transferred did not violate Section 8(a)(3). The effect of their decision, reasoned the majority, would be to encourage “realistic and meaningful collective bargaining that the Act contemplates.” The dissent argued that the employer was prohibited from transferring operations during the term of the agreement without the consent of the union. The Court of Appeals for the D.C. Circuit affirmed the majority’s decision in U.A.W. v. NLRB.34 Plant Closing Legislation Because of concerns over plant closings, Congress passed the Worker Adjustment and Retraining Notification Act (WARN) in August 1988. The law, which went into effect February 4, 1989, requires employers with 100 or more employees to give 60 days’ advance notice prior to any plant closings or mass layoffs. The employer must give written notice of the closing or mass layoff to the employees or their representative, to the state economic development officials, and to the chief elected local government official. WARN defines a plant closing as being when 50 or more employees lose their jobs during any 30-day period, because of a permanent plant closing, or a temporary shutdown exceeding six months. A plant closing may also occur when 50 or more employees experience more than a 50 percent reduction in the hours of work during each month of any six-month period. Mass layoffs are defined as layoffs creating an employment loss during any 30-day period for 500 or more employees or for 50 or more employees who constitute at least one-third of the full-time labor force at a unit of the facility. The act also requires a 60-day notice when a series of employment losses adds up to the requisite levels over a 90-day period. The notice requirement has two exceptions. One exception is the so-called failing firm exception, when the employer can demonstrate that giving the required notice would prevent the firm from obtaining capital or business necessary to maintain the operation of the firm. The other exception is when the work loss is due to “unforeseen circumstances.” Although the legislation speaks of plant closings, and Congress had industrial plant closings as a primary concern when passing WARN, the courts have held that it applies to employers such as law firms, brokerage firms, hotels, and casinos. The act imposes a penalty for failure to give the required notice; the employer is required to pay each affected employee up to 60 days’ pay and benefits if the required notice is not given. The act also provides for fines of up to $500 for each day the notice is not given, up to a maximum of $30,000. However, the fines can be imposed only in suits brought by local governments against the employer. WARN does not create any separate enforcement agency, nor does it give any enforcement authority to the Department of Labor. The act requires only that advance notice of the plant closings or mass layoffs be given; it does not require that the employer negotiate over the decision to close or lay off. To that extent, WARN does not affect the duty to bargain under the NLRA or the results of the First National Maintenance decision.

ethical DILEMMA

PoSSiBle PlanT cloSingS—To MeeT or noT To MeeT? You are the human resource manager at Immense Multinational Business’s production facility located in Utica, New York. The Utica plant is 75 years old. The plant is profit- able, but barely so. Its production costs are the highest in the corporation’s manufac- turing division. The workers at the Utica facility are unionized, and the wages at Utica are higher than at most of the company’s other manufacturing plants. But the utility costs, real estate taxes, and New York workers’ compensation and unemployment insurance payroll taxes at the Utica plant are very high and are the main reasons for the plant’s high production costs. The company has recently opened a manufacturing plant in Puerto Rico. Corporate headquarters is considering expanding the production at that facility by transferring production from the Utica plant. The Utica workers have heard rumors that the plant will be closed. The officials of the local union at the Utica plant offer to meet with you to discuss the plant closing rumors and concessions that they are willing to make to keep the Utica plant open. Should you meet with them to discuss the plant closing and possible concessions? What arguments can you make for meeting with the union? What arguments can you make for not meeting with the union? Would refusing to meet and discuss those matters with the union be an unfair labor practice? Prepare a memo for corporate headquarters addressing these questions. The Duty to Furnish Information In NLRB v. Truitt Mfg.,35 the Supreme Court held that an employer that pleads inability to pay in response to union demands must provide some financial information in an attempt to support that claim. The Court reasoned that such a duty was necessary if bargaining was to be meaningful; the employer is not allowed to “hide behind” claims that it cannot afford the union’s pay demands. The rationale behind this requirement is that the union will be able to determine if the employer’s claims are valid. If so, the union will moderate its demands accordingly. The Truitt requirement to furnish information is not a “truth-in-bargaining” require- ment. It relates only to claims of financial inability to meet union proposals. If the employer pleads inability to pay, the union must make a good faith demand for financial information supporting the employer’s claim. In responding to the union request, the employer need not provide all the information requested by the union, but it must provide financial infor- mation in a reasonably usable and accessible form. While the Truitt duty relates to financial information when the employer has pleaded inability to pay, another duty to furnish information is far greater in scope. Information relating to the enforcement and administration of the collective agreement must be provided to the union. This information is necessary for the union to perform its role as collective representative of the employees. This duty continues beyond negotiations to cover griev- ance arbitration during the life of the agreement as well. Such information includes: • Wage scales • Factors entering into compensation • Job rates • Job classifications • Statistical data on the employer’s minority employment practices • A list of the names and addresses of the employees in the bargaining unit The employer’s refusal to provide the union with a copy of the contract for the sale of the employer’s business was a violation of Section 8(a)(5) when the union sought the contract to determine whether the employees were adequately provided for after the sale and the union had agreed to keep the sales information confidential and to allow the employer to delete the sale price from the contract, according to NLRB v. New England Newspapers, Inc.36 Employers using toxic substances have been required to furnish unions with information on the generic names of substances used, their health effects, and toxi- cological studies. Employers are not required to turn over medical records of identified individual employees. To safeguard the privacy of individual employees, the courts have required that individual employees must consent to the disclosure of individual health records and scores on aptitude or psychological tests. An employer is entitled, however, to protect trade secrets and confidential information such as affirmative action plans or privately developed psychological aptitude tests. Information provided to the union does not have to be in the exact format requested by the union, but it must be in a form that is not burdensome to use or interpret. An employer may not prohibit union photocopying of the information provided, according to Communications Workers Local 1051 v. NLRB.37 However, in SDBC Holdings, Inc. v. NLRB,38 the court of appeals held that an employer had satisfied its obligation to provide information by allowing the union multiple opportunities to examine the company’s audited financial statement, and was not required to allow the union to retain a copy of that financial statement. We have seen that the requirements of the duty to bargain in good faith reflect a balance between promoting industrial peace and recognizing the principle of freedom of contract. To preserve the voluntary nature of collective bargaining, the Board and the courts will not require either party to make a concession or agree to a proposal. When the violation of Section 8(a)(5) or Section 8(b)(3) involves specific practices, such as the refusal to furnish information or the refusal to sign an already agreed-upon contract, the Board orders the offending party to comply. Likewise, when an employer has illegally made unilateral changes, the Board requires that the prior conditions be restored and any reduction in wages or benefits be paid back. However, if the violation of the duty to bargain in good faith involves either side’s refusal to recognize or negotiate seriously with the other side, the Board is limited in remedies available. In such cases, the Board will issue a “cease-and-desist” order directing the offending party to stop the illegal conduct and a “bargaining order” directing the party to begin to negotiate in good faith. But the Board cannot require that the parties make concessions or reach an agreement; it can only require that the parties return to the bargaining table and make an effort to explore the basis for an agreement. The following case deals with the limits on the Board’s remedial powers in bargaining-order situations.

CASE 15.5 H. K. Porter Co. v. NLrB 397 U.S. 99 (1970

Black, J. After an election, respondent United Steelworkers Union was, on October 5, 1961, certified by the National Labor Relations Board as the bargaining agent for the employees at the Danville, Virginia, plant of the H. K. Porter Co. Thereafter negotiations commenced for a collective bargaining agreement. Since that time the controversy has seesawed between the Board, the Court of Appeals for the District of Columbia Circuit, and this Court. This delay of over eight years is not because the case is exceedingly complex, but appears to have occurred chiefly because of the skill of the company’s negotiators in taking advantage of every opportunity for delay in an Act more noticeable for its generality than for its precise prescriptions. The entire lengthy dispute mainly revolves around the union’s desire to have the company agree to “check off ” the dues owed to the union by its members, that is, to deduct those dues periodi- cally from the company’s wage payments to the employees. The record shows, as the Board found, that the company’s objection to a check off was not due to any general prin- ciple or policy against making deductions from employees’ wages. The company does deduct charges for things like insurance, taxes, and contributions to charities, and at some other plants it has a check off arrangement for union dues. The evidence shows, and the court below found, that the company’s objection was not because of inconvenience, but solely on the ground that the company was “not going to aid and comfort the union.” Based on this and other evidence the Board found, and the Court of Appeals approved the finding that the refusal of the company to bargain about the check off was not made in good faith, but was done solely to frustrate the making of any collective bargaining agreement. In May 1966, the Court of Appeals upheld the Board’s order requiring the company to cease and desist from refusing to bargain in good faith and directing it to engage in further collective bargaining, if requested by the union to do so, over the check off. In the course of that opinion, the Court of Appeals inti- mated that the Board conceivably might have required peti- tioner to agree to a check off provision as a remedy for the prior bad-faith bargaining, although the order enforced at that time did not contain any such provision. In the ensuing negotiations the company offered to discuss alternative arrangements for collecting the union’s dues, but the union insisted that the company was required to agree to the check off proposal without modification. Because of this disagree- ment over the proper interpretation of the court’s opinion, the union, in February 1967, filed a motion for clarification of the 1966 opinion. The motion was denied by the court on March 22, 1967, in an order suggesting that contempt proceedings before the Board would be the proper avenue for testing the employer’s compliance with the original order. A request for the institution of such proceedings was made by the union, and in June 1967, the Regional Director of the Board declined to prosecute a contempt charge, finding that the employer had “satisfactorily complied with the affirmative requirements of the Order.”. . . The union then filed in the Court of Appeals a motion for reconsideration of the earlier motion to clarify the 1966 opinion. The court granted that motion and issued a new opinion in which it held that in certain circumstances a “check off may be imposed as a remedy for bad-faith bargaining. The case was then remanded to the Board and on July 3, 1968, the Board issued a supplemental order requiring the petitioner to “[g]rant to the Union a contract clause providing for the check off of union dues. . . . The Board had found that the refusal was based on a desire to frustrate agreement and not on any legitimate business reason. On the basis of that finding the Court of Appeals approved the further finding that the employer had not bargained in good faith, and the validity of that finding is not now before us. Where the record thus revealed repeated refusals by the employer to bargain in good faith on this issue, the Court of Appeals concluded that ordering agreement to the check off clause “may be the only means of assuring the Board, and the court, that [the employer] no longer harbors an illegal intent.” In reaching this conclusion the Court of Appeals held that Section 8(d) did not forbid the Board from compelling agreement. That court felt that “Section 8(d) defines collec- tive bargaining and relates to a determination of whether a . . . violation has occurred and not to the scope of the remedy which may be necessary to cure violations which have already occurred.” We may agree with the Court of Appeals that as a matter of strict, literal interpretation of that section it refers only to deciding when a violation has occurred, but we do not agree that that observation justifies the conclusion that the remedial powers of the Board are not also limited by the same considerations that led Congress to enact Section 8(d). It is implicit in the entire structure of the Act that the Board acts to oversee and referee the process of collective bargaining, leaving the results of the contest to the bargaining strengths of the parties. It would be anomalous indeed to hold that while Section 8(d) prohibits the Board from relying on a refusal to agree as the sole evidence of bad faith bargaining, the Act permits the Board to compel agree- ment in that same dispute. The Board’s remedial powers under Section 10 of the Act are broad, but they are limited to carry out the policies of the Act itself. One of these funda- mental policies is freedom of contract. While the parties’ freedom of contract is not absolute under the Act, allowing the Board to compel agreement when the parties themselves are unable to do so would violate the fundamental premise on which the Act is based—private bargaining under governmental supervision of the procedure alone, without any official compulsion over the actual terms of the contract. In reaching its decision, the Court of Appeals relied extensively on the equally important policy of the Act that workers’ rights to collective bargaining are to be secured. In this case the Court apparently felt that the employer was trying effectively to destroy the union by refusing to agree to what the union may have considered its most important demand. Perhaps the court, fearing that the parties might resort to economic combat, was also trying to maintain the industrial peace that the Act is designed to further. But the Act, as presently drawn, does not contemplate that unions will always be secure and able to achieve agreement even when their economic position is weak, nor that strikes and lockouts will never result from a bargaining to impasse. It cannot be said that the Act forbids an employer or a union to rely ultimately on its economic strength to try to secure what it cannot obtain through bargaining. It may well be true, as the Court of Appeals felt, that the present remedial powers of the Board are insufficiently broad to cope with important labor problems. But it is the job of Congress, not the Board or the courts, to decide when and if it is neces- sary to allow governmental review of proposals for collective bargaining agreements and compulsory submission to one side’s demands. The present Act does not envision such a process. The judgment is reversed and the case is remanded to the Court of Appeals for further action consistent with this opinion. Reversed and remanded. Case Questions 1. Had the employer agreed to the union dues check- off clause? Why did the court of appeals hold that the NLRB had the power to impose a check-off clause on the employer? 2. Does the Supreme Court agree that the NLRB has the power to impose the check-off clause? Why? 3. In light of this Supreme Court decision, what is the extent of the NLRB’s power to remedy violations of the duty to bargain in good faith?

reaching an agreement with the other side. Although unions are occasionally involved in such situations, most often employers have more to gain from refusing to bargain. The legal fees and fines may amount to less money than the employer would be required to pay in wages under a collective agreement (and the legal expenses are tax deductible). Perhaps the most extreme example of such intransigence was the J. P. Stevens Company. In the late 1970s, the company was found guilty of numerous unfair practices and was subjected to a number of bargaining orders, yet in only one case did it reach a collective agreement with the union. Extreme cases like J. P. Stevens are the exception, however. Despite the Board’s reme- dial shortcomings, most negotiations culminate in the signing of a collective agreement. That fact is a testament to the vitality of the collective bargaining process and a vindication of a policy emphasis on the voluntary nature of the process.

ThE WORKING LAw NLRB Office of the General Counsel Memorandum GC 14-03 April 30, 2014 TO: All Regional Directors, Officers-in-Charge and Resident Officers FROM: Richard F. Griffin, Jr., General Counsel SUBJECT: Affirmation of 10(j) Program

An important priority of mine is to ensure that we continue our efforts to obtain immediate relief in those unfair labor practice cases that present a significant risk of remedial failure. Section 10(j) of the Act provides the tool to ensure that employ- ees’ Section 7 rights will be adequately protected from such failure. During my tenure as General Counsel, I intend to aggressively seek 10(j) relief where necessary to preserve the status quo and the efficacy of final Board orders, and I thank you for your continued dedication and effort in working to achieve this goal. I am pleased to follow the most recent General Counsel and Acting General Counsel in emphasizing the need to seek 10(j) relief in particular types of cases. Specifically, in 2006, former General Counsel Meisburg instructed Regional Offices to “focus particular attention on remedies for violations that occur during the period after certification when parties are or should be bargaining for an initial collective bargaining agreement.” Similarly, former Acting General Counsel Solomon re-affirmed that priority, instructing Regional Offices in 2011 to “continue to consider the propriety of 10(j) relief in all first-contract bargaining cases,” and he also initiated a program “to ensure that effec- tive remedies are achieved as quickly as possible when employees are unlawfully discharged or [become] victims of other serious unfair labor practices because of union organizing at their workplaces,” establishing specific timelines to streamline processing of those cases. These initiatives have led to extremely positive results. For instance, in fiscal years 2012 and 2013, we sought 10(j) relief in 19 first-contract bargaining cases and obtained bargaining orders in 16 of those cases for an average success rate of 84%. . . . I fully endorse the initiatives of my predecessors and, based on the prior successes, I expect to obtain similar results. . . . Effective enforcement of the Act requires that we protect employees’ right to exercise their free choice regarding unionization, to participate in an election free of coercion, and to have their elected representative negotiate a first contract unencumbered by the impact of unfair labor practices. Cases involving a discharge during an organizing campaign or arising during negotiations for a first contract frequently require the most expeditious relief to ensure that employees are not irreparably deprived of those rights. . . . I have a particular interest in seeking injunctive relief in appropriate cases involving a successor’s refusal to bargain and, more importantly, successor refusal-to-hire cases. In many ways, successor cases present the same need for protection as those with a newly certified union. In both, the status of the employees’ chosen collective-bargaining successor’s refusal to bargain, unlawful conduct by a new employer that undermines the representa- tive will lead to employee disaffection, concomitant loss of bargaining power, and loss of employee benefits that cannot be restored by a final Board order. And in cases where a successor employer refuses to hire employees to avoid bargaining with an incumbent union, the potential scattering of those employees creates an even greater risk that a final Board order will not effectively restore the parties to establish a good faith bargaining relationship. Because these types of cases should be given special emphasis, Regions should submit to the Injunction Litigation Branch a recommendation with respect to whether to seek 10(j) relief in all successorship cases in which a determination has been made to issue complaint. . . . Thank you again for ensuring that our 10(j) program remains robust and successful so we can continue to provide timely, effective relief to the victims of unfair labor practices. R.F.G.

15-4 Antitrust Aspects of Collective Bargaining

When a union and a group of employers agree upon specified wages and working condi- tions, the effect may be to reduce competition among the employers with respect to those wages or working conditions. In addition, when the parties negotiate limits on subcon- tracting work or the use of prefabricated materials, the effect may be to reduce or prevent competition among firms producing these materials. Although the parties may be pursuing legitimate goals of collective bargaining, those goals may conflict with the policies of the antitrust laws designed to promote competition. In the case of U.S. v. Hutcheson,39 the Supreme Court held that a union acting in its self- interest, which does not combine with nonlabor groups, is exempt from the antitrust laws. Hutcheson involved union picketing of Anheuser-Busch and a call for a boycott of Anheuser- Busch products as a result of a dispute over work-assignment decisions. The Court ruled that such conduct was legal as long as it was not done in concert with nonlabor groups. The scope of the labor relations exemption from the antitrust laws was further clari- fied by the Supreme Court in Amalgamated Meat Cutters v. Jewel Tea Co.40 In that case, the union and a group of grocery stores negotiated restrictions on the hours its members would work, since the contract required the presence of union butchers for fresh meat sales. The effect of the agreement was to restrict the hours during which the grocery stores could sell fresh (rather than prepackaged) meat. Jewel Tea argued that such a restriction of competi- tion among the grocery stores violated the Sherman Antitrust Act. The Supreme Court held that since the union was pursuing its legitimate interests—that is, setting hours of work through a collective bargaining relationship—and did not act in concert with one group of employers to impose restrictions on another group of employers, the contract did not violate the Sherman Act. Despite the broad scope of the antitrust exemption for labor relations activities, several cases have held unions in violation of the antitrust laws. In United Mine Workers v. Pennington,41 the union agreed with one group of mine operators to impose wage and pension demands on a different group of mines. The union and the first group of mine owners were held by the Court to have been aware that the second group, composed of smaller mining operations, would be unable to meet the demands and could be forced to cease operations. The Supreme Court stated that if the union had agreed with the first group of employers in order to eliminate competition from the smaller mines, the union would be in violation of the antitrust laws. Although the union, acting alone, could attempt to force the smaller mines to agree to its demands, the union lost its exemption from the antitrust laws when it combined with one group of employers to force demands on the second group. In Connell Construction Co. v. Plumbers Local 100,42 a union attempted to force a general contractor to agree to hire only plumbing subcontractors who had contracts with the union. The general contractor did not itself employ any plumbers, and the union did not represent the employees of the general contractor. The effect of the union demand would be to restrict competition among plumbing subcontractors. Nonunion firms, and even unionized firms that had contracts with other unions, would be denied access to plumbing jobs. The Supreme Court held that the union conduct was not exempt from the antitrust laws because the union did not have a collective bargaining relationship with Connell, the general contractor. Although a union may attempt to impose restrictions on employers with whom it has a bargaining relationship, it may not attempt to impose such restrictions on employers outside that bargaining relationship. In Brown v. Pro Football, Inc.,43 the U.S. Supreme Court held that the nonstatutory exemption from the antitrust laws continued past the expiration of the collective agreement and the point of impasse and lasted as long as a collective bargaining relationship existed. The Court therefore upheld the legality of salary restrictions imposed by the members of a multiemployer bargaining unit—the teams of the National Football League—unilaterally after the expiration of their collective agreement and after bargaining in good faith to impasse. The NFL rule requiring a player to wait for at least three full football seasons after high school graduation before being eligible to enter the NFL draft was held to be within the nonstatutory exemption from the antitrust laws in Clarett v. National Football League.44 In summary, then, the parties are generally exempt from the antitrust laws when they act alone to pursue legitimate concerns within the context of a collective bargaining relationship. If a union agrees with one group of employers to impose demands on another group or if it attempts to impose work restrictions on employers outside a collective bargaining relation- ship, it is subject to the antitrust laws.

Summary

The duty to bargain in good faith arises under Section 9(a) of the NLRA because of a union’s status as exclusive bargaining agent. When a union demonstrates the support of a majority of the employees in the bargaining unit, both the union and the employer are required to bargain in good faith, as defined in Section 8(d). • The NLRB presumptions regarding the union’s majority status require that the employer recog- nize and bargain with the union for at least one year following the union’s victory in a represen- tation election or for a reasonable period of time following a voluntary recognition of the union by the employer. If the parties have negotiated a collective bargaining agreement, the presump- tion of union majority support continues for the length of the collective agreement or for the first three years of the agreement if it is for a longer term. After the expiration of the collective agree- ment, the employer must demonstrate a good faith doubt as to the union’s majority support, based on some objective evidence, to refuse to bargain with the union. • Bargaining in good faith, as defined in Section 8(d), requires that the parties meet and discuss matters with an open mind to explore the basis of an agreement. The parties are not required to make concessions or to reach an agreement. • The NLRB has classified bargaining subject matter as either mandatory, permissive, or illegal. Attempts to » Problems » Questions 1. Under what circumstances may an employer whose employees are unionized bargain legally with indi- vidual employees? 2. Must an employer refuse to bargain with either union when two unions are seeking to represent the employer’s workers? Explain your answer. 3. What are mandatory bargaining subjects? What is the significance of an item being classified as a mandatory bargaining subject? 4. When is an employer required to provide financial information to a union? 5. What conduct by unions is subject to the antitrust laws? » Case Problems 6. During bargaining, the employer reached an impasse on (a) a detailed “management rights” clause, (b) a broad “zipper” clause, (c) a waiver-of-past-practices negotiate illegal subjects, or taking an illegal subject to impasse, are a violation of the duty to bargain in good faith. Mandatory subjects are those that directly affect the wages, hours, and terms and conditions of employment of the employees in the bargaining unit; the parties are required to discuss such issues and, after reaching impasse, may strike or lock out over mandatory subjects. Permissive subjects are those that are neither mandatory nor illegal; while the parties are free to discuss these matters, they cannot take permissive subjects to impasse. • The NLRB’s remedies for violations of the duty to bargain in good faith are limited to cease-and- desist orders; the NLRB cannot order parties to reach an agreement, nor can it impose contractual terms on the parties. provision, and (d) a no-strike provision. The employer’s final economic offer consisted of an increase of 10 cents per hour for seven of the nine bargaining unit employees and a wage review for the remaining two. Based on these facts, the NLRB concluded that the employer had engaged in mere surface bargain- ing and condemned the employer’s final proposals as “terms which no self respecting union could be expected to accept.” The company appealed the case to the Ninth Circuit. If you had sat on the panel at the appellate court level, would you have agreed or disagreed with the board’s conclusions? [See NLRB v. Tomco Com- munications, Inc., 567 F.2d 871, 97 L.R.R.M. 2660 (9th Cir. 1978).] 7. The personnel department at an electrical utility had a policy of giving all new employees a “psycho- logical aptitude test.” The union demanded access to the test questions, answers, and individual scores for the employees in the bargaining unit. The union pointed out that among similar types of informa- tion that the NLRB had ordered disclosed in other cases were seniority lists, employees’ ages, names and addresses of successful and unsuccessful job applicants, information about benefits received by retirees under employer’s pension and insur- ance plans, information on employee grievances, and information on possible loss of work due to a proposed leasing arrangement. The company claimed that if it released the information the union sought, its test security pro- gram would be severely compromised. Furthermore, employee confidence in the confidentiality of the testing program would be shattered. How do you think the NLRB would rule in this case? [See Detroit Edison Co. v. NLRB, 440 U.S. 301, 100 L.R.R.M. 2728 (1979).] 8. During negotiations for renewing the collective agreement, the union representing the employees at Mercy Hospital presented a proposal that the hospital cafeteria be open for all employees from the hours of 6:30 a.m.–8:00 p.m. and 2:00 a.m.–4:00 a.m. The cafeteria had been open for those hours for the past ten years, but the hospital had consid- ered closing it overnight. The union argued that there were approximately 175 employees working the overnight shift, and many of them used the cafe- teria for lunch and breaks. The hospital responded that the cafeteria had been losing money during the 2:00 a.m.–4:00 a.m. operations. The union proposal was made on May 15, 2007; on May 19, without any notice to and discussions with the union, the hospital closed the cafeteria overnight. The hospital installed additional vending machines and provided a toaster and microwave for use by the employees. The union filed an unfair labor prac- tice complaint with the NLRB over the hospital’s closing of the cafeteria overnight. How should the NLRB rule on the complaint? Was the hospital required to bargain with the union over the decision to close the cafeteria overnight? Why? [See Mercy Hospital of Buffalo, 311 NLRB 869 (1993).] 9. Sonat Marine was engaged in the business of trans- porting petroleum and petrochemical products. The Seafarers International Union (SIU) represented two separate bargaining units of Sonat’s employees. One unit consisted of licensed employees—that is, the tugboat masters, mates, and pilots. In 2004, Sonat advised the union that it intended to withdraw recognition of the SIU as the bargaining representa- tive of these licensed personnel at the expiration of the current collective bargaining agreement. Sonat’s stated reason was that it had determined that these personnel were supervisors who were not subject to the NLRA as employees. The union demanded information on the factual basis for Sonat’s posi- tion. Sonat refused to provide a response. The union filed an unfair labor practice charge, asserting that Sonat was not bargaining in good faith. Was the union right? [See Sonat Marine, Inc., 279 NLRB 100 (1986).] 10. Pratt-Farnsworth, Inc., a unionized construction contractor in New Orleans, owned a nonunion subsidiary, Halmar. During negotiations of a new collective bargaining agreement with Pratt Farnsworth, the Carpenters’ Union demanded that the company provide information concerning Halmar’s business activities; the union was suspi- cious that the subsidiary was being used by the parent to siphon off work that could have been done by union members. If you represented the union, what arguments would you make to support your demand for in- formation? If you were on the company’s side, how would you respond? [See Carpenters Local 1846 v. Pratt-Farnsworth, Inc., 690 F.2d 489, 111 L.R.R.M. 2787 (5th Cir. 1982).] 11. The company and the union commenced collective bargaining in April 2003. After four sessions, the company submitted, on June 15, a contract package for union ratification. Two days later, the union’s membership rejected the package. No strike ensued. Following rejection, the union’s chief negotiator contacted the company and pointed out four stum- bling blocks to ratification: union security, wages, overtime pay, and sickness and accident benefits. On July 7, the company resubmitted its original contract package unchanged. The union agreed to put it to a second ratification vote. However, before the vote took place, the company’s president with- drew the package from the bargaining table. His reasoning was that the union’s failure to strike in- dicated that the company had earlier overestimated the union’s economic power. When in subsequent bargaining sessions the company proposed wages and benefits below those in the original package, the union charged it with bad faith bargaining. How should the NLRB have ruled on this com- plaint? [See Pennex Aluminum Corp., 271 NLRB 1205 (1984).] 12. For more than 30 years without challenge by the union, the Brod & McClung-Pace Co.’s bargaining unit employees performed warranty work at customers’ facilities. Then the international union altered its constitution to forbid its members to do such warranty work. Pursuant to this constitutional change, the local union, which was subject to the international’s consti- tution, sought a midterm modification of its collective bargaining agreement with the company to eliminate the warranty work. When the firm refused, the union sought to achieve a unilateral change by threatening its members with court-collectible fines if they continued to perform the work. Did the union violate the NLRA? If so, how? [See Sheet Metal Workers Int’l. Ass’n., Local 16, 270 NLRB 116 (1984).] 13. After five sessions of multiemployer bargaining, the Carpenters’ Union and the Lake Charles District of the Associated General Contractors of Louisiana reached a new agreement. However, the printed contract inadvertently omitted a “weather clause,” which was to state that an employee who reported for work but was sent home because of inclement weather would get four hours’ pay, and an employee sent home because of weather after having started work would get paid only for hours actually worked, but not less than two hours. When the omission was discovered, the contract was already ratified and signed. The union refused to add the clause. The company then asked to reopen bargaining over the wage and reporting clauses that were affected by the omission. The union refused. Who, if anyone, has committed an unfair labor practice? [See International Brotherhood of Carpen- ters Local 1476, 270 NLRB 1432 (1984).] 14. The production workers at Molded Products Co., represented by the Allied Workers Union, went on strike in June 2002, after their collective agreement expired. The strike lasted two months, and during the strike, almost half of the 150 workers crossed the picket line and returned to work. When the strike ended, the company recalled 60 of the strikers and operated with a work force of 135. Some of the workers then circulated a petition stating that they no longer wished to be represented by the union, and 70 of the workers signed it. The company then notified the union that it was withdrawing recog- nition and refused to bargain with the union over renewing the collective agreement. The union filed a complaint with the NLRB, arguing that the company’s withdrawal of recognition violated Sections 8(a)(1) and (5). How should the NLRB rule on the complaint? Why? Explain your answer. [See Quazite Div. of Morrison Molded Fiberglass Co. v. NLRB, 87 F.3d 493 (D.C. Cir. 1996).] 15. Plymouth Stamping, an automotive parts company located in Michigan, decided to contract out its parts assembly operations in response to dete- riorating sales and financial conditions. It notified the union on February 11, 2008, of its plans to subcontract. The notice stated that the operation would be discontinued as of February 15, that the assembly operation employees would be either laid off or transferred, and that the action was neces- sary “due to economic and business reasons.” The union requested a meeting, which was held on February 14, 2008. At this meeting, the company explained that the action was the result of a number of factors, including declining sales, noncompeti- tive wage rates, burdensome state taxes, and high workers’ compensation costs. The company, in response to a question concerning possible ways to retain the jobs, stated that the union would have to accept substantial wage cuts, a cost-of-living freeze, a reduction in some benefits, and a modification in work rules. The union requested that the company delay any action until at least the following week; the company, while stating that its decision was not final, requested a reply from the union by February 15 as to whether it would agree to conces- sions. The union failed to respond by February 15, and over the weekend (February 16 and 17), the company moved its assembly equipment to a plant in Ohio. Meanwhile, unbeknownst to the company, the union, in a letter dated February 14, had requested information regarding the specifics of the decision. The company received the union’s letter on February 20. The company responded to the union’s letter on March 11; it stated that the decision was not irreversible and that it was prepared to discuss the matter with the union. The company repeated that the decision to subcontract was taken because “assembly operations are labor intensive and the costs (wages/benefits) associ- ated with supporting this labor group have made the company noncompetitive.” On March 1, the company entered into a formal leasing agreement with the subcontracting company; the lease allowed the company to terminate the lease and repos- sess the equipment and gave the subcontractor the option to purchase the equipment. The subcon- tractor purchased the equipment on July 1, 1980. The union filed an unfair labor practice complaint with the NLRB, charging the company with viola- tions of Sections 8(a)(1) and 8(a)(5) for failing to bargain over a mandatory subject of bargaining and making a unilateral change in a mandatory subject without bargaining to impasse. How should the NLRB decide the union’s complaint? What would have been the effect of the WARN law if it had applied to this case? [See NLRB v. Plymouth Stamping Division, Eltec Corp., 870 F.2d 1112 (6th Cir. 1989).] 17. » Hypothetical Scenarios 16. During the negotiations between the employer, Spina Mfg., and the union representing Spina’s employees, the union representative noted that the company did not have an employee assistance program (EAP), although it did have a drug and alcohol policy. Parker, Spina’s manager replied that the company’s health insurance program addressed such employee issues and said that he did not favor instituting an EAP. After a fatal employee acci- dent in the workplace, Parker contacted TriCity Family Services, a local social services agency, to launch an EAP for employees. Parker did not notify the union about the EAP before agreeing with TriCity to set up the program. At the next negotiation session, Parker gave the union repre- sentatives a brochure and related information about the EAP, and told them that he instituted the program as result of the workplace accident. At the negotiation session held the next day, Parker asked the union representatives whether they had read the EAP information. The union representa- tives answered that they had not yet done so. The union did not offer a counterproposal to the EAP established by Parker. The union filed an unfair labor practice charge with the NLRB, alleging that the employer’s unilateral decision to create the EAP was in violation of Section 8(a)(5). Spina’s managers responded that its actions in creating the EAP were motivated solely by the desire to provide the employees with immediate grief counseling in light of the death of one of their fellow employees in the workplace accident. They also said that they did notify the union that they were willing to discuss and negotiate the program during their ongoing negotiations. Did Spina’s unilat- eral creation of the EAP violate Section 8(a)(5)? Explain your answer. Rodgers Graphics, a commercial printer, refused to bargain with the Communications Workers of America, Local 14, after its collective bargaining agreement expired. The company claimed that it had a good faith reasonable doubt of the union’s majority status, based on the following facts: • The company’s president, Doyle McDonald, gathered from frequent conversations with various employees that the employees were not happy with the union. • Cynthia Termath, an employee who served as one of two union stewards, told McDonald that most employees had lost confidence in the union, did not think it was representing them well, no longer wanted the union to represent them, and were generally dissatisfied with it. Termath gained her information from her con- versations with about 60 other employees. • Ignacio Burgos, the other union steward, also told McDonald that the employees were dissat- isfied with the union. Company managers informed McDonald that there was a “lack of interest” in the union among employees. Does Rodgers’s refusal to bargain with the union violate Sections 8(a)(1) and 8(a)(5) of the NLRA? Explain your answer. 18. Lakeland Bus Lines, Inc. is a private bus company whose drivers are represented by the Amalgamated Transit Union, Local 164. The parties’ collec- tive agreement expired on January 31, 2007. In February, when negotiations on a new agree- ment stalled, the company gave a final offer to the union. On the same day, Lakeland’s president sent a letter to the bargaining unit employees detailing the company’s bargaining position and its finan- cial difficulties. The union then requested that the company provide financial information to verify that it could not afford any contract terms that exceeded the costs of its final offer. Company repre- sentatives refused to furnish any of the requested information. Lakeland’s employees subsequently rejected the company’s final offer, and the company unilaterally implemented the terms of its final offer. The union filed unfair labor practice charges with the NLRB, claiming that Lakeland had failed to bargain in good faith by refusing to provide financial information requested by the union and by unilaterally imposing the terms of its final offer. How should the NLRB rule on the union’s complaint? Why? Callahan Construction Co. and the Carpenters’ Union had concluded negotiations for a new collec- tive agreement covering Callahan’s employees, when the union representative informed Callahan that the union would not agree to the final contract wage proposal unless the employer joined the Green Builders Association and agreed to promote energy- efficient and environmentally friendly construction techniques. Does the union’s demand violate the duty to bargain in good faith? Explain your answer. Local No. 580 of the Teamsters Union was certified by the NLRB as the exclusive bargaining representa- tive for the employees of Adams Potato Chip Co. At subsequent negotiations for a collective agreement covering the employees, the union negotiators indi- cated that they would accept the company’s proposal if the company agreed to change its offer of three weeks’ vacation for workers with at least 15 years of service to three weeks’ vacation after 10 years of service. The company’s lead negotiator agreed to the change and the parties held that the negotia- tions were completed. The company president later refused to sign the written agreement, claiming that the company negotiator lacked authority to agree to the change in vacation policy. Has the company violated Section 8(a)(5)? Explain.

C H A P T E R 16

Picketing and Strikes 16-1 Collective bargaining involves economic conflict: Each party to the negotiations seeks to protect its economic interests by extracting concessions from the other side. Both union and management back up their demands with the threat of pressure tactics that would inflict economic harm upon the other party. If the negotiations reach an impasse, the union may go on strike, or the employer may lock employees out to force concessions. This chapter discusses the limitations placed on the use of such pressure tactics.

16-1Pressure Tactics

Pressure tactics include: • • • • • Picketing Patrolling Strikes Boycotts by unions Lockouts by employers Picketing is the placing of persons outside the premises of an employer to convey informa- tion to the public. The information may be conveyed by words, signs, or the distribution of literature. Picketing is usually accompanied by patrolling, which is the movement of persons back and forth around the premises of an employer. A strike—the organized withholding of labor by workers—is the traditional weapon by which workers attempt to pressure employers. If the strike is successful, the economic harm resulting from the cessation of production will force the employer to accede to the union’s demands. Strikes are usually accompanied by picketing and patrolling as means of enforcing the strike. Unions may also instigate a boycott of the employer’s product to increase the economic pressure upon the employer. Employers are free to replace employees who go on strike. If the strike is an economic strike, replacement may be permanent. Employers are also free to lock out the employees— that is, to intentionally withhold work from them—to force the union to make concessions. An employer may resort to a lockout only after bargaining in good faith to an impasse. However, the bargaining dispute must be over a mandatory bargaining subject. Limitations on the right of an employer to lock out are discussed in Chapter 14 in the cases of NLRB v. Brown and American Shipbuilding v. NLRB.

Strikes may be economic strikes or unfair labor practice strikes. (The rights of the striking workers to reinstatement and their protection under the National Labor Relations Act [NLRA] is discussed in Chapter 14.) Strikes in violation of contractual no-strike clauses may give rise to union liability for damages and to judicial “back-to-work” orders. (The enforcement of no-strike clauses is discussed in Chapter 17.) The focus in this chapter is on economic strikes and picketing. When the word “strike” is used, it refers to an economic strike unless otherwise specified. 16-1a Strikes in the Health-Care Industry Section 8(g) of the NLRA provides that any union must give written notice of any strike, picketing, or any other concerted refusal to work against any health-care institution at least 10 days prior to the beginning of the strike or picketing. The notice must be given to the employer and to the Federal Mediation and Conciliation Service and must indicate the date and time the strike or picketing will commence. The purpose of this notice requirement is to allow the health-care institution to make arrangements for patient care that could be affected by the strike or picketing. The notice may be extended by the written agreement of both the union and the health-care employer. A union that unilaterally delays the start of a strike beyond the time specified in the written notice violates Section 8(g). Employees who engage in a strike in violation of the notice requirements of Section 8(g) lose their status as employees under the NLRA, and may be discharged for such conduct, as in Minnesota Licensed Practical Nurses Assn.1 A union giving only four days’ notice before its members collectively declined to work overtime was held to have violated Section 8(g).2 However, in Civil Service Employees Association, Local 1000 v. National Labor Relations Board,3 employees who participated in peaceful picketing at a health-care institution without giving the appropriate notice did not lose status as employees under the NLRA because they were not engaged in a strike.

16-2 The Legal Protection of Strikes There is no constitutional right to strike. In fact, courts have traditionally held strikes to be criminal conspiracies (see Chapter 12). Constitutional restrictions, however, apply only to government activity; private-sector strikes generally raise no constitutional issues. Strikes by private-sector employees are regulated by the NLRA and are protected activity under Section 7 of the act. For public-sector employees, there may be no right to strike (see Chapter 19). Although there is no recognized constitutional right to strike, there is a constitutional right to picket. The courts have held that picketing involves the expression and commu- nication of opinions and ideas and is therefore protected under the First Amendment’s freedom of speech. In Thornhill v. Alabama,4 the Supreme Court held a state statute that prohibited all picketing, including even peaceful picketing, to be unconstitutional. Courts did, however, recognize that picketing involves conduct apart from speech so that there may be some reason for limitations upon the conduct of picketing. In Teamsters Local 695 v. Vogt,5 the Supreme Court held that picketing, because it involves speech plus patrolling, may be regulated by the government more readily than pure speech activity. 16-2a The Norris-La Guardia Act As you recall from Chapter 12, the Norris-La Guardia Act, passed in 1932, severely restricted the ability of federal courts to issue injunctions in labor disputes. The act did not “protect” strikes; it simply restricted the ability of federal courts to issue injunctions. The act defines “labor dispute” very broadly to cover disputes even when the parties are not in an employer–employee relationship. Furthermore, the dispute need not be the result of economic concerns, as illustrated by Jacksonville Bulk Terminals v. ILA,6 which held that the Norris-La Guardia Act does not exempt labor disputes that spring from political protests. Does the Norris-La Guardia Act apply to a suit by employees alleging that a lockout by their employers violates the antitrust laws? That question is addressed in the following case.

CASE 16.1 Brady v. NatioNal FootBall league 644 F.3d 661 (8th Cir. 2011)

Facts: The National Football League [NFL] recognized the NFL Players Association [NFLPA] as the exclusive bargaining representative of all NFL players in 1968. Since then, the relationship between the League and its players has been punctuated by both collective bargaining agreements and antitrust lawsuits. The collective bargaining agreement [CBA] entered into by the NFL and NFLPA in 2006 was scheduled to continue through the end of the 2012–2013 season; the CBA also allowed either party to opt out of the final two years of it upon giving the other party written notice. In May 2008, the NFL gave the NFLPA written notice that it would opt out of the final two years of the CBA because of concerns about operating costs and other elements of the agreements. As a result, the CBA was scheduled to expire in early March 2011. Although the NFL and the NFLPA engaged in more than two years of negotiations toward a new CBA, the League and the players were unable to reach an agreement. On March 11, 2011, the CBA expired. The NFL had announced that it would lockout the players if a new agreement was not reached before the expiration date; during the lockout the players would not be paid or permitted to use club facilities. The players, aware of the League’s strategy, opted to terminate the union’s status as their collective bargaining agent as of 4:00 p.m. on March 11, just before the agreement expired. Later that day, the players filed suit alleging that the lockout planned by the League would constitute a group boycott and price-fixing agreement that would violate § 1 of the Sherman Antitrust Act. The players also alleged other violations of the antitrust laws and state common law. The NFL instituted the lockout on March 12, 2011. The players sought a preliminary injunction in the federal district court, asking the court to enjoin the lockout as an unlawful group boycott. The district court granted a preliminary injunction, and the NFL appealed. On appeal, the NFL argued that the Norris-La Guardia Act [NLGA] prohibited the district court from issuing an injunction. The players argued that the NLGA did not apply here because there was no union involved, and they were alleging violations of the antitrust laws. Issue: Does the Norris-La Guardia Act apply to a suit seeking an injunction under the antitrust laws when no union is involved? Decision: The NLGA was enacted by Congress in 1932. It limits the authority of federal district courts to issue injunctions in labor disputes except in the very limited circumstances set out in the act. The impetus for the NLGA was dissatisfaction with injunctions entered against workers in labor disputes, but the act also requires that an injunction against an employer participating in a labor dispute must conform to the provisions of the NLGA. The district court here held that the NLGA did not apply in this case because it did not involve or grow out of a labor dispute. Section 13(c) of the NLGA states that “[t]he term ‘labor dispute’ includes any controversy concerning terms or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of employment, regardless of whether or not the disputants stand in the proximate relation of employer and employee.”). This suit involves a controversy concerning terms or conditions of employment. The players are seeking broad relief that would affect the terms or conditions of employment for the entire industry of professional football. In particular, they urge the court to declare unlawful and to enjoin several features of the relationship between the NFL and the players, including the limit on compensation that can be paid to rookies, the salary cap, the “franchise player” designation, and the “transition player” designation, all of which the players assert are anticompetitive restrictions that violate § 1 of the Sherman Act. The district court did not appear to question this point. The Supreme Court has observed that the NLGA defi- nition of a labor dispute is extremely broad. Section 13(a) of the NLGA states that “[a] case shall be held to involve or grow out of a labor dispute when the case involves persons who are engaged in the same industry, trade, craft, or occupation.” This case, involves persons engaged in the “same industry,” namely, professional football. The statute continues that such a case “shall be held to involve or grow out of a labor dispute” when “such dispute is . . . between one or more employers or associations of employers and one or more employees or associations of employees.” The dispute here is between one or more employers or associa- tions of employers (the NFL and the NFL teams) and one or more employees (the players under contract). By the plain terms of the NLGA, this case “shall be held to involve or grow out of a labor dispute.” In New Negro Alliance v. Sanitary Grocery Co. [303 U.S. 552] the Supreme Court ruled that the NLGA definition of a labor dispute is not limited to controversies involving unions or unionized employees. Because the NLGA does not require the present existence of a union to establish a labor dispute, the district court could only issue an injunction in compliance with the procedural requirements set out in the act. Because the district court did not comply with the NLGA, the court of appeals vacated the district court’s injunction, and remanded the case to the district court.

Section 8 of the Norris-La Guardia Act also prohibits federal courts from issuing an injunction in a labor dispute if the employer seeking an injunction has failed to comply with any obligation imposed by law which is involved in the labor dispute in question, or has failed to make “every reasonable effort to settle such dispute either by negotia- tion or with the aid of any available governmental machinery of mediation or voluntary arbitration.”7 The Norris-La Guardia Act applies only to federal courts, but a number of states passed similar legislation restricting the issuance of labor injunctions by their courts. Some exceptions to the Norris-La Guardia restrictions have been recognized. Sections 10(j) and 10(l) of the NLRA authorize the National Labor Relations Board (NLRB) to seek injunctions against unfair labor practices. Section 10(h) of the NLRA provides that Norris-La Guardia does not apply to actions brought under Sections 10(j) and 10(l) or to actions to enforce NLRB orders in the courts. The Supreme Court upheld this exemption in the case of Bakery Sales Drivers, Local 33 v. Wagshal.8 The ability to initiate or main- tain an action for an injunction under Sections 10(j) or 10(l) is restricted to the NLRB, according to Solien v. Misc. Drivers & Helpers Union, Local 610.9 Another exception to the Norris-La Guardia restrictions has been recognized when a union strikes over an issue that is subject to arbitration. That exception is discussed in Chapter 17. 16-2b The National Labor Relations Act The National Labor Relations Act, as mentioned earlier, makes strikes protected activity. The NLRA also contains several provisions that deal with picketing. Section 8(b)(4) outlaws secondary boycotts, and Section 8(b)(7) prohibits recognitional picketing in some situations. In NLRB v. Drivers, Chauffeurs, Helpers Local 639,10 the Supreme Court held that the NLRB may not regulate peaceful picketing that does not run afoul of Section 8(b)(4) or Section 8(b)(7). Section 8(b)(1)(A) may be used to prohibit union violence on the picket line, but it does not extend to peaceful picketing. As a result, NLRB regulation of picketing under the NLRA is limited to specific situations such as recognition picketing or secondary picketing. State Regulation of Picketing Although the NLRB role in regulating picketing is limited, the states enjoy a major role in the legal regulation of picketing. Thornhill v. Alabama, mentioned earlier, prohibited the states from banning all picketing, including peaceful picketing. In Teamsters Local 695 v. Vogt, also mentioned earlier, the Supreme Court held that the states may regulate picketing when it conflicts with valid state interests. The state’s interest in protecting the safety of its citizens and enforcing the criminal law justifies state regulation of violent picketing. State courts may issue injunctions against acts of violence by strikers, but an outright ban on all picketing because of violence can be justified only when “the fear generated by past violence would survive even though future picketing might be wholly peaceful” according to the Supreme Court in Milk Wagon Drivers, Local 753 v. Meadowmoor Dairies, Inc.11 State courts may also issue injunctions against mass picketing—picketing in which pickets march so closely together that they block access to the plant—even though it is peaceful, as in Westinghouse Electric Co. v. U.E., Local 410.12 Picketing intended to force an employer to join a conspiracy in violation of state antitrust laws may be enjoined by a state court, according to Giboney v. Empire Storage & Ice Co.13 According to Linn v. United Plant Guard Workers Local 114,14 state courts may also enjoin the use of language by pickets that constitutes fraud, misrepresentation, libel, or inciting a breach of the peace. All of these cases involved picketing activity on public property. Can trespass laws be used to prohibit peaceful picketing on private property? That is the question addressed by the following case.

CASE 16.2 HudgeNs v. NlrB 424 U.S. 507 (1976)

Stewart, J. The petitioner, Scott Hudgens, is the owner of the North DeKalb Shopping Center, located in suburban Atlanta, Ga. The center consists of a single large building with an enclosed mall. Surrounding the building is a parking area which can accommodate 2,640 automobiles. The shopping center houses 60 retail stores leased to various business. One of the lessees is the Butler Shoe Co. Most of the stores, including Butler’s, can be entered only from the interior mall. In January 1971, warehouse employees of the Butler Shoe Co. went on strike to protest the company’s failure to agree to demands made by their union in contract nego- tiations. The strikers decided to picket not only Butler’s warehouse but its nine retail stores in the Atlanta area as well, including the store in the North DeKalb Shopping Center. On January 22, 1971, four of the striking ware- house employees entered the center’s enclosed mall carrying placards which read: “Butler Shoe Warehouse on Strike, AFL-CIO, Local 315.” The general manager of the shopping center informed the employees that they could not picket within the mall or on the parking lot and threatened them with arrest if they did not leave. The employees departed but returned a short time later and began picketing in an area of the mall immediately adjacent to the entrances of the Butler store. After the picketing had continued for approximately 30 minutes, the shopping center manager again informed the pickets that if they did not leave they would be arrested for trespassing. The pickets departed. The union subsequently filed with the Board an unfair labor practice charge against Hudgens, alleging interference with rights protected by Section 7 of the Act. Relying on this Court’s decision in Food Employees v. Logan Valley Plaza, the Board entered a cease-and-desist order against Hudgens, reasoning that because the warehouse employees enjoyed a First Amendment right to picket on the shopping center property, the owner’s threat of arrest violated Section 8(a)(1) of the Act. Hudgens filed a petition for review in the Court of Appeals for the Fifth Circuit. Soon thereafter this Court decided Lloyd Corp. v. Tanner, and Central Hardware Co. v. NLRB, and the Court of Appeals remanded the case to the Board for reconsideration in light of those two decisions. The Board, in turn, remanded to an Administrative Law Judge, who made findings of fact, recommendations, and conclusions to the effect that Hudgens had committed an unfair labor practice by excluding the pickets. This result was ostensibly reached under the statutory criteria set forth in NLRB v. Babcock & Wilcox Co., a case which held that union organizers who seek to solicit for union membership may intrude on an employer’s private property if no alterna- tive means exist for communicating with the employees. But the Administrative Law Judge’s opinion also relied on the Court’s constitutional decision in Logan Valley for a “real- istic view of the facts.” The Board agreed with the findings and recommendations of the Administrative Law Judge, but departed somewhat from his reasoning. It concluded that the pickets were within the scope of Hudgens’ invitation to members of the public to do business at the shopping center, and that it was, therefore, immaterial whether or not there existed an alternative means of communicating with the customers and employees of the Butler store. Hudgens again petitioned for review in the Court of Appeals for the Fifth Circuit, and there the Board changed its tack and urged that the case was controlled not by Babcock & Wilcox, but by Republic Aviation Corp. v. NLRB, a case which held that an employer commits an unfair labor practice if he enforces a no-solicitation rule against employees on his premises who are also union organizers, unless he can prove that the rule is necessitated by special circumstances. The Court of Appeals enforced the Board’s cease-and-desist order but on the basis of yet another theory. While acknowledging that the source of the pickets’ rights was Section 7 of the Act, the Court of Appeals held that the competing constitutional and property right consid- erations discussed in Lloyd Corp. v. Tanner, “burde[n] the General Counsel with the duty to prove that other locations less intrusive upon Hudgens’ property rights than picketing inside the mall were either unavailable or ineffective,” and that the Board’s General Counsel had met that burden in this case. In this Court the petitioner Hudgens continues to urge that Babcock & Wilcox Co. is the controlling precedent, and that under the criteria of that case the judgment of the Court of Appeals should be reversed. The respondent union agrees that a statutory standard governs, but insists that, since the Section 7 activity here was not organizational as in Babcock but picketing in support of a lawful economic strike, an appropriate accommodation of the competing interests must lead to an affirmance of the Court of Appeals’ judg- ment. The respondent Board now contends that the conflict between employee picketing rights and employer property rights in a case like this must be measured in accord with the commands of the First Amendment, pursuant to the Board’s asserted understanding of Lloyd Corp. v. Tanner, and that the judgment of the Court of Appeals should be affirmed on the basis of that standard. As the above recital discloses, the history of this litigation has been a history of shifting positions on the part of the litigants, the Board, and the Court of Appeals. It has been a history, in short, of considerable confusion, engendered at least in part by decisions of this Court that intervened during the course of the litigation. In the present posture of the case the most basic question is whether the respective rights and liabilities of the parties are to be decided under the criteria of the National Labor Relations Act alone, under a First Amendment standard, or under some combination of the two. It is to that question, accordingly, that we now turn. It is, of course, a commonplace that the constitutional guarantee of free speech is a guarantee only against abridg- ment by government, federal or state.... [T]he rights and liabilities of the parties in this case are dependent exclu- sively upon the National Labor Relations Act. Under the Act the task of the Board, subject to review by the courts, is to resolve conflicts between Section 7 rights and private prop- erty rights, “and to seek a proper accommodation between the two.” What is “a proper accommodation” in any situation may largely depend upon the content and the context of the Section 7 rights being asserted. The task of the Board and the reviewing courts under the Act, therefore, stands in conspic- uous contrast to the duty of a court in applying the standards of the First Amendment, which requires “above all else” that expression must not be restricted by government “because of its message, its ideas, its subject matter, or its content.” In the Central Hardware case, and earlier in the case of NLRB v. Babcock & Wilcox Co., the Court considered the nature of the Board’s task in this area under the Act. Accommodation between employees’ Section 7 rights and employers’ property rights, the Court said in Babcock & Wilcox, “must be obtained with as little destruction of one as is consistent with the maintenance of the other.” Both Central Hardware and Babcock & Wilcox involved organizational activity carried on by nonemployees on the employers’ property. The context of the Section 7 activity in the present case was different in several respects which may or may not be relevant in striking the proper balance. First, it involved lawful economic strike activity rather than orga- nizational activity. Second, the Section 7 activity here was carried on by Butler’s employees (albeit not employees of its shopping center store), not by outsiders. Third, the property interests impinged upon in this case were not those of the employer against whom the Section 7 activity was directed, but of another. The Babcock & Wilcox opinion established the basic objective under the Act: accommodation of Section 7 rights and private property rights “with as little destruction of one as is consistent with the maintenance of the other.” The locus of that accommodation, however, may fall at differing points along the spectrum depending on the nature and strength of the respective Section 7 rights and private prop- erty rights asserted in any given context. In each generic situation, the primary responsibility for making this accom- modation must rest with the Board in the first instance. . . . For the reasons stated in this opinion, the judgment is vacated and the case is remanded to the Court of Appeals with directions to remand to the National Labor Relations Board, so that the case may be there considered under the statutory criteria of the National Labor Relations Act alone. It is so ordered. Case Questions 1. With whom does the union have the dispute? Where is the union picketing? Who seeks to prevent the union from picketing there? What is the purpose of the union’s picketing there? 2. According to the Babcock & Wilcox decision (see Chapter 14), what factors should the court consider in determining whether a union can picket on private property? 3. Are the picketers employees of Butler Shoe Co.? How does the picketing affect the employer’s property rights?

16-2c Picketing Under the NLRA As has been noted, Sections 8(b)(4) and 8(b)(7) of the NLRA prohibit certain kinds of picketing. Peaceful picketing is protected activity under the NLRA. However, violent picketing and mass picketing, as well as threatening conduct by the picketers, are not protected under Section 7. Employees who engage in such conduct may be disciplined or discharged by the employer and may also be subject to injunctions, criminal charges, and civil tort suits. Section 8(b)(7) regulates picketing by unions for organizational or recognitional purposes. Section 8(b)(4) deals with secondary boycotts—certain union pressure tactics aimed at employers that are not involved in a labor dispute with the union. Section 8(b)(7): Recognitional and Organizational Picketing Section 8(b)(7) was added to the NLRA by the 1959 Landrum-Griffin Act. It prohibits recognitional picketing by an uncertified union in certain situations. Section 8(b)(7) contains the following provisions: [It is an unfair practice for a labor organization] (7) to picket or cause to be picketed, or threaten to picket or cause to be picketed, any employer where an object thereof is forcing or requiring an employer to recognize or bargain with a labor organization as the representative of his employees, or forcing or requiring the employees of an employer to accept or select such labor organization as their collective-bargaining representative, unless such labor organization is currently certified as the representative of such employees: (A) where the employer has lawfully recognized in accordance with this Act any other labor organization and a question concerning representation may not appropriately be raised under Section 9(c) of this Act, (B) where within the preceding twelve months a valid election under Section 9(c) of this Act has been conducted, or (C) where such picketing has been conducted without a petition under Section 9(c) being filed within a reasonable period of time not to exceed thirty days from the commencement of such picketing: Provided, That when such a petition has been filed the Board shall forthwith, without regard to the provisions of Section 9(c)(1) or the absence of a showing of a substantial interest on the part of the labor organization, direct an election in such unit as the Board finds to be appropriate and shall certify the results thereof: Provided further, That nothing in this subparagraph (C) shall be construed to prohibit any picketing or other publicity for the purpose of truthfully advising the public (including consumers) that an employer does not employ members of, or have a contract with, a labor organization, unless an effect of such picketing is to induce any individual employed by any other person in the course of his employment, not to pick up, deliver or transport any goods or not to perform any services. Nothing in this paragraph (7) shall be construed to permit any act which would otherwise be an unfair labor practice under this Section 8(b). The interpretation of Section 8(b)(7) and its application to recognitional picketing are the subjects of the following case. If a union pickets in violation of Section 8(b)(7)(C), the employer may request that the NLRB hold an expedited election. The NLRB will determine the appropriate bargaining unit and hold an election. No showing of interest on the part of the union is necessary. The NLRB will certify the results of the election; if the union is certified, the employer must bargain with it. If the union loses, continued picketing will violate Section 8(b)(7)(B). Why? Section 10(1) requires the board to seek an injunction against the picketing when it issues a complaint for an alleged Section 8(b)(7) violation. In International Transp. Serv. v. NLRB,15 a union picketing to force the employer to recognize a one-person bargaining unit

CASE 16.3 smitley v. NlrB 327 F.2d 351 (U.S. Court of Appeals, 9th Cir. 1964)

[After the NLRB dismissed a complaint that the union had violated Section 8(b)(7)(C), the company sought judicial review of the Board’s decision.] Duniway, J. The findings of the Board as to the facts are not attacked. It found, in substance, that the unions picketed the cafeteria for more than thirty days before filing a repre- sentation petition under Section 9(c) of the act, that an object of the picketing was to secure recognition, that the purpose of the picketing was truthfully to advise the public that petitioners employed nonunion employees or had no contract with the unions, and that the picketing did not have the effect of inducing any stoppage of deliv- eries or services to the cafeteria by employees of any other employer. . . . We conclude that the views of the Board, as stated after its second consideration of the matter, are correct, and that the statute has not been violated. . . . It will be noted that Subdivision (7) of Subsection (b), Section 8, starts with the general prohibition of picketing “where an object thereof is forcing or requiring an employer to recog- nize or bargain with a labor organization” (this is often called recognitional picketing) “... or forcing or requiring the employees of an employer to accept or select such labor orga- nization....” (this is often called organizational picketing), “...unless such labor organization is currently certified as the representative of such employees....” This is followed by three subparagraphs, (A), (B), and (C). Each begins with the same word, “where.” (A) deals with the situation “where” the employer has lawfully recognized another labor organiza- tion and a question of representation cannot be raised under Section 9(c). (B) refers to the situation “where,” within the preceding 12 months, a valid election under Section 9(c) has been conducted. (C) with which we are concerned, refers to a situation “where” there has been no petition for an election under Section 9(c) filed within a reasonable period of time, not to exceed thirty days, from the commencement of the pick- eting. Thus, Section 8(b)(7) does not purport to prohibit all picketing having the named “object” of recognitional or orga- nizational picketing. It limits the prohibition of such picketing to three specific situations. There are no exceptions or provisos in subparagraphs (A) and (B), which describe two of those situations. There are, however, two provisos in subparagraph (C). The first sets up a special procedure for an expedited election under Section 9(c). The second is one with which we are concerned. It is an excep- tion to the prohibition of “such picketing,” i.e., recognitional or organizational picketing, being a proviso to a prohibition of such picketing “where” certain conditions exist. . . . ... We think that, in substance, the effect of the second proviso to subparagraph (C) is to allow recognitional or organizational picketing to continue if it meets two impor- tant restrictions: (1) it must be addressed to the public and be truthful and (2) it must not induce other unions to stop deliveries or services. The picketing here met those criteria.... [The court affirmed the Board’s dismissal of the complaint.] Case Questions 1. Why was the union picketing the cafeteria? How long had it been picketing? 2. What kind of picketing is allowed under the proviso to Section 8(b)(7)(C)? What two conditions must be met for picketing to fall under the proviso’s protection? 3. Does the picketing in this case fall under the proviso?

was held to violate Section 8(b)(7)(C) because the NRLB will not accept petitions for certi- fication of one-person units, so the union could not file a petition for an election within a reasonable period of time. As Smitley emphasizes, not all recognitional picketing violates Section 8(b)(7). The proviso in Section 8(b)(7)(C) allows recognitional picketing directed at the public to inform them that the picketed employer does not have a contract with the union. Such picketing for publicity may continue beyond 30 days, unless it causes other employees to refuse to work. Picketing to protest substandard wages paid by an employer, as long as the union does not have a recognitional object, is not subject to Section 8(b)(7). Such picketing may continue indefinitely and is not unlawful, even if it has the effect of disrupting deliveries to the employer, according to Houston Building & Construction Trades Council.16 Similarly, picketing to protest unfair

practices by the employer, when there is no recognitional objec- tive, is not prohibited, according to UAW Local 259.17

Section 8(b)(4): Secondary Boycotts Section 8(b)(4), which deals with secondary boycotts, is one of the most complex provi- sions of the NLRA. Section 8(b)(4) contains the following provisions: [It is an unfair practice for a labor organization] (4) (i) to engage in, or to induce or encourage any individual employed by any person engaged in commerce or in an industry affecting commerce to engage in, a strike or refusal in the course of his employment to use, manufacture, process, transport, or otherwise handle or work on any goods, articles, materials, or commodities or to perform any services; or (ii) to threaten, coerce, or restrain any person engaged in commerce or in an industry affecting commerce, where in either case an object thereof is: (A) forcing or requiring any employer or self-employed person to join any labor or employer organization to enter into any agreement which is prohibited by Section 8(e); (B) forcing or requiring any person to cease using, selling, handling, transporting, or otherwise dealing in the products of any other producer, processor, or manufacturer, or to cease doing business with any other person, or forcing or requiring any other employer to recognize or bargain with a labor organization as the representative of his employees unless such labor organization has been certified as the representative of such employees under the provisions of Section 9: Provided, That nothing contained in this clause (B) shall be construed to make unlawful, where not otherwise unlawful, any primary strike or primary picketing; (C) forcing or requiring any employer to recognize or bargain with a particular labor organization as the representative of his employees if another labor organization has been certified as the representative of such employees under the provisions of Section 9; (D) forcing or requiring any employer to assign particular work to employees in a particular labor organization or in a particular trade, craft, or class rather than to employees in another labor organization or in another trade, craft, or class, unless such employer is failing to conform to an order or certification of the Board determining the bargaining representative for employees performing such work: Provided, That nothing contained in this Subsection (b) shall be construed to make unlawful a refusal by any person to enter upon the premises of any employer (other than his own employer), if the employees of such employer are engaged in a strike ratified or approved by a representative of such employees whom such employer is required under this Act: Provided further, That for the purposes of this paragraph (4) only, nothing contained in such paragraph shall be construed to prohibit publicity, other than picketing, for the purpose of truthfully advising the public, including consumers and members of a labor organization, that a product or products are produced by an employer with whom the labor organization has a primary dispute and are distributed by another employer, as long as such publicity does not have an effect of inducing any individual employed by any person other than the primary employer in the course of his employment to refuse to pick up, deliver, or transport any goods, or not to perform any services, at the establishment of the employer engaged in such distributions. . . . When considering Section 8(b)(4), the courts and the Board generally consider the intention behind the provisions rather than its literal wording. The intention is to protect employers who are not involved in a dispute with a union from being pres- sured by that union. For example, if the union representing the workers of a toy manu- facturing company goes on strike, it is free to picket the manufacturer (the primary employer). But if the union pickets the premises of a wholesaler who distributes the toys of the primary employer, such picketing may be secondary and prohibited by Section 8(b)(4)(B). Whether the picketing is prohibited depends on whether the union’s pick- eting has the objective of trying to force the wholesaler to cease doing business with the manufacturer. Most secondary picketing situations, however, are more complicated than this simple example. For instance, if the primary employer’s location of business is mobile, such as a cement-mix delivery truck, is the union allowed to picket a construction site where the cement truck is making a delivery? What if the union has a dispute with a subcontractor on a construction site? Can it picket the entire construction site? Primary picketing by a union is against an employer with which it has a dispute. Section 8(b)(4) does not prohibit such picketing, even though it is intended to persuade customers to cease doing business with the primary employer. It is important, therefore, to identify which employer is the primary employer—the employer with whom the union has the dispute. It is helpful to consider three questions when confronting a potential secondary picketing situation. • With whom does the union have the dispute? This question identifies the primary employer. • Is the union picketing at the primary employer’s premises or at the site of a neutral employer? • What is the object of the union’s picketing? If the union is picketing at a secondary employer to force that employer to cease doing business with the primary employer, then it is illegal. But if the picketing is intended only to inform the public that the secondary employer handles the primary product, it is legal. The objective of the picketing is the key to its legality: Does the picketing have an objective prohibited by Section 8(b)(4)? Ambulatory Situs Picketing When the primary employer’s business location is mobile, picketing by a union following that mobile location is called ambulatory situs picketing. The following NLRB decision sets out the conditions under which the union may engage in ambulatory situs picketing.

CASE 16.4 sailors’ uNioN oF tHe PaciFic aNd moore dry dock co. 92 NLRB 547 (NLRB, 1950)

Facts: Samsoc, a shipping company, contracted with Kaiser Gypsum to ship gypsum from Mexico in the ship Phopho. Samsoc replaced the Phopho crew with a foreign crew. The union demanded bargaining rights for the ship, but Samsoc refused. The union therefore requested permission from Moore to post pickets alongside the ship at the dry dock, but Moore refused. The union then posted pickets at the entrances to the dry dock. The signs carried by the picketers clearly indicated that the union’s dispute was with the ship and not with the dry-dock company. When the pickets were posted, the dry-dock workers refused to work on the ship but did perform other work. The dry-dock company filed an unfair practice charge with the NLRB, alleging that the union’s picketing at the dry dock violated Section 8(b)(4)(B). Issue: Does picketing directed against the primary employer, but taking place at a secondary location, violate Section 8(b)(4)(B)? Decision: Picketing at the premises of the primary employer is traditionally recognized as primary action, even though it is intended to induce and encourage third persons to cease doing business with the picketed employer. The Phopho was the place of employment of the seamen, and it was the situs of the dispute between Samsoc and the union over working conditions aboard the vessel. If Samsoc, the ship’s owner, had its own dock at which the Phopho had been docked while undergoing conversion by Moore Dry Dock employees, it is clear that picketing by the union at the dock site would be primary picketing, even though the union might have expected that the picketing would be more effective in persuading Moore employees not to work on the ship. In the case here, however, the Phopho was not tied up at its own dock, but at Moore’s dock, and the union picketing was going on in front of the gates at Moore’s premises. The location of the primary employer is not limited to a fixed location—here it is ambulatory. Thus, the situs may come to rest temporarily at the premises of another employer. How can the union picket to follow the situs while it is stationed at the premises of a secondary employer, if the only way to picket is in front of the secondary employer’s premises? The situation requires balancing the right of a union to picket at the site of its dispute against the right of a secondary employer to be free from picketing in a controversy in which it is not directly involved. The NLRB rules for ensuring that the picketing at the secondary location is legally permitted primary picketing are as follows: • the union’s picketing at the secondary location is limited to the times when the situs of the labor dispute is located at the secondary employer’s premises; • at the time of the picketing, the primary employer is engaged in its normal business at the situs; • the picketing is limited to places reasonably close to the location of the situs; and • the picketing clearly discloses that the union’s dispute is with the primary employer and not the secondary employer. All these conditions were met in the present case: • during the entire period of the union’s picketing at Moore’s shipyard, the Phopho was tied up at a dock there; • while the ship was at the dry dock, its crew was engaged in getting the ship ready for sea, which is part of the normal business of a ship, so the Phopho was engaged in its normal business; • when Moore refused to allow the union to place pickets alongside the ship, the union posted its pickets at the shipyard entrance which was as close to the Phopho as they could get under the circumstances; and • the union’s picketing and other conduct clearly indi- cated that its dispute was solely with the primary employer, the owners of the Phopho. The NLRB therefore dismissed the unfair labor prac- tice complaint because it held that the union’s picketing at Moore’s premises was primary in nature, and did not violate Section 8(b)(4)(B).

CASE 16.5 local 761, iNterNatioNal uNioN oF electrical radio & macHiNeworkers [geNeral electric] v. NlrB 366 U.S. 667 (1961)

Facts: General Electric Corporation operates a huge plant known as Appliance Park near Louisville, Kentucky, where it manufactures household appliances. The lot on which the plant is located is surrounded by a large drainage culvert, and access to the lot is limited to five roadways, known as gates, that cross the culvert. At any given time, there are employees of various contractors present at the GE plant. Those employees perform a variety of tasks: • some do construction work on new buildings; • some install and repair ventilating and heating equipment; • some engage in retooling and rearranging operations necessary to the manufacture of new models; and • others do general maintenance work. In order to isolate the GE employees from the effects of any labor disputes involving the contractors, GE requires that the employees of the contractors use Gate 3-A; Gate 3-A is limited to use only by the contractors and GE employees are not permitted to use it. A large sign has been posted at the gate which states: “Gate 3-A for Employees of Contractors Only—G.E. Employees Use Other Gates,” and guards at the gate enforce the ban on GE employees using the gate. The union representing the GE employees went on strike against GE, and initially placed pickets at all gates, including Gate 3-A. The signs carried by the pickets at all gates read: “Local 761 on Strike G.E. Unfair.” Because of the picketing at Gate 3-A, almost all of the employees of inde- pendent contractors refused to enter the company premises. GE filed a complaint with the NLRB, alleging that union’s picketing at Gate 3-A, used exclusively by the employees of the contractors, violated Section 8(b)(4)(ii)(B). The ALJ hearing the complaint recommended that the complaint be dismissed because the picketing at Gate 3-A was primary in nature. The NLRB reversed the ALJ’s decision and held that, because only the employees of the independent contrac- tors used Gate 3-A, the union’s object in picketing there was encourage those employees to engage in a concerted refusal to work “with an object of forcing the independent contractors to cease doing business with the Company,” in violation of Section 8(b)(4)(ii)(B). On review, the Court of Appeals for the District of Columbia granted enforcement of the Board’s order. The union then appealed to the U.S. Supreme Court. Issue: Does the union picketing at the gate used only by the employees of the contractors violate Section 8(b)(4)(ii)(B)? Decision: Section 8(b)(4)(B) of the National Labor Relations Act provided that it shall be an unfair labor practice for a labor organization: to engage in, or to induce or encourage the employees of any employer to engage in, a strike or a concerted refusal in the course of their employment to use, manufacture, process, transport, or otherwise handle or work on any goods, articles, materials, or commodities or to perform any services, where an object thereof is: [(B)] forcing or requiring ... any employer or other person ... to cease doing business with any other person.... The Supreme Court noted that Section 8(b)(4)(B) could not be literally construed because to do so would ban most primary strikes. Congress included a proviso in Section 8(b) (4)(B) that states “Provided, That nothing in this clause (B) shall be construed to make unlawful, where not otherwise unlawful, any primary strike or picketing.” The prohibi- tion in Section 8(b)(4)(B) is directed toward secondary boycotts, which involve union pressure or sanctions directed not at the primary employer, who is a party to the dispute, but at some third party who has no involvement in the dispute. A union involved in a strike with the primary employer is free to use persuasion, including picketing, not only on the primary employer and his employees, but also on secondary employers who were customers or suppliers of the primary employer, and persons dealing with them, and even employees of secondary employers, as long as the union does not “induce or encourage the employees of any [other] employer to engage in a strike or a concerted refusal in the course of their employment.” Section 8(b)(4)(B) does not speak generally of secondary boycotts, but rather condemns specific union conduct directed to specific objec- tives: inducing employees to engage in a strike or concerted refusal, of which an object must be to force or require their employer or another person to cease doing business with a third person. While the distinction between legitimate “primary activity” and prohibited “secondary activity,” is critical, it is not always a “bright line.” The objectives of any pick- eting include a desire to influence others from withholding from the employer their services or trade; but primary picketing which induces secondary employees to respect a primary picket line is not the equivalent of picketing that has an object of inducing those employees to engage in concerted conduct against their employer in order to force him to refuse to deal with the struck employer. Under the Moore Dry Dock analysis, whether picketing at a gate used exclusively by employees of independent contractors who work at the primary employer’s premises depends upon the type of work that is being performed by those employees who use the separate gate. The NLRB has only applied the separate gate analysis to situations where the independent workers were performing tasks unconnected to the normal operations of the struck employer, usually construction work on the buildings of the primary employer. The Court of Appeals of the Second Circuit upheld the NLRB appli- cation of Section 8(b)(4)(B) to a separate-gate situation. The court there held that there must be a separate gate marked and set apart from other gates; and the work done by the employees who use the separate gate must be unrelated to the normal operations of the primary employer, and the work must be of a kind that would not, if done when the plant were engaged in its regular operations, necessitate curtailing those operations. The Supreme Court adopted the analysis of the Second Circuit, but in this case, neither the NLRB nor the court of appeals considered whether the employees who used Gate 3-A performed work necessary to the normal operations of General Electric. If that is so, then the gate would not be considered a separate gate, and the mixed use of the gate would allow the striking union to picket that gate as part of its actions directed against the primary employer. The Supreme Court therefore remanded the case to the NLRB to consider whether the work performed by the employees using Gate 3-A was related to the normal operations of GE, the primary employer.

Common Situs Picketing The General Electric case made the nature of the work performed by the secondary employees at the primary site the key to whether the union may target secondary employees with picketing. In the construction industry, subcontractors and the general contractor are all working on the same project: erecting a building. Does this mean a union that has a dispute with the general contractor may picket the entire construction site (such picketing is known as common situs picketing)? Should the NLRB apply the General Electric sepa- rate gate approach to picketing at construction sites, or does the legality of common situs picketing require a different approach? In Building and Construction Trades Council of New Orleans, AFL-CIO and Markwell and Hartz, Inc.,18 the NLRB held that the Moore Dry Dock approach applied to common situs picketing. The following case illustrates the appli- cation of the Moore Dry Dock doctrine to a case of common situs picketing.

CASE 16.6 iNterNatioNal uNioN oF oPeratiNg eNgiNeers, local 150, aFl-cio v. NlrB 47 F.3d 218 (7th Cir. 1995)

Coffin, Circuit Judge Local 150 of the International Union of Operating Engineers, AFL-CIO, seeks review of a decision by the National Labor Relations Board (Board) that the Union violated the secondary boycott provisions of the National Labor Relations Act (NLRA), Section 8(b)(4)(i), (ii)(B). The Board, which cross-petitions for enforcement of its order, found that the Union . . . picketed neutral gates at a multi- employer workplace in an effort to force the uninvolved employers to pressure the struck employer into settling the dispute more quickly. . . . LTV Steel operates a large steel making plant in East Chicago, Indiana. Located on the grounds of the 1,150-acre facility are two companies that serve as subcontractors to LTV for the processing and disposal of slag, a by-product of the steelmaking process. The strike at issue in this case was aimed at one of those companies, Edward C. Levy Co. (Levy), whose collective bargaining agreement with Local 150 expired at the end of September 1991. Employees of the other slag processing firm, the Heckett Division of Harsco Corp. (Heckett), also are represented by Local 150. . . . The LTV plant has three entrances, designated as the East Bridge gate, the West Bridge gate, and the Burma Road gate. The East and West Bridge gates are the entrances normally used for access to the facility by employees and vendors. The ALJ found that the Burma Road entrance is used only in strike situations, as part of a so-called “reserved gate” system. Such a system is common where employers share a site but only one is experiencing labor strife. One entrance is “reserved” for the exclusive use of traffic related to the struck firm, and all picketing must be directed there. This system is designed to keep neutral parties out of the dispute, and avoids the need for them to cross picket lines. The strike against Levy began on October 12, 1991, and ended on October 18. On the first day of the strike, LTV posted signs at each of the three gates. All of them identified the East and West Bridge gates as “neutral” gates reserved for the use of LTV Steel and all persons having business with the company, except for anyone connected with Levy. The signs directed Levy’s traffic to the Burma Road gate, “which has been reserved solely and exclusively for Levy’s employees, their suppliers, their delivery men, their subcontractors and all others having business with Levy.” LTV expected the Union to picket only at this gate. It is undisputed that no one from LTV gave written notice, or any other formal notification, of the gate arrange- ment to the Union, which established picket lines on public property near each of the three gates. The signs posted by LTV at the East and West Bridge gates could be seen by the picketers, but the words probably were not visible. Two company officials testified, however, that they told picketers at both the East and West Bridge locations on October 12 that a Levy gate had been set up at the Burma Road entrance and that the picketing should be confined to that location. An LTV security officer also testified that he informed four picketers near the East Bridge gate entrance that they would have to picket at Burma Road. . . . Burma Road . . . is a distinctly non-road-like path that lies between the Amoco Oil gate and the EJ & E property. A large pole placed there by Amoco usually blocks the entrance to Burma Road from Front Street, but this was removed at LTVs request during the strike. The truck traffic generated by Levy made the location of the road “obvious” as the strike progressed. Burma Road is central to this case because the Board maintains that, once the Levy reserved gate was established, the Union was legally permitted to picket only at that loca- tion. The Union claims that it ... received no notice of the reserved gate system. . . . Also of significance is the role of Heckett’s employees during the strike. Heckett and Levy are direct competi- tors and, consequently, there apparently was some concern on the part of the Union about whether LTV would look to Heckett for help during a strike by Levy. Heckett’s employees, meanwhile, were concerned about what the Union expected of them if a strike were called against Levy; their contract had a no-strike provision and they feared losing their jobs if they did not report to work.... Several Heckett employees testified that they were told either before the strike, or at its outset, that a neutral gate would be set up. On two occasions, however, Union officials at least implicitly urged members to respect picket signs established at their worksite, thereby disdaining the reserved gate system. . . . About 53 of the 69 Union members employed by Heckett worked during the strike. On October 14, during the strike, the Union filed internal charges against them for “refus[ing] to honor the picket line,” in violation of the Union’s by-laws. . . . the Board found that various of the Union’s actions constituted unfair labor practices under the NLRA: (1) pick- eting at neutral gates; (2) distributing pamphlets encour- aging employees of neutral employers to stay out of work; (3) bringing internal charges against members employed by a neutral employer; and (4) applying to employees of a neutral employer the Union bylaw barring members from working on a job where a strike has been called. The Union challenges only the finding that it violated the NLRA by picketing at the East and West Bridge gates. . . . The question before us, therefore, is whether substantial evidence in the record supports the Board’s finding that the Union’s picketing ran afoul of the NLRA’s secondary boycott provisions. Union conduct violates section 8(b)(4) of the NLRA “if any object of that activity is to exert improper influence on secondary or neutral parties....” Whether the Union was motivated by a secondary objective is a question of fact, and is to be determined through examination of “the totality of [the] union’s conduct in [the] given situation.” . . . Because not all union conduct that interferes with uninvolved employers is banned, the distinction between permissible “primary” activity and unlawful “secondary” activity “is often more nice than obvious.” This is particularly true where the primary and secondary employers occupy a common work site. As an evidentiary tool for determining the dispositive point—the union’s intent—the NLRB has adopted the so-called Moore Dry Dock standards. Under these standards, a union’s picketing is presumed to be lawful primary activity if (1) it is “strictly limited to times when the situs of the dispute is located on the secondary employer’s premises”; (2) “the primary employer is engaged in its normal business at the situs”; (3) it is “limited to places reasonably close to the location of the situs”; and (4) it “discloses clearly that the dispute is with the primary employer.” The third [Moore Dry Dock] standard is the one of signif- icance in this case. When an employer implements a valid reserved gate system, and a union continues to picket a gate designated exclusively for neutrals, a violation of the third Dry Dock criterion is established because the picketing is not limited to the “location” of the dispute as permissibly confined. This gives rise to a presumption of illegitimate, secondary intent. The question remains, however, “a factual inquiry into the union’s actual state of mind under the totality of the circumstances.” . . . Under these standards, we have little difficulty affirming the Board’s determination that the Union violated section 8(b)(4) by intentionally enmeshing neutrals in its dispute with Levy. The ALJ’s most crucial finding, that the Union knew about the reserved gate system, yet “consciously chose” to ignore it, is amply supported by the record. The evidence recounted by the ALJ showed that Union officials anticipated the establishment of a reserved gate system and had indicated to some Heckett employees that the Union itself was working toward setting up a safe gate. In addition, Union officials knew that Levy was using the Burma Road entrance, and it is undisputed that [the Burma Road] gate was used only during strikes as part of a reserved gate system. Thus, the fact that the Union sent pickets to Burma Road by itself reflects knowledge that a reserved gate system was in place. Moreover, while the wording on the signs posted at the East and West Bridge gates may not have been visible to picketers and super- vising Union officials, they certainly could see that signs had been posted and so must have realized that the anticipated reserved gates had been designated. Indeed, LTV officials testi- fied that they told Union members at both the East and West Bridge gates to move to the Levy gate at Burma Road. . . . The Union contends that, in the absence of formal notice of a reserved gate system, it may not be penalized for failing to confine its picketing to the Burma Road location. We acknowledge that it would be better if employers gave written or other formal notice of such a system, even when it appears that the Union must have gained actual knowledge through an informal method. In these circumstances, however, we cannot say that the ALJ improperly imposed responsibility on the Union based, among other factors, on its having received sufficient notice of the system. . . . Moreover, misuse of the reserved gate system was not the only evidence of the Union’s intent to engage in secondary activity. As the Board found, the Union unlawfully distributed pamphlets to Heckett employees advising them that they had the right not to work “no matter how many gates the employer sets up.” In addition, on the first day of the strike, a picketer who identified himself as picket captain, told LTV’s labor relations manager that a Union official had directed that all three gates be picketed and that the Union’s “intent was to impact not only Levy employees but Heckett employees, iron workers and other employees.” This intent also was reflected in state- ments made by Union official Cisco at a November meeting, in which he suggested that the strike would have been shorter if the Heckett employees had not crossed the picket line. Finally, the fact that the Union brought charges against those employees for crossing the line lends further support to the finding of a secondary objective. . . . In sum, we believe the ALJ permissibly found that the Union received adequate notice of a validly established reserved gate system, and “chose to ignore it.” This conclu- sion, particularly when taken together with the Union’s distribution of leaflets encouraging Heckett employees to honor the picket line, the disciplinary action against the 53 employees who did work, and the statements made by Union representatives, provides more than substantial evidence to support the Board’s determination that Local 150’s picketing activity was intended to implicate secondary parties and thus was unlawful under section 8(b)(4). The Union’s petition for review is therefore denied, and the Board’s cross-application for enforcement of its order is granted. Case Questions 1. Was the union ever formally notified by LTV about the reserved gate arrangement set up in response to the strike against Levy? Did the court determine that the union was aware of the reserved gate arrange- ment? Why? 2. What is the relevance of the third Moore Dry Dock standard—the requirement that the union picketing be limited to places reasonably close to the situs of the dispute (the operations of the struck employer, Levy)? Where was the situs of Levy’s operations in this case? 3. What is the significance of the union’s efforts to get Heckett employees to honor the picket line against Levy? What is the significance of the union’s efforts to discipline the Heckett employees who crossed the picket line?

The NLRB had adopted a requirement that a union notifying an employer of its intention to engage in common situs picketing must affirmatively declare its intention to conform with the requirements of Moore Dry Dock, but that requirement was rejected by the U.S. Court of Appeals for the Ninth Circuit in United Ass’n of Journeymen, Local 32 v. NLRB,19 and by the U.S. Court of Appeals for the D.C. Circuit in Sheet Metal Workers’ Int. Ass’n, Local 15 v. NLRB.20 Ally Doctrine Not all union picketing directed against employers other than the primary employer is prohib- ited. The secondary boycott prohibitions were intended to protect neutral employers from union pressure. If any employer is not neutral—because it is performing the work normally done by the workers of the primary employer, who are now on strike—may the union picket that other employer? That is the issue addressed in the following case on page 531. Publicity: “Consumer” Picketing The second proviso to Section 8(b)(4) allows the union to use “... publicity, other than picketing, for the purpose of truthfully advising the public” that the secondary employer is handling the product of the primary employer. Such publicity is legal unless it has the effect of inducing other employees to refuse to perform their services at the secondary employ- er’s location. This proviso allows the union to distribute handbills addressed to the public, asking for the public to support the union in its strike by refusing to buy the primary product or by refraining from shopping at the secondary employer.

CASE 16.7 NlrB v. BusiNess macHiNe & oFFice aPPliaNce mecHaNics coNFereNce Board, iue, local 459 [royal tyPewriter co.] 228 F.2d 553 (2d Cir. 1955), cert. denied, 351 U.S. 962 (1956)

Lumbard, J. This case arose out of a labor dispute between the Royal Typewriter Company and the Business Machine and Office Appliance Mechanics Conference Board, Local 459, IUE-CIO, the certified bargaining agent of Royal’s type- writer mechanics and other service personnel. The National Labor Relations Board now seeks enforcement of an order directing the Union to cease and desist from certain pick- eting and to post appropriate notices. . . . On about March 23, 1954, the Union, being unable to reach agreement with Royal on the terms of a contract, called the Royal service personnel out on strike. The service employees customarily repair typewriters either at Royal’s branch offices or at its customers’ premises. Royal has several arrangements under which it is obligated to render service to its customers. First, Royal’s warranty on each new machine obligates it to provide free inspection and repair for one year. Second, for a fixed periodic fee Royal contracts to service machines not under warranty. Finally, Royal is committed to repairing typewriters rented from it or loaned by it to replace machines undergoing repair. Of course, in addition Royal provides repair service on call by non-contract users. During the strike Royal differentiated between calls from customers to whom it owed a repair obligation and others. Royal’s office personnel were instructed to tell the latter to call some independent repair company listed in the tele- phone directory. Contract customers, however, were advised to select such an independent from the directory to have the repair made, and to send a receipted invoice to Royal for reimbursement for reasonable repairs within their agree- ment with Royal. Consequently many of Royal’s contract customers had repair services performed by various indepen- dent repair companies. In most instances the customer sent Royal the unpaid repair bill and Royal paid the independent company directly. Among the independent companies paid directly by Royal for repairs made for such customers were Typewriter Maintenance and Sales Company and Tytell Typewriter Company. . . . During May, 1954, the Union picketed four indepen- dent typewriter repair companies who had been doing work covered by Royal’s contracts pursuant to the arrangement described above. The Board found this picketing unlawful with respect to Typewriter Maintenance and Tytell. Typewriter Maintenance was picketed for about three days and Tytell for several hours on one day. In each instance the picketing, which was peaceful and orderly, took place before entrances used in common by employees, deliverymen and the general public. The signs read substantially as follows (with the appropriate repair company name inserted): NOTICE TO THE PUBLIC ONLY EMPLOYEES OF ROYAL TYPEWRITER COMPANY ON STRIKE TYTELL TYPEWRITER COMPANY EMPLOYEES ARE BEING USED AS STRIKEBREAKERS BUSINESS MACHINE & OFFICE APPLIANCE MECHANICS UNION, LOCAL 459, IUE-CIO Both before and after this picketing, which took place in mid-May, Tytell and Typewriter Maintenance did work on Royal accounts and received payment directly from Royal. Royal’s records show that Typewriter Maintenance’s first voucher was passed for payment by Royal on April 20, 1954, and Tytell’s first voucher was passed for payment on May 3, 1954. After these dates each independent serviced various of Royal’s customers on numerous occasions and received payment directly from Royal. . . . On the above facts the Trial Examiner and the Board found that ... the repair company picketing violated Section 8(b)(4) of the National Labor Relations Act.... We are of the opinion that the Board’s finding with respect to the repair company picketing cannot be sustained. The inde- pendent repair companies were so allied with Royal that the Union’s picketing of their premises was not prohibited by Section 8(b)(4). We approve the “ally” doctrine which had its origin in a well reasoned opinion by Judge Rifkind in the Ebasco case, Douds v. Architects, Engineers, Chemists & Technicians, Local 231. Ebasco, a corporation engaged in the business of providing engineering services, had a close business relation- ship with Project, a firm providing similar services. Ebasco subcontracted some of its work to Project and when it did so Ebasco supervised the work of Project’s employees and paid Project for the time spent by Project’s employees on Ebasco’s work plus a factor for overhead and profit. When Ebasco’s employees went on strike, Ebasco transferred a greater percentage of its work to Project, including some jobs that had already been started by Ebasco’s employees. When Project refused to heed the Union’s requests to stop doing Ebasco’s work, the Union picketed Project and induced some of Project’s employees to cease work. On these facts Judge Rifkind found that Project was not “doing business” with Ebasco within the meaning of Section 8(b)(4) and that the Union had therefore not committed an unfair labor practice under that Section. He reached this result by looking to the legislative history of the Taft-Hartley Act and to the history of the secondary boycotts which it sought to outlaw. He deter- mined that Project was not a person “wholly unconcerned in the disagreement between an employer and his employees” such as Section 8(b)(4) was designed to protect. . . . Here there was evidence of only one instance where Royal contacted an independent (Manhattan Typewriter Service, not named in the complaint) to see whether it could handle some of Royal’s calls. Apart from that incident there is no evidence that Royal made any arrangement with an independent directly. It is obvious, however, that what the independents did would inevitably tend to break the strike. As Judge Rifkind pointed out in the Ebasco case: “The economic effect on Ebasco’s employees was precisely that which would flow from Ebasco’s hiring strikebreakers to work on its own premises. . . . Moreover, there is evidence that the secondary strikes and boycotts sought to be outlawed by Section 8(b)(4) were only those which had been unlawful at common law. And although secondary boycotts were generally unlawful, it has been held that the common law does not proscribe union activity designed to prevent employers from doing the farmed-out work of a struck employer. Thus the picketing of the independent typewriter companies was not the kind of a secondary activity which Section 8(b)(4) of the Taft- Hartley Act was designed to outlaw. Where an employer is attempting to avoid the economic impact of a strike by securing the services of others to do his work, the striking union obviously has a great interest, and we think a proper interest in preventing those services from being rendered. This interest is more fundamental than the interest in bringing pressure on customers of the primary employer. Nor are those who render such services completely unin- volved in the primary strike. By doing the work of the primary employer they secure benefits themselves at the same time that they aid the primary employer. The ally employer may easily extricate himself from the dispute and insulate himself from picketing by refusing to do that work. A case may arise where the ally employer is unable to deter- mine that the work he is doing is “farmed-out.” We need not decide whether the picketing of such an employer would be lawful, for that is not the situation here. The existence of the strike, the receipt of checks from Royal, and the picketing itself certainly put the independents on notice that some of the work they were doing might be work farmed-out by Royal. Wherever they worked on new Royal machines they were probably aware that such machines were covered by a Royal warranty. But in any event, before working on a Royal machine they could have inquired of the customer whether it was covered by a Royal contract and refused to work on it if it was. There is no indication that they made any effort to avoid doing Royal’s work. The Union was justified in picketing them in order to induce them to make such an effort. We therefore hold that an employer is not within the protection of Section 8(b)(4) when he knowingly does work which would otherwise be done by the striking employees of the primary employer and where this work is paid for by the primary employer pursuant to an arrangement devised and originated by him to enable him to meet his contractual obligations. Enforcement denied. Case Questions 1. Against whom was the union on strike? Why did the union picket the independent typewriter repair shops? 2. Was the union’s picketing at the independent repair shops primary or secondary? Explain your answer. 3. What is the rationale for the “ally” exception to the secondary picketing prohibitions of Section 8(b)(4)? How does that rationale apply to the facts in this case? Explain.

prohibit peaceful picketing by a union at a supermarket that sold apples packed by the employer against whom the union was on strike. The union’s picketing was directed at consumers and asked only that they refuse to buy the apples; it did not ask them to refrain from shopping at the market. The Supreme Court found that such picketing was not prohibited because it was directed at the primary product rather than the neutral supermarket. In Tree Fruits, the primary product, the apples, was only one of many products sold by the supermarket. May the union engage in consumer picketing when the secondary employer sells only one product—the primary product? In NLRB v. Retail Store Employees Union, Local 1001, Retail Clerks Int. Association (Safeco),22 the union striking against Safeco Title Insurance Co. conducted consumer picketing of local title companies, asking consumers to cancel their Safeco policies. The local title companies sold title insurance, performed escrow services, and conducted title searches; over 90 percent of their gross income was derived from the sale of Safeco title insurance. The Supreme Court held that the consumer picketing was in violation of Section 8(b)(4) because, unlike that in Tree Fruits, it was “reasonably calculated to induce customers not to patronize the neutral parties at all.... Product picketing that reasonably can be expected to threaten neutral parties with ruin or substantial loss simply does not square with the language or the purpose of Section 8(b)(4)(ii)(B).” The Court also stated that if “secondary picketing were directed against a product representing a major portion of a neutral’s business, but significantly less than that represented by a single dominant product.... The critical question would be whether, by encouraging customers to reject the struck product, the secondary appeal is reasonably likely to threaten the neutral party with ruin or substan- tial loss.” The effect of the Safeco decision is to restrict consumer picketing (also known as product picketing) to situations in which the primary product accounts for less than a substantial portion of the business of the neutral party at whose premises the picketing takes place. Other problems under consumer picketing have involved cases in which the primary product has become mixed with the product of the neutral or secondary employer. In such merged product cases, the public is unable to separate the primary product from the secondary product; hence, a call to the public to avoid the primary product becomes, in effect, a call to avoid the secondary employer’s product altogether. For example, if a union representing striking bakery workers pickets a fast-food restaurant, urging customers not to eat the sandwich buns supplied by the struck bakery, the effect of the union’s consumer picketing may be to urge consumers to boycott the restaurant totally, according to Teamsters Local 327.23 In Kroger Co. v. NLRB,24 the union representing striking paper workers picketed grocery stores, asking consumers to refrain from using paper bags to pack their groceries. The picketing was held to violate Section 8(b)(4) because the bags had lost their separate identity and had become “merged” with the products (groceries) of the neutral grocery stores.

ethical DILEMMA

consumeR and Publicity Picketing You are the human resources manager for FoodMart, a regional grocery retailer. The FoodMart employees are members of the Retail Clerks Union, and FoodMart and the union are engaged in negotiations to renew their collective agreement. The retail gro- cery business is extremely competitive, and a number of low-cost, low-overhead chains compete directly with FoodMart. The employees of the low-cost grocery chains are not unionized, and their wages are barely above the minimum wage. FoodMart em- ployees’ wages average around $9.25 per hour, and FoodMart also offers generous benefit packages, including medical insurance and pensions. As a result, FoodMart’s labor costs are much higher than the low-cost chains, and FoodMart has seen its profit margins decline. FoodMart had considered proposing wage and benefit reductions to the union; the union had publicly vowed not to agree to any wage concessions. To avoid a strike, the CEO suggests that you offer the union a guarantee not to reduce wages and benefits if the union agrees to begin a campaign of consumer and publicity picketing and hand-billing in front of the low-cost grocery stores—to inform the public how the low-cost chains treat their employees. What arguments can you make in favor of such a proposal? What arguments can you make against it? Should you make such an offer to the union? Prepare a memo to the CEO outlining the posi- tive and negative aspects of the proposal, and recommending a course of action, with appropriate supporting reasons.

The Publicity Proviso The publicity proviso of Section 8(b)(4) purports to allow publicity, other than picketing, for the purposes of truthfully advising the public that the products of the employer against whom the union is striking are being distributed by another employer. How far does that proviso go in allowing consumer appeals by a union? This question is addressed by the following Supreme Court decision.

CASE 16.8 edward J. deBartolo corP. v. Florida gulF coast BuildiNg trades couNcil 485 U.S. 568 (1988)

Facts: The Florida Gulf Coast Building Trades Council, a group of construction unions, engaged in hand billing at the entrances to a shopping mall in Tampa, Florida, to protest the presence of High Construction Co., a nonunion contractor constructing a department store in the mall. The hand-billing was peaceful. The union’s handbills asked mall customers not to shop at any of the stores in the mall “until the Mall’s owner publicly promises that all construction at the Mall will be done using contractors who pay their employees fair wages and fringe benefits.” The handbills made clear that the union was seeking only a consumer boycott against the other mall tenants, not a secondary strike by the employees of the mall tenants. DeBartolo, the mall owner, tried to get the union to change the language of the handbills to state that the union’s dispute did not involve DeBartolo or the mall lessees other than Wilson, and to get the union to limit its distribution to the immediate vicinity of construction site. DeBartolo then filed a complaint with the NLRB, charging the union with engaging in unfair labor practices under Section 8(b)(4) of the NLRA. The NLRB’s General Counsel issued a complaint— which the NLRB eventually dismissed—concluding that the hand-billing was protected by the publicity proviso of Section 8(b)(4). The Court of Appeals for the Fourth Circuit affirmed the Board, but the Supreme Court reversed, holding that the hand-billing did not fall within the proviso’s limited scope of exempting “publicity intended to inform the public that the primary employer’s product is ‘distributed by’ the secondary employer” because DeBartolo and the other tenants, as opposed to Wilson, did not distribute products of High. The Court remanded the case to the NLRB for a determination whether the hand-billing was in violation of Section 8(b)(4), and, if so, whether it was protected by the First Amendment. On remand, the NLRB held that the union’s hand- billing was in violation of Section 8(b)(4)(ii)(B), reasoning that “hand-billing and other activity urging a consumer boycott constituted coercion.” Because it held that the hand-billing was prohibited by Section 8(b)(4), the NLRB also held that it was not necessary to consider whether the hand-billing was protected by the First Amendment. On review, the court of appeals held that the hand-billing was protected by the First Amendment, and refused to enforce the NLRB order. DeBartolo again appealed to the U.S. Supreme Court. Issue: Is peaceful hand-billing a violation of Section 8(b)(4), or is the hand-billing protected by the First Amendment? Decision: The Supreme Court noted that the handbills here truthfully revealed the existence of a labor dispute and urged potential customers of the mall not to patronize the retailers doing business in the mall. The hand-billing was peaceful, and no picketing or patrolling was involved; it was expressive activity arguing that substandard wages should be opposed by abstaining from shopping in a mall where such wages were paid. The court of appeals was correct that the NLRB’s interpretation of Section 8(b)(4) (ii) raises concerns under the First Amendment. The Court noted that the main issue here was whether the hand-billing must be held to “threaten, coerce, or restrain any person” to cease doing business with another, within the meaning of Section 8(b)(4)(ii)(B). The Court stated that more than mere persuasion is necessary to prove a violation of 8(b)(4)(ii), which requires a showing of threats, coercion, or restraints. The Court held that the handbills involved in this case did not constitute “threats, coercion or restraints.” There was no suggestion that the handbills had any coercive effect on customers of the mall. There was no violence, picketing, or patrolling and only an attempt to persuade customers not to shop in the mall. The NLRB here found that the hand-billing “coerced” mall tenants, explaining that “[a]ppealing to the public not to patronize secondary employers is an attempt to inflict economic harm on the secondary employers by causing them to lose business ... such appeals constitute ‘economic retaliation’ and are therefore a form of coercion.” The Court noted, however, that its decision in Tree Fruits held that any kind of hand-billing, picketing, or other appeals to a secondary employer to cease doing business with the employer involved in the labor dispute was not “coercion” within the meaning of Section 8(b)(4)(ii)(B) just because it has some economic impact on the neutral. Tree Fruits involved a union picketing a retailer, asking the public not to buy a product produced by the primary employer and sold by the retailer. The impact of this picketing was not coercion within the meaning of Section 8(b)(4) even though, if the appeal succeeded, the retailer would lose revenue. Tree Fruits held that Congress did not intend to prohibit all peaceful consumer picketing at secondary sites. It is also clear that the language of Section 8(b)(4)(ii), standing alone, does not give any indication that hand- billing, without picketing, “coerces” secondary employers. The loss of customers because they read a handbill urging them not to patronize a business, and not because they are intimidated by a line of picketers, is the result of mere persuasion, and the neutral who reacts is doing no more than what its customers honestly want it to do. Section 8(b)(4) should not be read as prohibiting publicity that does not involve picketing, and that includes making appeals to customers of a retailer as they approach the store, to urge a complete boycott of the retailer because he handles products produced by nonunion shops. Interpreting Section 8(b)(4) as not reaching the hand- billing involved in this case is necessary to avoid raising the question of the constitutionality of a prohibition on other- wise peaceful publicity. The Supreme Court affirmed the decision of the court of appeals.

Sheet Metal Workers Int. Assoc., Local 15 v. NLRB25 held that union conduct including leafleting, staging a mock funeral procession, and displaying a huge inflatable rat to protest the use of nonunion labor at a construction site was protected by the First Amendment, as with the DeBartolo decision. A union distributing handbills and displaying a huge banner reading “labor dispute” on public property outside firms that were employing nonunion contractors was not picketing and did not violate Section 8(b)(4)(ii)(B), according to Overstreet v. United Brotherhood of Carpenters and Joiners of America, Local Union No. 1506.26 The case of Int. Longshoremen’s Association v. NLRB27 involved requests by U.S. union officials to Japanese unions asking for support in a dispute with nonunion ship- ping firms. The Japanese unions responded by stating that they would refuse to unload any cargo that had been loaded by nonunion workers. The U.S. Court of Appeals for the D.C. Circuit held that the Japanese unions were not acting as agents of the U.S. unions, and the U.S. unions’ requests for support did not violate Section 8(b)(4). But not all union hand-billing or publicity activity is protected. In Warshawsky & Co. v. NLRB,28 union hand-billing directed at employees of neutral subcontractors and intended to induce them to walk off the job was held to be an effort to induce a secondary boycott in viola- tion of Section 8(b)(4). A union protesting the use of nonunion carpenters at a residential complex by using a sound system to broadcast a protest message at excessive volume levels was held to violate Section 8(b)(4)(ii)(B) because it caused, or threatened to cause, disrup- tion to a secondary employer’s operation in Metropolitan Regional Council of Philadelphia (Society Hill Towers).29 Section 8(b)(4)(D): Jurisdictional Disputes Section 8(b)(4)(D) prohibits a union from picketing an employer in order to force that employer to assign work to that union. If the picketing union is not entitled to that work by reason of a certification or NLRB order, such picketing violates Section 8(b)(4)(D). For example, the union representing plasterers and the union representing stonemasons on the construction site of an apartment complex both might demand the right to lay the ceramic tiles in hallways and bathrooms. If either union picketed to force such assignment of the work, it would be a violation of Section 8(b)(4)(D). When a Section 8(b)(4)(D) complaint is filed with the Board, Section 10(k) requires that the Board give the parties involved 10 days to settle the dispute. If the parties are unable to settle the jurisdictional dispute in 10 days, the Board must then make an assign- ment of the work in dispute. Once the Board awards the work, the successful union may picket to force the employer to live up to the Board order. Section 10(l) requires that the Board seek an injunction against the picketing when a complaint alleging a violation of Section 8(b)(4)(D) is filed.

Section 8(e): Hot Cargo Clauses Hot cargo clauses are provisions in collective bargaining agreements purporting to permit employees to refuse to handle the product of any employer involved in a labor dispute. Section 8(e), inserted into the NLRA as one of the 1959 Landrum-Griffin amendments, prohibits the negotiation and enforcement of such clauses: (e) It shall be an unfair labor practice for any labor organization and any employer to enter into any contract or agreement, express or implied, whereby such employer ceases or refrains or agrees to cease or refrain from handling, using, selling, transporting or otherwise dealing in any of the products of any other employer, or to cease doing business with any other person, and any contract or agreement entered into heretofore or hereafter containing such an agreement shall be to such extent enforceable and void: Provided, That nothing in this subsection (e) shall apply to an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work: Provided further, That for the purposes of this subsection (e) and section 8(b)(4)(B) the terms “any employer,” “any person engaged in commerce or an industry affecting commerce,” “any person” when used in relation to the terms “any other producer, processor, or manufacturer,” “any employer,” or “any other person” shall not include persons in the relation of a jobber, manufacturer, contractor, or subcontractor working on the goods or premises of the jobber or manufacturer or performing parts of an integrated process of production in the apparel and clothing industry: Provided further, That nothing in this Act shall prohibit the enforcement of any agreement which is within the foregoing exception. It can be seen that the provisos to Section 8(e) exempt the garment industry and the construction industry from its provisions. The garment industry is completely exempted; the construction industry is exempted to the extent of allowing unions to negotiate hot cargo clauses that relate to work normally done at the work site. The objective of Section 8(e) is to prohibit language in a collective agreement that purports to authorize conduct that is prohibited by Section 8(b)(4), such as refusing to handle goods produced by a nonunion employer or by an employer who is being struck by a different union. The courts have allowed contract language that authorizes conduct that is primary, such as refusing to cross a primary picket line and refusing to perform the work normally done by the employees of an employer who is the target of a primary strike. One issue that has been problematic under Section 8(e) is whether work preserva- tion clauses outside the construction industry are prohibited by Section 8(e). The courts have consistently held that when unions seek to retain the right to perform work that they have traditionally done or to acquire work that is similar to work they have tradi- tionally done, and such activity to enforce the clauses is directed against the employer with the right of control over the working conditions at issue, such activity is primary. In NLRB v. International Longshoremen’s Association,30 the Supreme Court considered a union rule penalizing shippers who used prepacked containers to ship cargo that had traditionally been loaded and unloaded by union members at the docks. The Court held that, even though the use of containers had eliminated most of the traditional loading work done by longshoremen, the language that sought to preserve such “unnecessary” work was a legitimate work preservation clause under Sections 8(e) and 8(b)(4). The union’s objective through the language was the preservation of work similar in nature to that traditionally performed by the longshoremen, and the employers had the power to control the assignment of such work. A neutrality agreement, by which an employer agrees that all business entities it controls will allow unions access for organizing and to recognize the union if a majority of employees sign authorization cards, was not in viola- tion of Section 8(e) because it did not require the employer to cease doing business with any company refusing to accept the neutrality agreement, according to Heartland Ind. Partners LLC.31 A collective agreement provision that required the employer to recognize the union upon a showing of majority support and to apply the terms of the collec- tive-bargaining agreement within its operations performing bargaining unit work to the extent that the employer controlled the operation was held to have the primary objective of preserving unit work was not a violation Section 8(e).32 16-2d Remedies for Secondary Activity As mentioned, the NLRB is required to seek an immediate injunction against the picketing when a complaint alleging a violation of Section 8(b)(4), Section 8(b)(7), or Section 8(e) is filed. The injunction is intended to prevent the activity in question until its legality can be determined. If the Board holds the conduct illegal, it will issue a cease-and-desist order against it. Section 303 of the NLRA also provides that any person suffering harm to business or property by reason of activity that violates Section 8(b)(4) may sue in federal court to recover damages for the injuries sustained and legal fees. Either the primary or secondary employer may sue under Section 303, and they may file a suit regardless of whether an unfair labor practice charge has been filed with the NLRB.

16-3 National Emergencies

Sections 206 to 210 of the NLRA, which were added by the Taft-Hartley Act of 1947, provide for injunctions forestalling strikes when they threaten the national health or safety. When a strike or threatened strike poses such a threat, the president is authorized to appoint a board of inquiry to report on the issues involved in the dispute. The U.S. attorney general can secure an injunction to forestall the strike for up to eighty days, while the Federal Mediation and Conciliation Service (FMCS) attempts to resolve the dispute. The parties are not bound by the FMCS recommendations, and if no agreement is reached, the NLRB is required to poll the employees to determine if they will accept the employer’s last offer. If the last offer is rejected, the injunction is dissolved, and the president may refer the issue to Congress for “appropriate action.” The emergency provisions of the Taft-Hartley Act have been invoked only rarely in recent years. President George W. Bush’s action to stop a lockout of longshoremen in West Coast ports in October 2002 was the first use of the Taft-Hartley emergency provisions since 1978. The emergency provisions allow the president to delay a strike but do not address the causes of the strike. As a result, the dispute remains despite the invocation of the emergency provisions, and the strike or lockout may resume after the delay period under the injunction expires.

The WORKING Law FMCS Statement on Tentative West Coast Ports Agreement Between the ILWU and the PMA

wASHINGTON, D.C.—Federal Mediation and Conciliation Service Acting Director Allison Beck today issued the following statement on a tentative agreement reached between representatives of the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association covering operations at 29 U.S. ports on the Pacific coast: “I am extremely pleased to announce today that after extensive negotiations and mediation provided by the FMCS and with the support and assistance of Secretary of Labor Tom Perez, Secretary of Commerce Penny Pritzker, and Los Angeles Mayor Eric Garcetti, representatives of the ILWU and PMA have tenta- tively agreed to a new contract, resolving all outstanding issues that divided them and that have affected operations at U.S. west coast ports. Due to the complexity of the issues the parties had to address, these have been lengthy and at times difficult negotiations. The parties persevered over a long and chal- lenging process and were ultimately successful in averting any further situations that could have been disruptive to shipping operations and to the nation’s economy.” “As a result of their efforts, shippers can expect that normal operations will be restored as soon as possible at our nation’s west coast ports. At the FMCS, we are proud and honored that we were able to assist the parties and contribute to this successful negotiation.” “I want especially to acknowledge the extraordinary contributions of FMCS Deputy Director Scot Beckenbaugh, who led our Agency’s efforts in assisting the ILWU and PMA in their negotia- tion, and I especially want to thank Secretary Perez and Secretary Pritzker for their leadership these past few days. We are grateful for their efforts and for their commitment to bringing this significant negotiation to a positive resolution.”

C H A P T E r 17

The Enforcement and Administration of the Collective Agreement The signing of a collective agreement by a union and an employer may mark the end of the bargaining process; it is also the beginning of a continuing relationship between them. The agreement creates rights for and imposes obligations on both parties. The parties are bound to uphold the terms of the contract for its duration. How can union and management ensure that the “other side” will honor the contract? What means are available to enforce the contract in the event of a breach by either side? How can disputes over the interpretation of the agreement be resolved? This chapter discusses the means available for the enforcement and administration of the collective agreement. Section 301 of the National Labor Relations Act (NLRA) provides that suits for viola- tions of contracts between an employer and a labor union may be brought in federal and state courts. Therefore, either the union or employer could bring a lawsuit over the other side’s failure to live up to the contract. However, lawsuits are a cumbersome means of resolving most contract disputes; they are also expensive and time consuming. For these reasons, lawsuits are impractical for resolving disputes over how collective agreements should be interpreted or applied. Either party to the agreement could resort to pressure tactics to try to resolve a contract dispute. The union could go on strike, or the employer could lock out the employees to force the other side to live up to the contract. The employer generally is not willing to lock out employees and cease production over minor matters. Nor are union members likely to strike, lose wages, and risk being replaced over insignificant issues.

17-1 Arbitration arbitration the settlement of disputes by a neutral adjudicator chosen by the parties Because of the shortcomings of both lawsuits and pressure tactics as a way to resolve contract disputes, the parties usually agree, as a part of their collective agreement, to establish their own process for resolving disputes peacefully. The peaceful settlement process usually involves arbitration. Arbitration is the settlement of disputes by a neutral adjudicator chosen by the parties to the dispute. It provides a means to resolve contractual disputes relatively inexpensively and expeditiously. Arbitration also provides flexibility because the parties are free to tailor the arbitration process to suit their particular situation. The parties generally incorporate arbitration as the final step of the grievance procedure. In return for

the agreement by each party to arbitrate their dispute, they give up their right to strike or lock out over such issues. 17-1a Interest Arbitration Versus rights Arbitration In a labor relations setting, arbitration may be used either to settle a dispute over the creation of a new collective agreement or over the interpretation and administration of an existing agreement. When arbitration is used to create a new agreement (or renew an existing one), it is known as interest arbitration—the parties seek to protect their economic interests through favorable contract terms. Interest arbitration is common in the public sector, where employees are generally prohibited from striking. Interest arbitration replaces pressure tactics as a means to resolve the negotiating impasse in the public sector. It is much less common in the private sector. If the dispute involves interpreting an existing agreement rather than creating a new one, the arbitration to resolve it is known as rights arbitration. Rights arbitration is the means to define the rights and obligations of each party under the agreement. It is very common in both the public and private sectors. Even though rights arbitration is not required by the NLRA, more than 90 percent of all collective agreements provide for rights arbitration as the means to resolve disputes over the interpretation and/or application of the collective agreement. This chapter is concerned with rights arbitration, and unless other- wise specified, the term arbitration refers to rights arbitration. 17-1b rights Arbitration and the Grievance Process Rights arbitration is generally used as the final step in the grievance process—a process set up to deal with complaints under the collective agreement. Like rights arbitration, the grievance process is created by the parties to the agreement. It is not required by statute. Because it is voluntarily created by the parties under the collective agreement, the grievance process can be tailored to fit their particular situation or desires. A grievance is simply a complaint that either party to the agreement is not living up to the obligations of the agreement. Most grievances are filed by employees complaining about the actions of the employer (or its agents), but management may also file grievances under the agreement. Grievance procedures vary widely; the parties to an agreement can devise whatever procedure is best suited to their purposes. The following is an example of a four-step griev- ance procedure, with arbitration as the final step. Article Xiii: GrievAnce Procedure SECTION 1. Any grievance or dispute between the Company and the Union involv- ing the interpretation or application of any terms of this Agreement shall be adjusted according to the following procedure: Step One: The employee who believes he has suffered a grievance or been un- justly treated may raise the alleged grievance with his Foreman or Assistant Fore- man in an attempt to settle the same. The said employee may be accompanied or

represented if he so desires by the Steward. The Foreman shall have two (2) working days to settle the grievance. Step Two: If the matter is not satisfactorily settled in Step One, it may be taken to the Second Step by the Union’s reducing it to writing, on a mutually agreed upon form provided by the Company. Any grievance taken to the Second Step must be signed by a Steward, a Chief Steward, or a Local Union Committee member. Two (2) copies will be delivered to the Supervisor, who will sign and date the grievance upon receipt of it. A meeting will be arranged within four (4) working days following receipt of the form, between the Supervisor, Plant Superintendent, Grievant, Steward, or in his absence, Chief Steward. A written answer shall be given within four (4) working days from the date of the meeting even though an oral decision is given at the meeting. If the answer is not received during the time period, the grievance shall be deemed settled in favor of the grievant or Union. Step Three: The Steward, or Chief Steward in his absence, may appeal the Second Step decision by completing the “Appeal to Third Step” portion of the grievance form and by delivering the same to the Industrial Relations Department within five (5) working days (excluding Saturday and Sunday) after the decision in the Second Step. The Industrial Relations Department shall arrange a meeting within five (5) working days (excluding Saturday and Sunday) following receipt of the appeal, between the representative designated by the Company, the Shop Grievance Committee, and the International Representative. A written answer shall be given within five (5) working days (excluding Saturday and Sunday) from the date of the meeting even though an oral decision is given at the meeting. Any fail- ure by either party to meet the time limits required shall deem the grievance settled in favor of the other party. Step Four: Any grievance or dispute involving the interpretation or application of this Agreement, which has not been satisfactorily settled in the foregoing steps, may, at the request of either party, be submitted to an arbitrator or arbitration board selected as hereinafter provided, by written notice delivered to the other party within four (4) calendar weeks subsequent to the decision in Step Three. Any failure, by either party, to meet such time limits shall be deemed a waiver of the grievance. Un- less the parties mutually agree upon arbitration by the State Board of Mediation and Arbitration, the matter shall be referred to the American Arbitration Association for arbitration under its rules. The fees and expenses of the arbitrator thus selected shall be divided equally between the parties. SECTION 2. The arbitration board or the arbitrator is not authorized to add to, modify, or take away from the express terms of this Agreement and shall be limited to the interpretation or application of the provisions of the Agreement of the determina- tion as to whether there is a violation of it. Any decision of the arbitration board or the arbitrator within the scope of the above authority shall be final and binding on both parties. SECTION 3. Time limits above set forth must be complied with strictly. SECTION 4. The Company or the Union may institute a grievance at Step Three on any matter concerning general application, and process it through Step Four.

It can be seen that the actual grievance procedure is a series of meetings between union and management representatives. As the grievance remains unresolved and moves through the various steps of the procedure, the rank of the representatives involved increases. Either party may request that a grievance unresolved at Step Three be submitted to arbitration.

17-2 The Courts and Arbitration As noted, arbitration as a means to resolve grievances is a voluntary mechanism; the parties to the contract have agreed to use it. But what happens if either party refuses to submit a dispute to arbitration? What remedies are available to the party seeking arbitration? The following Lincoln Mills case deals with an attempt to use Section 301 of the NLRA to force management to arbitrate a union grievance. As Lincoln Mills indicates, if the parties have agreed to arbitration as a means of resolving disputes, the courts will require them to use it. What is voluntary about arbi- tration, then, is its existence—whether the agreement provides for arbitration. Once the parties have agreed to use arbitration, the courts will enforce that agreement. What should the role of the court be when it is asked to order that a dispute be arbi- trated or when it is asked to enforce an arbitration award? Those issues were addressed by the Supreme Court in three cases that came to be known as the Steelworkers Trilogy. In United Steelworkers of America v. Warrior & Gulf Navigation Co.,1 the Supreme Court held that when a court is asked to order arbitration under Section 301, an order to arbitrate the grievance should not be denied “unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.” In a more recent decision, the Supreme Court again affirmed the holding of Warrior & Gulf Navigation. In AT&T Technologies v. Communications Workers of America,2 the Court held that it is the role of the courts, not of the arbitrators, to resolve questions of whether a grievance is subject to arbitration. A dispute

between an employer and a union over the date upon which a collective agreement was ratified was to be decided by a court and not by arbitration.3 The collective agreement’s arbitration clause may also affect the right of individual employees to bring employment discrimination suits. (See the discussion on this topic in Chapter 8.) In Alexander v. Gardner Denver Co.,4 the Supreme Court held that an employee who had lost in arbitration under the collective agreement was still able to bring a Title VII suit in court. The Court held that the arbitration dealt with the employee’s rights under the collective agreement, which were distinct from the employee’s statutory rights under Title VII. In Wright v. Universal Marine Supply,5 the Supreme Court held that the arbitration clause of a collective agreement must contain a “clear and unmistakable waiver” of the individual employee’s rights to sue in order to waive the individual employee’s right to sue over employ- ment discrimination claims. More recently, the Supreme Court decided the case of 14 Penn Plaza v. Pyett 6 involving age discrimination claims filed by employees covered by a collective agreement that included an arbitration clause specifically covering any claims under Title VII, the Age Discrimination in Employment Act, and other EEO legislation. The Court held that the employees were required to arbitrate their age discrimination claims. The Court noted that Alexander did not apply where the collective bargaining agreement’s arbitration provision expressly included statutory claims as well as contractual claims arising under the terms of the collective agreement. The effect of the decision in 14 Penn Plaza v. Pyett may be limited, however, because the Court specifically refrained from holding that employees must arbitrate their statutory EEO claims when the union controls access to arbitration and could prevent the employees from pursuing their EEO claims through arbitration.

CASE 17.1 TexTile Workers Union of AmericA v. lincoln mills of AlAbAmA 353 U.S. 448 (1957)

Facts: The Textile Workers Union entered into a collec- tive bargaining agreement with the employer, Lincoln Mills. The agreement provided that there would be no strikes or work stoppages, and contained a grievance procedure. The last step in the grievance procedure was arbitration, which could be invoked by either party. The union processed several grievances concerning work loads and work assignments through the various steps in the grievance procedure, but the employer denied them. The union then requested arbitration, and the employer refused. The union then filed suit under Section 301 of the NLRA to compel the employer to arbitrate the grievances. The trial court ordered the employer to arbi- trate the grievances under the arbitration provisions of the collective bargaining agreement. The employer appealed, and the court of appeals reversed the trial court decision. The union then appealed to the U.S. Supreme Court. Issue: Does Section 301 authorize a court to order the parties to a collective agreement to arbitrate a grievance? Decision: The Court looked to the wording of Section 301, which provides: (a) Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties. Previous decisions involving Section 301 hold that Section 301(a) authorizes federal courts to fashion a body of federal law for the enforcement of collective bargaining agreements, including enforcing of promises to arbitrate grievances under collective bargaining agreements. The agreement to arbitrate grievance disputes, contained in this collective bargaining agreement, should be enforced. The agreement to arbitrate grievances is the quid pro quo for an agreement not to strike. Section 301 expresses a federal policy that federal courts should enforce these agreements to arbitrate in order to ensure that indus- trial peace can be promoted. In enforcing agreements to arbitrate under Section 301, the courts should to apply substantive federal law, fashioned from the policy of the national labor laws. The Court also noted that the Norris–La Guardia Act, which restricts federal courts issuing injunctions in labor disputes, does not apply to suits seeking to order arbitration under Section 301. The Supreme Court reversed the decision of the court of appeals and remanded the case.

The limited role of the court ordering arbitration was emphasized in United Steelworkers v. American Mfg Co.,7 the second case in the trilogy. In that case, the Supreme Court held that [t]he function of the court ... is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the contract. Whether the moving party is right or wrong is a question of contract interpretation for the arbitrator.... The courts, therefore, have no business weighing the merits of the grievance. [emphasis added] The duty to arbitrate arises from the collective agreement between the parties, but does the duty to arbitrate continue to exist after the expiration of the collective agreement? In Litton Financial Printing Div., Litton Business Systems v. NLRB,8 the Supreme Court held that the duty to arbitrate continues after the expiration of the agreement if the grievance arises “under the agreement.” In other words: • it involves facts and occurrences that arose prior to expiration; • it concerns post-expiration action that infringes a right accrued or vested under the agreement; or • it involves disputed contract rights that survive the expiration of the collective agree- ment. When one of the parties refuses to comply with the arbitrator’s award or decision after the grievance has been arbitrated, the other party may seek to have the award judicially enforced. What is the role of the court that is asked to enforce the arbitration decision? This was the subject of the final case in the trilogy, United Steelworkers v. Enterprise Wheel & Car Co.9 In that case, the Supreme Court held that the court is required to enforce the arbitrator’s decision unless it is clear to the court that the arbitrator has exceeded the authority given to him or her by the collective agreement. The Court stated that “the ques- tion of interpretation of the collective agreement is a question for the arbitrator. It is the arbitrator’s construction which was bargained for; and so far as the arbitrator’s decision concerns the construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his.” In Major League Baseball Players Association v. Garvey,10 the Supreme Court emphasized that even when the court vacates an arbitration award, the court must remand the issue back to arbitration for resolu- tion rather than settling the merits of the dispute according to the court’s own judgment. Under the Enterprise Wheel & Car decision, the court should refuse to enforce an arbi- tration decision that violates the law. How should the court react when an employer claims that an arbitration decision conflicts with the “policy” behind the law?

CASE 17.2 eAsTern AssociATed coAl corporATion v. UniTed mine Workers of AmericA, disTricT 17 531 U.S. 57 (2000)

Justice Breyer Delivered the Opinion of the Court ... Eastern Associated Coal Corp., and respondent, United Mine Workers of America, are parties to a collective- bargaining agreement with arbitration provisions. The agree- ment specifies that, in arbitration, in order to discharge an employee, Eastern must prove it has “just cause.” Otherwise the arbitrator will order the employee reinstated. The arbi- trator’s decision is final. James Smith worked for Eastern as a member of a road crew, a job that required him to drive heavy truck-like vehicles on public highways. As a truck driver, Smith was subject to Department of Transportation (DOT) regula- tions requiring random drug testing of workers engaged in “safety-sensitive” tasks. In March 1996, Smith tested positive for marijuana. Eastern sought to discharge Smith. The union went to arbitra- tion, and the arbitrator concluded that Smith’s positive drug test did not amount to “just cause” for discharge. Instead the arbitrator ordered Smith’s reinstatement, provided that Smith (1) accept a suspension of 30 days without pay, (2) partici- pate in a substance-abuse program, and (3) undergo drug tests at the discretion of Eastern (or an approved substance-abuse professional) for the next five years. Between April 1996 and January 1997, Smith passed four random drug tests. But in July 1997 he again tested positive for marijuana. Eastern again sought to discharge Smith. The union again went to arbitration, and the arbi- trator again concluded that Smith’s use of marijuana did not amount to “just cause” for discharge, in light of two mitigating circumstances. First, Smith had been a good employee for 17 years. And, second, Smith had made a cred- ible and “very personal appeal under oath... concerning a personal/family problem which caused this one time lapse in drug usage.” The arbitrator ordered Smith’s reinstatement provided that Smith (1) accept a new suspension without pay, this time for slightly more than three months; (2) reimburse Eastern and the union for the costs of both arbitration proceedings; (3) continue to participate in a substance-abuse program; (4) continue to undergo random drug testing; and (5) provide Eastern with a signed, undated letter of resigna- tion, to take effect if Smith again tested positive within the next five years. Eastern brought suit in federal court seeking to have the arbitrator’s award vacated, arguing that the award contra- vened a public policy against the operation of dangerous machinery by workers who test positive for drugs. The District Court, while recognizing a strong regulation-based public policy against drug use by workers who perform safety-sensitive functions, held that Smith’s conditional reinstatement did not violate that policy. And it ordered the award’s enforcement. The Court of Appeals for the Fourth Circuit affirmed on the reasoning of the District Court. [Eastern appealed to the U.S. Supreme Court.] ... Eastern claims that considerations of public policy make the arbitration award unenforceable.... Eastern does not claim here that the arbitrator acted outside the scope of his contractually delegated authority. Hence we must treat the arbitrator’s award as if it represented an agreement between Eastern and the union as to the proper meaning of the contract’s words “just cause.” ... We must then decide whether a contractual reinstatement requirement would fall within the legal exception that makes unenforceable “a collective bargaining agreement that is contrary to public policy.” The Court has made clear that any such public policy must be “explicit,” “well defined,” and “dominant.” It must be “ascertained ‘by reference to the laws and legal precedents and not from general considerations of supposed public interests.’” And, of course, the question to be answered is not whether Smith’s drug use itself violates public policy, but whether the agreement to reinstate him does so. To put the question more specifically, does a contractual agreement to reinstate Smith with specified conditions run contrary to an explicit, well-defined, and dominant public policy, as ascertained by reference to positive law and not from general considerations of supposed public interests?... We agree, in principle, that courts’ authority to invoke the public policy exception is not limited solely to instances where the arbitration award itself violates positive law. Nevertheless, the public policy exception is narrow and must satisfy the principles set forth in ... Misco. Moreover, in a case like the one before us, where two political branches have created a detailed regulatory regime in a specific field, courts should approach with particular caution pleas to divine further public policy in that area. Eastern asserts that a public policy against reinstate- ment of workers who use drugs can be discerned from an examination of that regulatory regime, which consists of the Omnibus Transportation Employee Testing Act of 1991 and DOT’s implementing regulations. The Testing Act ... requires the Secretary of Transportation to promulgate regu- lations requiring “testing of operators of commercial motor vehicles for the use of a controlled substance.” It mandates suspension of those operators who have driven a commercial motor vehicle while under the influence of drugs. And DOT’s implementing regulations set forth sanctions appli- cable to those who test positive for illegal drugs. In Eastern’s view, these provisions embody a strong public policy against drug use by transportation workers in safety-sensitive positions and in favor of random drug testing in order to detect that use. Eastern argues that rein- statement of a driver who has twice failed random drug tests would undermine that policy—to the point where a judge must set aside an employer–union agreement requiring reinstatement. Eastern’s argument, however, loses much of its force when one considers further provisions of the Act that make clear that the Act’s remedial aims are complex. The Act says that “rehabilitation is a critical component of any testing program”.... Neither the Act nor the regulations forbid an employer to reinstate in a safety-sensitive position an employee who fails a random drug test once or twice. The congressional and regulatory directives require only that the above-stated prerequisites to reinstatement be met. Moreover, when promulgating these regulations, DOT decided not to require employers either to provide reha- bilitation or to “hold a job open for a driver” who has tested positive, on the basis that such decisions “should be left to management/driver negotiation.” That determina- tion reflects basic background labor law principles, which caution against interference with labor-management agree- ments about appropriate employee discipline.... We believe that these expressions of positive law embody several relevant policies. As Eastern points out, these policies include Testing Act policies against drug use by employees in safety-sensitive transportation positions and in favor of drug testing. They also include a Testing Act policy favoring rehabilitation of employees who use drugs. And the relevant statutory and regulatory provisions must be read in light of background labor law policy that favors determination of disciplinary questions through arbitration when chosen as a result of labor-management negotiation. The award before us is not contrary to these several poli- cies, taken together. The award does not condone Smith’s conduct or ignore the risk to public safety that drug use by truck drivers may pose. Rather, the award punishes Smith by suspending him for three months, thereby depriving him of nearly $9,000 in lost wages; it requires him to pay the arbi- tration costs of both sides; it insists upon further substance- abuse treatment and testing; and it makes clear (by requiring Smith to provide a signed letter of resignation) that one more failed test means discharge. The award violates no specific provision of any law or regulation. It is consistent with DOT rules requiring completion of substance-abuse treatment before returning to work, for it does not preclude Eastern from assigning Smith to a non-safety-sensitive position until Smith completes the prescribed treatment program. It is consistent with the Testing Act’s ... driving license suspension require- ments, for those requirements apply only to drivers who, unlike Smith, actually operated vehicles under the influence of drugs. The award is also consistent with the Act’s reha- bilitative concerns, for it requires substance-abuse treatment and testing before Smith can return to work.... Regarding drug use by persons in safety-sensitive posi- tions, then, Congress has enacted a detailed statute. And Congress has delegated to the Secretary of Transportation authority to issue further detailed regulations on that subject. Upon careful consideration, including public notice and comment, the Secretary has done so. Neither Congress nor the Secretary has seen fit to mandate the discharge of a worker who twice tests positive for drugs. We hesitate to infer a public policy in this area that goes beyond the careful and detailed scheme Congress and the Secretary have created. We recognize that reasonable people can differ as to whether reinstatement or discharge is the more appropriate remedy here. But both employer and union have agreed to entrust this remedial decision to an arbitrator. We cannot find in the Act, the regulations, or any other law or legal precedent an “explicit,” “well defined,” “dominant” public policy to which the arbitrator’s decision “runs contrary.” We conclude that the lower courts correctly rejected Eastern’s public policy claim. The judgment of the Court of Appeals is affirmed. Case Questions 1. Why did the arbitrator order the reinstatement of Smith? What penalties did Smith suffer as a result of testing positive for drug use? 2. What does the employer use to define the public policy it claims requires that Smith be discharged? Does the Court read those materials as defining the same public policy as claimed by the employer? 3. Does the Court enforce the arbitrator’s award here? Why?

In Paperworkers v. Misco, Inc.,11 the Supreme Court held that a court may refuse to enforce an arbitration award only if the award violates “explicit” public policy as defined by reference to legislation and court decisions rather than “general considerations of supposed public interests.” 17-2a Judicial Enforcement of No-Strike Clauses The decisions in the Steelworkers Trilogy emphasized that arbitration was a substitute for industrial strife. The Lincoln Mills decision stated that the employer’s agreement to arbitrate disputes is the quid pro quo for the union’s agreement not to strike over arbitrable disputes. Many agreements contain no-strike clauses by which the union agrees not to strike over disputes of interpretation of the agreement during the term of the agreement. In Teamsters Local 174 v. Lucas Flour,12 the Supreme Court held that a no-strike clause will be implied by the court, even when the agreement itself is silent on the matter, if the agree- ment contains an arbitration provision. The implied no-strike clause covers any dispute that is subject to arbitration under the agreement. If the collective agreement contains an express no-strike clause, or even an implied one under Lucas Flour, can a federal court enforce that clause by enjoining a strike in violation of the no-strike clause? What about the anti-injunction provisions of the Norris–La Guardia Act? This issue was presented to the Supreme Court in Boys Markets, Inc. v. Retail Clerks Union, Local 770.13 The Court in Boys Markets held that the Norris–La Guardia Act did not prevent a federal court from issuing an injunction to stop a strike over an issue that was subject to the arbitration clause of a collective agreement. Injunctions under the doctrine of Boys Markets may also be issued against employers for breaches of the collective agreement that threaten the arbitration process. In Oil, Chemical and Atomic Workers International Union, Local 2–286 v. Amoco Oil Co.,14 the court affirmed an injunction preventing an employer’s unilateral implementation of a drug testing program, pending the outcome of arbitration to determine the employer’s right to institute such a program under the collective bargaining agreement. The decision in Boys Markets allowing federal courts to enjoin strikes in violation of no-strike clauses does not mean that a union may never go on strike during the term of a collective agreement. The Boys Markets holding is limited to strikes over issues subject to arbitration under the agreement. In Jacksonville Bulk Terminals, Inc. v. Int. Longshoremen’s Assn.,15 the Supreme Court refused to enjoin a refusal by longshoremen to handle cargo destined for the Soviet Union in protest over the Soviet invasion of Afghanistan. The Court held that the strike was over a political dispute that was not arbitrable under the collective agreement. The policy behind that decision was first set out in the Supreme Court deci- sion of Buffalo Forge Co. v. United Steelworkers of America,16 which held that the use of an injunction to stop a strike, as in Boys Markets, is appropriate only when the cause of the strike is a dispute that is subject to arbitration under the collective agreement.

Concept Summary 17.2

Remedies for Breach of No-Strike Clauses As the preceding cases demonstrate, an employer may enjoin strikes that violate a no-strike clause when the strike is over an arbitrable issue. But even when an injunction will not be issued, an employer may still recover damages for breach of the no-strike clause through a suit under Section 301. In the Lucas Flour case, the Supreme Court upheld a damage award for a strike in violation of the implied no-strike clause. Section 301 Suits The Supreme Court had held that suits under Section 301 are governed by the appropriate state statutes of limitations, according to UAW v. Hoosier Cardinal Corp.17 More recently, in DelCostello v. Teamsters,18 the Court held that suits under Section 301 by an individual employee against the employer for breach of the collective agreement and against the union for breach of the duty of fair representation were subject to the six-month limitation period under Section 10(b) of the NLRA. Section 301, while allowing damage suits for breach of no-strike clauses, places some limitations upon such suits. Section 301(b) specifies that “any money judgment against a labor organization in a district court of the United States shall be enforceable only against the organization as an entity and its assets, and shall not be enforceable against any indi- vidual member or his assets.” In Atkinson v. Sinclair Refining Co.,19 the Supreme Court held that Section 301 does not authorize damage suits against individual union officials when their union is liable for violating a no-strike clause. In Complete Auto Transit, Inc. v. Reis,20 the Court held that individual employees are not liable for damages from a wildcat strike not authorized by their union in breach of the collective agreement. If the employer cannot recover damages from the individuals responsible for such a strike, what other steps can the employer take against those individuals? In Carbon Fuel Co. v. United Mine Workers,21 the Supreme Court held that an interna- tional union was not liable for damages resulting from a strike by one of its local unions when the international had neither instigated, authorized, supported, nor encouraged the strike. Why would the employer seek damages from the international when the local had gone on strike? The result of the Complete Auto Transit and Carbon Fuel cases is to deprive the employer of the right to recover damages from either the union or the individual union members when a strike by the individual union members is not authorized by the union. The remedy of damages is available to the employer only when the union has called or authorized the strike in breach of the collective agreement. When the employer can pursue arbitration over the union violation of the agreement, the court will stay a suit for damages pending arbitration according to the Supreme Court decision in Drake Bakeries Inc. v. Bakery Workers Local 50.22 The employer’s obligation to arbitrate such disputes continues despite the union’s breach of its contractual obligations, according to Packinghouse Workers Local 721 v. Needham Packing Co.23 Section 301 and Other Remedies Can a court hear a suit alleging a breach of contract under Section 301 even though the contract is silent about judicial remedies? In Groves v. Ring Screw Works,24 the collective agreement provided for arbitration in discharge cases only upon agreement of both parties. It also provided that if a grievance was not resolved through the grievance procedure, the union could go on strike over the issue. Two employees who were discharged by the employer filed suit for wrongful discharge in state court; their union joined the suits as a plaintiff. The employer argued that the union could not file suit because the contract did not require arbitration. The Supreme Court reversed the court of appeals. The Court unanimously held that a contract giving the union the right to strike or the employer the right to lock out does not automatically strip federal courts of the authority to resolve contractual disputes. The union was not precluded from filing suit against the employer to enforce the contract, even though the contract was silent about judicial remedies. Section 301 Preemption of Other Remedies In Allis-Chalmers Corp. v. Leuck,25 the Supreme Court held that if the resolution of a state law claim depends on the interpretation of a collective agreement, the application of the state law is preempted by federal law. A suit under state law alleging bad-faith handling of a disability benefits claim was preempted by Section 301 because the collective agreement set out provisions for handling disability claims. In I.B.E.W. v. Hechler,26 the Supreme Court held that an employee’s tort suit against the union for failure to provide a safe place to work was precluded by Section 301 because her claim was “nothing more than a breach of the union’s federal duty of fair representation.” However, where state law remedies exist independently of any collective agreement and do not require interpretation of the agreement, the state law remedy is not preempted. In Lingle v. Norge Division of Magic Chef, Inc.,27 the Supreme Court held that an employee who was discharged for filing a workers’ compensation claim could file suit under state law for compensation and punitive damages. Her suit was not preempted by Section 301. California law requires that employers pay discharged employees all wages owed to them immediately at the time of the discharge. The California State commissioner of labor interpreted that law as not applying to employees covered by a collective agreement containing an arbitration clause. In Livadas v. Bradshaw,28 the U.S. Supreme Court held that the commissioner’s interpretation was preempted by Section 301 because it denied employees benefits for engaging in activity—pursuing arbitration and other remedies under the collective agreement—protected under federal labor law. 17-2b The NLrB and Arbitration As the preceding cases have demonstrated, the courts favor the policy of voluntary resolu- tion of disputes between labor and management. The courts will therefore refrain from deciding issues that are subject to arbitration, instead deferring to the arbitrator’s resolu- tion of such issues. If a grievance under an agreement involves conduct that may also be an unfair labor practice under the NLRA, what is the role of the National Labor Relations Board (NLRB)? Should the Board, like the courts, defer to arbitration? Or should the Board decide the issue to ensure that the parties’ statutory rights are protected? The NLRB had previously taken the position that it would defer to arbitration on unfair labor practice complaints, even if they involved claims of violations of Sections 8(a)(1) and 8(a)(3). Over the years, several courts of appeals have criticized the NLRB’s broad deferral policy. etermining whether the NLRB should defer resolution of an unfair practice complaint to an arbitrator’s decision under the relevant collective bargaining approach. The approach is intended to enable the NLRB to determine whether the arbitrator has actually resolved the unfair labor practice issue in a manner consistent with the act, without placing an undue burden on unions, employers, arbitrators, or the arbitration system itself. The approach also is used to determine whether the NLRB should defer to the settlement of a grievance by the union and the employer. The NLRB will defer a meritorious unfair labor practice charge to the arbitration process where the following conditions are met: 1. The arbitrator must be explicitly authorized to decide the statutory issue. 2. The arbitrator must have been presented with and considered the statutory issue, or have been prevented from doing so by the party opposing deferral. 3. NLRB law must reasonably permit the award. 4. The proponent of deferral has the burden to show that the standards for deferral have been met. The Board will consider an arbitration procedure to be unworkable if an employer, through prohibited means, precludes employee access to it. For instance, the Board has held that where an employer discharges employees or threatens reprisals against employees who attempt to file grievances, the grievance-resolution procedure is not actually open for use by disputants.30 Deferral is not appropriate for an alleged unfair labor practice violation that “strikes at the foundation of the grievance and arbitration mechanism upon which we have relied in the formulation of the [deferral] doctrine.” In Community Convalescent Hospital,31 the Board subsequently revoked its deferral where additional delay and the employer’s imposition of preconditions were evidence of bad faith and an unwillingness to arbitrate the dispute.

17-3 Changes in the Status of Employers

17-3a Successor Employers When a new employer takes over a unionized firm, what is the obligation of the successor employer to recognize the union, to adhere to the collective agreement, and to arbitrate grievances that arose under the collective agreement? In John Wiley & Sons, Inc. v. Livingston,32 the Supreme Court held that the successor employer must arbitrate a grievance arising under the collective agreement where there was a “substantial continuity of identity in the business enterprise” and the employer retained a majority of the employees from the former unionized work force. The union in Wiley sought only to force the new employer to arbitrate; it did not seek to force the employer to bargain with it. In NLRB v. Burns International Security Services, Inc.,33 the Supreme Court dealt with a case where the union sought to force the new employer to recognize the union and to abide by the collective agreement. The Supreme Court held that the successor employer was not bound by the prior collective agreement but was required to recognize and bargain with the union because it had retained enough employees from the prior, unionized work force to constitute a majority of the new employer’s work force. What factors should be considered when determining whether a “substantial continuity of identity” of the operation exists, and at what point in the hiring process does the presence of a union’s supporters constituting a majority of the work force trigger the duty to bargain with the union? The Supreme Court addressed these issues in the Fall River Dyeing case. Following Fall River Dyeing, a court held that an employer who assumed operation of a steel mill that had been closed for two years and that had drastically reduced the number of employees and restructured job classifications was not a successor employer because of the lack of a substantial continuity of operation with the former employer, according to CitiSteel USA v. NLRB.34 However, a two-year hiatus in operations did not preclude the NLRB from holding that the new employer was a successor in Pennsylvania Transformer Technology, Inc. v. NLRB.35

CASE 17.3 fAll river dyeing & finishing corp. v. nlrb 482 U.S. 27 (1987)

Blackmun, J. ... For over 30 years before 1982, Sterlingwale operated a textile dyeing and finishing plant in Fall River, Massachusetts. Its business consisted basically of two types of dyeing, called, respectively, “converting” and “commission.” Under the converting process, which in 1981 accounted for 60 to 70 percent of its business, Sterlingwale bought unfinished fabrics for its own account, dyed and finished them, and then sold them to apparel manufacturers. In commission dyeing, which accounted for the remainder of its business, Sterlingwale dyed and finished fabrics owned by customers according to their specifications. The financing and marketing aspects of converting and commission dyeing are different. Converting requires capital to purchase fabrics and a sales force to promote the finished products. The production process, however, is the same for both converting and commission dyeing. In the late 1970s the textile-dyeing business, including Sterlingwale’s, began to suffer from adverse economic conditions and foreign competition. After 1979, busi- ness at Sterlingwale took a serious turn for the worse because of the loss of its export market, and the company reduced the number of its employees. Finally, in February 1982, Sterlingwale laid off all its production employees, primarily because it no longer had the capital to continue the converting business. It retained a skeleton crew of workers and supervisors to ship out the goods remaining on order and to maintain the corporation’s building and machinery. In the months following the layoff, Leonard Ansin, Sterlingwale’s president, liquidated the inventory of the corporation and, at the same time, looked for a business partner with whom he could “resurrect the business.”... For almost as long as Sterlingwale had been in exis- tence, its production and maintenance employees had been represented by the United Textile Workers of America, AFL-CIO, Local 292 (Union). In late summer 1982, however, Sterlingwale finally went out of business. It made an assignment for the benefit of its creditors [who held] ... a first mortgage on most of Sterlingwale’s real property and ... a security interest on Sterlingwale’s machinery and equipment.... During this same period, a former Sterlingwale employee and officer, Herbert Chace, and Arthur Friedman, presi- dent of one of Sterlingwale’s major customers ... formed petitioner Fall River Dyeing & Finishing Corp. Chace, who had resigned from Sterlingwale in February 1982, had worked there for 27 years, had been vice-president in charge of sales at the time of his departure, and had participated in collective bargaining with the Union during his tenure at Sterlingwale. Chace and Friedman formed petitioner with the intention of engaging strictly in the commis- sion-dyeing business and of taking advantage of the avail- ability of Sterlingwale’s assets and workforce. Accordingly, Friedman [acquired] ... Sterlingwale’s plant, real property, and equipment, and [sold] them to petitioner. Petitioner also obtained some of Sterlingwale’s remaining inventory at the liquidator’s auction. Chace became petitioner’s vice- president in charge of operations and Friedman became its president. In September 1982, petitioner began operating out of Sterlingwale’s former facilities and began hiring employees.... Petitioner’s initial hiring goal was to attain one full shift of workers, which meant from 55 to 60 employees. Petitioner planned to “see how business would be” after this initial goal had been met and, if business permitted, to expand to two shifts. The employees who were hired first spent approximately four to six weeks in start-up operations and an additional month in experimental production. By letter dated October 19, 1982, the Union requested petitioner to recognize it as the bargaining agent for peti- tioner’s employees and to begin collective bargaining. Petitioner refused the request, stating that, in its view, the request had “no legal basis.” At that time, 18 of petition- er’s 21 employees were former employees of Sterlingwale. By November of that year, petitioner had employees in a complete range of jobs, had its production process in opera- tion, and was handling customer orders; by mid-January 1983, it had attained its initial goal of one shift of workers. Of the 55 workers in this initial shift, a number that repre- sented over half the workers petitioner would eventually hire, 36 were former Sterlingwale employees. Petitioner continued to expand its workforce, and by mid-April 1983 it had reached two full shifts. For the first time, ex-Ster- lingwale employees were in the minority but just barely so (52 or 53 out of 107 employees). Although petitioner engaged exclusively in commission dyeing, the employees experienced the same conditions they had when they were working for Sterlingwale. The produc- tion process was unchanged and the employees worked on the same machines, in the same building, with the same job classifications, under virtually the same supervisors. Over half the volume of petitioner’s business came from former Sterlingwale customers,... On November 1, 1982, the Union filed an unfair labor practice charge with the Board, alleging that in its refusal to bargain petitioner had violated Section 8(a)(1) and (5) of the National Labor Relations Act. After a hearing, the Administrative Law Judge (ALJ) decided that, on the facts of the case, petitioner was a successor to Sterlingwale.... Thus, in the view of the ALJ, petitioner’s duty to bargain rose in mid-January because former Sterlingwale employees then were in the majority and because the Union’s October demand was still in effect. Petitioner thus committed an unfair labor practice in refusing to bargain. In a brief deci- sion and order, the Board, with one member dissenting, affirmed this decision. The Court of Appeals for the First Circuit, also by a divided vote, enforced the order.... ... [I]n NLRB v. Burns International Security Services, Inc., this Court first dealt with the issue of a successor employer’s obligation to bargain with a union that had represented the employees of its predecessor.... These presumptions [of majority support developed in Burns are based not so much on an absolute certainty that the union’s majority status will not erode following certification, as on a particular policy decision. The overriding policy of the NLRA is “industrial peace.” The presumptions of majority support further this policy by “promot[ing] stability in collective-bargaining relationships, without impairing the free choice of employees.” In essence, they enable a union to concentrate on obtaining and fairly administering a collec- tive-bargaining agreement without worrying that, unless it produces immediate results, it will lose majority support and will be decertified.... The presumptions also remove any temptation on the part of the employer to avoid good- faith bargaining in the hope that, by delaying, it will under- mine the union’s support among the employees.... The rationale behind the presumptions is particularly pertinent in the successorship situation and so it is under- standable that the Court in Burns referred to them. During a transition between employers, a union is in a peculiarly vulnerable position. It has no formal and established bargaining relationship with the new employer, is uncer- tain about the new employer’s plans, and cannot be sure if or when the new employer must bargain with it. While being concerned with the future of its members with the new employer, the union also must protect whatever rights still exist for its members under the collective bargaining agreement with the predecessor employer. Accordingly, during this unsettling transition period, the union needs the presumptions of majority status to which it is entitled to safeguard its members’ rights and to develop a relationship with the successor. The position of the employees also supports the appli- cation of the presumptions in the successorship situation. If the employees find themselves in a new enterprise that substantially resembles the old, but without their chosen bargaining representative, they may well feel that their choice of a union is subject to the vagaries of an enterprise’s transformation.... Without the presumptions of majority support and with the wide variety of corporate transforma- tions possible, an employer could use a successor enterprise as a way of getting rid of a labor contract and of exploiting the employees’ hesitant attitude towards the union to elimi- nate its continuing presence. In addition to recognizing the traditional presumptions of union majority status, however, the Court in Burns was careful to safeguard “the rightful prerogative of owners inde- pendently to rearrange their businesses.” If the new employer makes a conscious decision to maintain generally the same business and to hire a majority of its employees from the predecessor, then the bargaining obligation of Section 8(a)(5) is activated. This makes sense when one considers that the employer intends to take advantage of the trained workforce of its predecessor.... We now hold that a successor’s obligation to bargain is not limited to a situation where the union in question has been recently certified. Where, as here, the union has a rebuttable presumption of majority status, this status continues despite the change in employers. And the new employer has an obligation to bargain with that union so long as the new employer is in fact a successor of the old employer and the majority of its employees were employed by its predecessor. We turn now to the three rules, as well as to their appli- cation to the facts of this case, that the Board has adopted for the successorship situation. In Burns we approved the approach taken by the Board and accepted by courts with respect to determining whether a new company was indeed the successor to the old. This approach, which is primarily factual in nature and is based upon the totality of the circumstances of a given situa- tion, requires that the Board focus on whether the new company has “acquired substantial assets of its predecessor and continued, without interruption or substantial change the predecessor’s business operations.” Hence, the focus is on whether there is “substantial continuity” between the enterprises. Under this approach, the Board examines a number of factors: whether the business of both employers is essentially the same; whether the employees of the new company are doing the same jobs in the same working conditions under the same supervisors; and whether the new entity has the same production process, produces the same products, and basically has the same body of customers.... In conducting the analysis, the Board keeps in mind the question whether “those employees who have been retained will understandably view their job situations as essentially unaltered.”... [W]e find that the Board’s determination that there was “substantial continuity” between Sterlingwale and petitioner and that petitioner was Sterlingwale’s successor is supported by substantial evidence in the record. Petitioner acquired most of Sterlingwale’s real property, its machinery and equip- ment, and much of its inventory and materials. It intro- duced no new product line. Of particular significance is the fact that, from the perspective of the employees, their jobs did not change. Although petitioner abandoned converting dyeing in exclusive favor of commission dyeing, this change did not alter the essential nature of the employees’ jobs because both types of dyeing involved the same production process. The job classifications of petitioner were the same as those of Sterlingwale; petitioner’s employees worked on the same machines under the direction of supervisors most of whom were former supervisors of Sterlingwale. The record, in fact, is clear that petitioner acquired Sterlingwale’s assets with the express purpose of taking advantage of its predeces- sor’s workforce.... For the reasons given above, this is a case where the other factors suggest “substantial continuity” between the companies despite the 7-month hiatus. Here, moreover, the extent of the hiatus between the demise of Sterlingwale and the start-up of petitioner is somewhat less than certain. After the February layoff, Sterlingwale retained a skeleton crew of supervisors and employees that continued to ship goods to customers and to maintain the plant. In addition, until the assignment for the benefit of the creditors late in the summer, Ansin was seeking to resurrect the business or to find a buyer for Sterlingwale. The Union was aware of these efforts. Viewed from the employees’ perspective, therefore, the hiatus may have been much less than seven months. Although petitioner hired the employees through advertisements, it often relied on recommendations from supervisors, themselves formerly employed by Sterlingwale, and intended the advertisements to reach the former Sterlingwale workforce. Accordingly, we hold that, under settled law, petitioner was a successor to Sterlingwale. We thus must consider if and when petitioner’s duty to bargain arose. In Burns, the Court determined that the successor had an obligation to bargain with the union because a majority of its employees had been employed by Wackenhut. The “trig- gering” fact for the bargaining obligation was this compo- sition of the successor’s workforce. The Court, however, did not have to consider the question when the successor’s obligation to bargain arose: Wackenhut’s contract expired on June 30 and Burns began its services with a majority of former Wackenhut guards on July 1. In other situations, as in the present case, there is a start-up period by the new employer while it gradually builds its operations and hires employees. In these situations, the Board, with the approval of the Courts of Appeals, has adopted the “substantial and representative complement” rule for fixing the moment when the determination as to the composition of the succes- sor’s workforce is to be made. If, at this particular moment, a majority of the successor’s employees had been employed by its predecessor, then the successor has an obligation to bargain with the union that represented these employees. In deciding when a “substantial and representative comple- ment” exists in a particular employer transition, the Board examines a number of factors. It studies “whether the job classifications designated for the operation were filled or substantially filled and whether the operation was in normal or substantially normal production.” In addition, it takes into consideration “the size of the complement on that date and the time expected to elapse before a substantially larger complement would be at work ... as well as the relative certainty of the employer’s expected expansion.”... We conclude ... that in this situation the successor is in the best position to follow a rule the criteria of which are straightforward. The employer generally will know with tolerable certainty when all its job classifications have been filled or substantially filled, when it has hired a majority of the employees it intends to hire, and when it has begun normal production. Moreover, the “full complement” stan- dard advocated by petitioner is not necessarily easier for a successor to apply than is the “substantial and representa- tive complement.” In fact, given the expansionist dreams of many new entrepreneurs, it might well be more difficult for a successor to identify the moment when the “full comple- ment” has been attained, which is when the business will reach the limits of the new employer’s initial hopes, than it would be for this same employer to acknowledge the time when its business has begun normal production— the moment identified by the “substantial and representa- tive complement” rule. We therefore hold that the Board’s “substantial and representative complement” rule is reason- able in the successorship context. Moreover, its application to the facts of this case is supported by substantial record evidence. The Court of Appeals observed that by mid- January petitioner “had hired employees in virtually all job classifications, had hired at least fifty percent of those it would ultimately employ in the majority of those clas- sifications, and it employed a majority of the employees it would eventually employ when it reached full comple- ment.” At that time petitioner had begun normal produc- tion. Although petitioner intended to expand to two shifts, and, in fact, reached this goal by mid-April, that expansion was contingent expressly upon the growth of the business. Accordingly, as found by the Board and approved by the Court of Appeals, mid-January was the period when peti- tioner reached its “substantial and representative comple- ment.” Because at that time the majority of petitioner’s employees were former Sterlingwale employees, petitioner had an obligation to bargain with the Union then. We also hold that the Board’s “continuing demand” rule is reasonable in the successorship situation. The succes- sor’s duty to bargain at the “substantial and representa- tive complement” date is triggered only when the union has made a bargaining demand. Under the “continuing demand” rule, when a union has made a premature demand that has been rejected by the employer, this demand remains in force until the moment when the employer attains the “substantial and representative complement.” Such a rule, particularly when considered along with the “substantial and representative complement” rule, places a minimal burden on the successor and makes sense in light of the union’s position. Once the employer has concluded that it has reached the appropriate complement, then, in order to determine whether its duty to bargain will be triggered, it has only to see whether the union already has made a demand for bargaining. Because the union has no established relationship with the successor and because it is unaware of the successor’s plans for its operations and hiring, it is likely that, in many cases, a union’s bargaining demand will be premature. It makes no sense to require the union repeatedly to renew its bargaining demand in the hope of having it correspond with the “substantial and representative complement” date, when, with little trouble, the employer can regard a previous demand as a continuing one. The reasonableness of the “continuing demand” rule is demonstrated by the facts of this case. Although the Union had asked Ansin to inform it about his plans for Sterlingwale so that it could become involved in the employer transi- tion, the Union learned about this transition only after it had become a fait accompli. Without having any established relationship with petitioner, it therefore is not surprising that the Union’s October bargaining demand was premature. The Union, however, made clear after this demand that, in its view, petitioner had a bargaining obligation: the Union filed an unfair labor practice in November. Petitioner responded by denying that it had any duty to bargain. Rather than being a successor confused about when a bargaining obligation might arise, petitioner took an initial position—and stuck with it—that it never would have any bargaining obligation with the Union. The judgment of the Court of Appeals is affirmed. It is so ordered. Case Questions 1. What is the NLRB’s substantial and representative complement rule? How does it apply to the facts in this case? Explain. 2. What factors does the NLRB consider when determin- ing if there is a substantial continuity of operation be- tween the former employer and a successor employer? How do those factors apply to the facts here? 3. What is the NLRB’s continuing demand rule? How does it apply to the facts in this case? Explain.

An employer that intends to rehire most of the employees from the predecessor firm may lawfully recognize the union that represented the previous firm’s workers, and negotiate with the union over the terms upon which it will hire those workers, according to Road & Rail Services., Inc.36 Where a successor employer has rehired most of the employees from the previous employer, it is a violation of Section 8(a)(5) for the successor employer to unilater- ally change the terms of employment for the individuals it hires from the previous employer, as held by Rosedev Hospitality, Secaucus LP.37 A successor employer who discriminatorily refuses to rehire the unionized employees from the prior firm violates Section 8(a)(3), according to Planned Bldg. Servs. Inc.38 In Trafford Dist. Center v. NLRB,39 where a company formed after a bankrupt employer surrendered its assets was determined by the NLRB to be an “alter ego” of the original employer, the successor firm was held to violate Sections 8(a)(1) and 8(a)(5) when it refused to honor the terms of the union’s collective agreement with the predecessor employer. A successor employer can be held liable for the remedy of an unfair labor practice committed by the old employer. In NLRB v. Winco Petroleum,40 a successor was held subject to a bargaining order remedy even though the successor itself was not guilty of a refusal to bargain. The incumbent union in a successorship situation is entitled to a rebuttable presump- tion of continuing majority status, the new employer has a legally enforceable duty to recognize and bargain with a union that represented its predecessor’s employees, and the Board will bar any challenge to the union’s representative status for a similar reasonable period of time.41

ethical DILEMMA

to retAin or not to retAin? Immense Multinational Business (IMB) is planning to purchase the entire plant, assets, and operation of CastCo, a small manufacturing company. The employees at CastCo are represented by the International Molders Union, but IMB’s employees are not unionized. IMB plans to maintain most of the operations at CastCo and is considering whether to retain the former CastCo employees as well. What are the benefits of retaining the former CastCo production workers? Are there any arguments against retaining the CastCo workers? Are there any legal restrictions on the decision whether to retain the CastCo workers? How should IMB proceed here? You, the recently promoted director of human resources for IMB’s manufacturing operations, are asked by the CEO to prepare a memo discussing these issues and recommending a course of action. Be sure to support your recommendation.

17-4 Bankruptcy and the Collective Agreement

The prior cases dealt with the obligations of successor employers. When an employer expe- riencing financial difficulties seeks protection from creditors under the bankruptcy laws, can the employer also reject the collective agreement? When a corporation files a petition for the protection of the bankruptcy laws, the financial obligations of the corporation are suspended pending the resolution of the issue by the bankruptcy courts. What happens when a unionized employer files a petition for bankruptcy? Is the employer required to adhere to the terms and conditions of the collec- tive agreement? In the case of NLRB v. Bildisco & Bildisco42 the Supreme Court held that an employer who files for reorganization under Chapter 11 of the Bankruptcy Act does not violate Section 8(a)5 by unilaterally changing the terms of the collective agreement after filing the bankruptcy petition. The Court also held that the bankruptcy court may allow the employer to reject the collective agreement if the court finds that the agreement “burdens the estate” of the employer and if “the equities balance in favor of rejecting the labor contract.” Following the Supreme Court’s Bildisco decision, Congress amended the Bankruptcy Code to deal with the rejection of a collective agreement. The changes, enacted in

Public Law 98-353 (1984), 11 U.S.C. Section 1113, allow the employer petitioning for bankruptcy protection to reject the collective agreement only when the following condi- tions are met: 1. The employer has made a proposal for contractual modifications, necessary to permit reorganization and treating all interested parties equitably, to the union. 2. The employer must provide the union with such relevant information as is necessary to evaluate the proposal. 3. The employer must offer to “confer in good faith in attempting to reach mutually satisfactory modifications.” 4. The bankruptcy court finds that the union has rejected the employer’s proposal “without good cause.” 5. The court concludes that “the balance of equities clearly favors rejection” of the agreement. The bankruptcy court is required to hold a hearing on the employer’s petition within fourteen days and to issue its determination on the rejection issue within thirty days after the hearing.

ThE WORKING LAw

Reorganizations of GM and Chrysler Gave UAW a Unique Role as Union and Investor

General Motors (GM) and Chrysler both emerged from bankruptcy in the summer of 2009. GM and Chrysler had struggled for years in the face of declining sales, increased foreign competition, and soaring retiree health care and benefit costs. In 2007, GM agreed with the United Auto Workers (UAW) to transfer the company’s health care liabilities to a union-run trust (a Voluntary Employee Beneficiary Association, or VEBA) and to reduce wages and benefits for new employees. But the general economic crisis of 2008 and 2009 caused a drastic fall in auto sales and dried up credit for would- be customers. GM lost $80 billion from 2005 to 2009. In May 2009, the UAW agreed to accept wage and benefit concessions and to eliminate restrictive work rules as part of the reorganization of the company, and also agreed to take GM stock in lieu of half of the $20.4 billion that GM owed to the VEBA. The union also agreed to similar concessions at Chrysler and agreed not to go on strike against GM or Chrysler until 2015. As a result of the reorganization in bankruptcy, a new corporation, the Vehicle Acquisitions Holding LLC, was created to assume most of the assets of the former company. This “new General Motors” is owned by the U.S. and Canadian governments and the UAW. The liabilities of the “old General Motors” were retained by GM, which will eventually be liquidated under the bankruptcy courts. In return for bailouts from the U.S. Treasury of about $50 billion, the U.S. government received a 60.8 percent ownership stake in new General Motors, and the Canadian government received 11.7 percent in return for providing $9.5 billion. The UAW-operated VEBA received 17.5 percent, with warrants to purchase an addi- tional 2.5 percent, $6.5 billion worth of preferred stock, and a note for $6.5 billion. The unsecured bondholders received a 10 percent stake in return for having lent the company $27 billion. Challenges to GM by some bondholders to the bankruptcy reorganization were rejected by the Bankruptcy Court of the Southern District of New York in In re General Motors Corp. GM offered its workers a buyout and early retirement program in an effort to reduce its workforce. Workers who agreed to retire were given cash payments of between $20,000 and $115,000, with the largest payouts going to workers with at least 20 years of service who agreed to give up retirement benefits other than pensions. The retiring workers also received a voucher worth $25,000 toward the purchase of a new vehicle. In the case of Chrysler, the shares were divided as follows: • The VEBA received 55 percent • The U.S. government received 10 percent in return for providing a bailout of $25.5 billion • The Italian automaker Fiat, in return for agreeing to operate the reorganized Chrysler, initially received 20 percent of the shares. Fiat took full ownership of Chrysler in 2014 by purchasing the remaining shares owned by the UAW for $4.35 billion. The reorganization agreements of Chrysler and GM placed the UAW in an unusual position—acting as a union representing the firms’ employees but also serving as a major investor in the firms. The alternative to the union’s acceptance of the reorganiza- tion plans would most likely have been liquidation of the firms, which would mean huge job losses. Some analysts predict that the UAW’s new role would make the union more willing to work with management to increase profitability—a higher stock price would provide the VEBA with billions more to cover retiree health care costs in the years ahead. But other industry experts feel it will be difficult for the union to give up its traditional focus on preserving jobs for its members rather than increasing profits and share price. The financial future of the union and its members will depend upon the stock performance of Chrysler and General Motors. It remains to be seen whether the UAW would be willing to go on strike against either of the companies, if the strike could affect the price of the shares of stock held by the VEBA to cover the health care costs of retirees. The provisions of Section 1113 apply to an employer’s attempt to reject a collective bargaining agreement that has expired, but the provisions of the agreement still remain in effect.43 Section 1113 also applies to employers under the NLRA and also to employers under the Railway Labor Act, such as railroads and airlines. In addition to the bankruptcy filings of Chrysler and General Motors, fluctuating oil prices and the economic crisis have caused numerous airlines to go through Chapter 11 bankruptcy proceedings, including: • Aloha Airlines • ATA Airlines • Comair • Delta Air Lines • Frontier Airlines • Era Aviation • Hawaiian Airlines • Independence Air • Mesaba Airlines • Northwest Airlines • United Airlines • U.S. Airways • American Airlines The results have been significant wage and benefit reductions for the labor unions involved. The Northwest pilots agreed to a pay cut of 24 percent over a five-and-a- half-year contract. A bankruptcy court approved the imposition of a proposal lowering the Northwest flight attendants’ take-home pay by up to 40 percent. The Delta pilots agreed to a new contract with a 14 percent pay cut, in addition to concessions in a 2004 agreement in which Delta’s pilots had agreed to a 33 percent wage cut. The following case involves American Airlines’ request to reject its collective agreement with the union representing its pilots; the case focuses on whether American Airlines negotiated in good faith and whether the union rejected the proposals “without good cause” as required under Section 1113.

CASE 17.4 in re Amr corporATion 477 B.R. 384, aff’d. by 523 B.R. 415 (S.D.N.Y. 2014)

Facts: American Airlines, Inc. [American] filed under Section 1113 of the Bankruptcy Code for bankruptcy court permission to reject the collective bargaining agreements between American and its pilots, flight attendants and some of its transit workers. These employees are represented by three unions: (1) the Association of Professional Flight Attendants [APFA]; (2) the Allied Pilots Association [APA]; and (3) the Transit Workers Union of America [TWU]. American has approximately 65,000 active employees, 70% of whom are represented by one of three labor unions under nine separate collective bargaining agree- ments. American has suffered losses of approximately $6.6 billion since 2003 and cumulative losses of more than $10 billion since 2001. American has maintained negative net margins since 2003, averaging –4.6% over the period of 2003–2011. American has a much higher percentage of secured debt than do the other network carriers, and has run out of unencumbered assets to pledge as collateral for additional financing. American’s poor financial perfor- mance over the last few years stands in sharp contrast not only to that of the lower cost carriers [LCCs] but also to other large network carriers. American lost $1.06 billion in 2011, the only network carrier that failed to earn a profit last year. While other airlines maintained posi- tive net margins in 2011, American had net margins of –4.4%. While American ranked first in the world in terms of overall capacity in 2000, it now ranks fourth in the world and third in the United States, behind Delta and United. Because American’s smaller route network relative to United/Continental and Delta, American is at a greater competitive disadvantage in attracting passengers, particu- larly time-sensitive, high-yield business travelers who value larger networks that offer more non-stop flight options and more convenient connecting options with less travel time. American’s financial weakness has hurt its ability to invest in products and services that may have enabled it to counter further erosion of its revenue. The decline in American’s financial performance results from many factors, including but not limited to: (1) increased price and service competition from the LCC’s, other large network carriers and foreign fare carriers; (2) high labor costs and low productivity; and (3) mergers and restructurings of other carriers. American’s overall costs per available seat mile [CASM, a common industry metric] significantly exceed those for most of its competi- tors. A significant reason for this difference is labor costs, American’s largest controllable cost. American’s labor CASM is approximately 24% higher than the average of the other network carriers and 79% higher than the average of the LCCs with which American competes. Several factors contribute to American’s high unit labor cost, including relatively high wage scales for employees, pilots and flight attendants; generous benefits; and a more senior workforce. American has maintained the highest pension accounting costs per ASM and that American’s labor CASM is 21% higher than the average of other large network carriers and 70% higher than the LCC average. In the last decade, the airline industry also has been reshaped by mergers and bankruptcy restructurings, all of which have made it more difficult for American to compete. All of American’s major network competitors have already filed for bankruptcy, some more than once. On November 29, 2011, American filed for bank- ruptcy, together with its parent AMR Corporation, and other affiliates. In their bankruptcy filings, the American explained that they have been unable to match its competi- tors’ abilities to adequately deal with the variables associ- ated with the airline industry because the “airline industry is labor intensive” and because of their higher labor-related costs. On February 1, 2012, American began the process leading up to its Section 1113 application. It unveiled its new business plan, labeled the “Plan for Success,” for the six year period from 2012 through 2017 [Business Plan]. The Business Plan contains a detailed business model, a network plan and a fleet plan, including details about the markets in which American plans to operate and the equip- ment it intends to use to serve those markets. The funda- mental principles behind the Business Plan include: • Concentration on the five key hub markets for Ameri- can: Dallas-Fort Worth, Miami, Chicago, Los Angles, and New York; • Expanding American international presence, particu- larly through the use of joint business agreements and codesharing; • Increasing passenger feed to American’s hub and across its network through codesharing with domestic air car- riers and increased use of regional jets; • Implementing a long-term fleet plan sufficient for both replacement and growth; • Creating a capital structure that allows American to grow and compete, attract capital at favorable rates and withstand external shock to the business; and • Setting up a sustainable cost structure. The Business Plan is designed to enable American to better compete for its share of “high value” customers and restore its unit revenue to levels consistent with those of other network carriers. At the same time as it unveiled its Business Plan, American also provided term sheets for the Business Plan, including the projections for the six year period. In discussing these term sheets with the Unions, American explained that it was seeking a 20% reduction in costs from each labor group, or $1.25 billion in average annual costs over a six year period from all labor groups. Of this number, American sought $370 million from the pilots, $230 million from the flight attendants, and $390 million from its transit workers. At this time, American proposed to terminate its pension plan for all employees and institute uniform plans for active employee medical, future retiree medical, and pensions. During and after the February 1st meeting with American, the Unions requested informa- tion regarding the Business Plan and the term sheets. On March 21, 2012, American delivered a new term sheet to the pilots. The overall requested amount of average labor concessions of $1.25 billion sought from all Unions did not change, but the new term sheet included two substantial changes from the Company’s initial term sheet: American’s decision to freeze its defined pension plans rather than terminate them and to lower the monthly cost share of American’s medical plan for active employees from 23% to 21%. On March 27, 2012, American filed its Motion seeking authority to reject some nine collective bargaining agree- ments with the three Unions pursuant to Section 1113 of the Bankruptcy Code. After the filing of the Motion, American continued to negotiate with the TWU and, to a lesser extent, the APA and the APFA. Section 1113(b) requires that a debtor take a number of procedural steps prior to the rejection of a collective bargaining agreement. The debtor must provide the union with its proposed modifications to a collective bargaining agreement prior to filing an application with a court to reject the union’s agreement. The proposed modifications must be (1) “based on the most complete and reliable infor- mation available at the time of the proposal;” (2) “neces- sary to permit the reorganization of the debtor;” and (3) “assure that all creditors, the debtor and all of the affected parties are treated fairly and equitably.” The debtor must also provide the union with the relevant information neces- sary for the union to evaluate the proposal. Section 1113(b) (2) requires that, between the time that the debtor’s 1113 proposal and the hearing date on any 1113 application, the debtor must bargain in good faith with the union in an attempt to reach an agreement. Section 1113(c) sets forth additional substantive requirements for rejection of a collective bargaining agreement. First, the debtor must establish that it made a proposal that fulfills the require- ments of subsection (b)(1). Second, the debtor must show that the union refused to accept the proposal without good cause. Third, the debtor must prove that the balance of the equities favors rejection of the agreement. The Debtor bears the burden of proof to show that it complied with on the elements of Section 1113. Issue: Has American met the requirements under Section 1113 to reject its collective agreements? Decision: Section 1113(b)(2) requires that after a proposal is made, but before a hearing on rejection, the debtor meet with the union at reasonable times to negotiate in good faith. Section 1113(c)(2) also requires that a collec- tive bargaining agreement can only be rejected if the union has refused to accept the proposal without good cause. American did make some changes to its initial proposal to the APA; those changes demonstrate good faith bargaining. One of these changes was particularly significant: American decided to freeze its pensions rather than terminate them. The Unions had objected to the termination of the pension plan, and the freezing of the pension plan is a significant improvement over termination. American did not seek to offset the added costs from the pension freeze through addi- tional labor cost reductions. That change presents a signifi- cant additional hurdle to American’s re-emergence from bankruptcy, because American will be required to make significant cash contributions that had not originally been factored into the initial Business Plan. Freezing the pension plans would result in significant pension underfunding liability upon emergence from bankruptcy. American must compete against LCCs that do not carry the same pension obligations. Retaining the pension liabilities and the related ongoing cash payments affects American’s credit profile. American’s unwillingness to move on the other savings requested in its initial proposal was not necessarily a failure to confer in good faith. Parts of a debtor’s Section 1113 proposal may be non-negotiable if they are essential to its reorganization. Thus, it is not bad faith to adhere to a necessary cost-saving target. American made clear to the unions that it is open to ways to achieve its labor ask that are different from those it proposed provided that the same overall monetary reduction is achieved. American concedes that its current proposal goes further than the pre-petition concessions it sought from the unions. Those pre-petition negotiations were an attempt to balance the twin goals of lowering American’s costs and enhancing productivity while at the same time trying to reach a consensual deal with the unions that could avert a Chapter 11 filing. Those proposals were designed to be acceptable to the unions, as opposed to fully addressing American’s financial issues. In contrast, the Section 1113 proposals were designed as part of a comprehensive Business Plan for a reorganized entity that will be profit- able going forward. American noted that, in hindsight, the pre-petition proposals would have been inadequate, as they were based on assumptions that have not yet come to pass: improvement in the economy, stabilization of fuel prices, and convergence with other airline costs. The APA claimed that American refused to negotiate over certain terms of its proposal, such as the scope clause and sick leave. The APA specifically argues that American has not shown that these particular terms are essential to its reorganization and that the APA’s counterproposals would enable American to achieve the revenue enhancements contemplated in the Business Plan. But the court held that the APA objection was not based on American’s refusal to negotiate, but rather American’s refusal to adopt the APA’s counterproposals. The APA the objection conflates the requirement to negotiate in good faith with the require- ment of necessity. The APA admits that reasonable people can disagree on the issues between itself and the American, but there is no evidence on the record that American has taken these positions in bad faith or to stalemate negotia- tions. American has shown flexibility in the allocation of concessions; it was willing to consider any reasonable alter- native suggestions the union might have to the American’s cost reduction proposals so long as the total cost reduc- tion total was met. The failure to come to an agreement shows that both sides have become entrenched, and under the circumstances, the court did not find that American’s failure to adopt the proposals of the APA constituted a failure to negotiate in good faith. Under Section 1113(c)(2) a collective bargaining agree- ment can only be rejected if the union has refused to accept the proposal without good cause. The union must come forward with evidence of its reasons for declining to accept the debtor’s proposal in whole or in part. If a union insists on economically unworkable terms without offering a compromise that will provide the debtor with necessary savings, the court will find that the union has not acted with good cause. The APA argued that it put forth two alterna- tives that would permit the American to reorganize. First, it states that it negotiated a contingent labor agreement with U.S. Airways that would generate $240 million in annual savings. But the merger transaction with U.S. Airways had been discussed and the court rejected the argument that an agreement on labor costs between the unions and U.S. Airways constituted a viable alternative that would permit American to reorganize. The APA also contended that it put forward a package that would allow American, as a stand-alone company, to generate between $260 and $270 million in annual savings. In Maxwell Newspapers, Inc. [981 F.2d 85 (2d Cir. 1992)], the court held that “a union will not have good cause to reject an employer’s proposal that contains only those modifications essential for the debtor’s reorganization, that is, the union’s refusal to accept it will be held to be without good cause. On the other hand ... where the union makes compromise proposals during the negotiating process that meet its needs while preserving the debtor’s savings, its rejection of the debtor’s proposal would be with good cause.” The court here held that the APA’s reliance on its counterproposal was not a good cause basis for the APA to reject American’s proposals. American has stated that it needs at least $370 million in cuts to success- fully reorganize, excluding changes to the scope clauses. The APA admits that its counterproposal will generate only between $260 and $270 million in annual savings. Because the APA failed to provide cuts in that amount, its rejection of American’s proposals lacked good cause. The APA’s counterproposal for sick leave was also prob- lematic. While the APA would consent to a medical verifica- tion program, it would not require verification until a pilot has been out for 30 days of uninterrupted sick leave, at which time the employer would have to make a demand for substan- tiation. If the pilot then returned to work, no substantiation would be required, but the pilot could again call in sick the next day and restart the 30 day period. The APA proposal would also establish a sell-back program for unused pilot sick leave. Rather than saving money, this proposed program could cost American additional money because pilots could sell either 30 or 60 hours of sick for pay depending on whether the pilot had accrued more than 1,000 hours of sick time. The U.S. Court of Appeals for the Second Circuit has set forth a non-exclusive list of factors to consider when determining whether the equities clearly favor rejection of a collective bargaining agreement: (1) the likelihood and consequences of liquidation if rejection is not permitted; (2) the likely reduction in the value of creditors’ claims if the bargaining agreement remains in force; (3) the likelihood and consequences of a strike if the bargaining agreement is voided; (4) the possibility and likely effect of any employee claims for breach of contract if rejection is approved; (5) the cost-spreading abilities of the various parties, taking into account the number of employees covered by the bargaining agreement and how various employees’ wages and benefits compare to those of others in the industry; and (6) the good or bad faith of the parties in dealing with the debtor’s financial dilemma. When balancing these factors, a court must examine them in relation to the debtor’s attempts to reorganize. The first two factors favor rejection of the collective bargaining agreement. It is clear that rejection of the agreement is necessary for American to successfully reorganize. The court noted that the existing APA agreement is a burden that American is unable to maintain on an ongoing basis and the APA itself has recognized that continuation of the status quo is not a viable option. American suffered losses of approximately $6.6 billion since 2003 and cumula- tive losses of more than $10 billion since 2001. American lost $1.06 billion in 2011, the only network carrier that failed to earn a profit last year. Leaving the agreement intact would severely impact the return that creditors would receive on their claims. The diminished likelihood of a strike also weighs in favor of approving rejection of the agreement. Following the rejection of a collective bargaining agreement, it would be unlawful for a union to strike until the bargaining process set forth in the Railway Labor Act had been exhausted. After rejection of the agree- ment, both management and a union under the Railway Labor Act would be required to continue negotiating in good faith. A strike is an inherent risk in every § 1113 motion, and in the end, it makes little difference if the debtors are forced out of business because of a union strike or because of the continuing obligation to pay union benefits to avoid one. The unions may have the legal right to strike, but that does not mean that they must exercise that right. The Court must also consider the possibility and likely effect of any employee claim for breach of contract in the event of rejection. It is unlikely that the unions would have rejection claims for breach of contract here, because, as the Second Circuit observed [in Northwest Airlines Corp., 483 F.4d 160 (2007)] “a debtor who rejects a contract pursuant to [Section 1113] abrogates rather than breaches the [collec- tive bargaining agreement] at issue.” Even if that were not the case, rejection would relegate employee damage claims “to the status of unsecured debt.... Absent rejection, and assuming they have the money, the Debtors [would] have to pay these claims, as they accrue, on an administrative basis. From the viewpoint of the other creditors, rejection is preferable.” The court also considered the cost-spreading abilities of the various parties, taking into account the number of employees covered by the agreement and how various employees’ wages and benefits compare to those of others in the industry. It is undoubted that the sacrifices the union employees are being asked to make will affect them deeply. However, American’s Section 1113 proposal to each union requested the same sacrifice, together with non-union employees, of 20% across the board. This request for across the board reduction must be viewed in light of the fact that the wages and benefits of APA are above industry standard, a point conceded by the APA. Finally, the court examined the good or bad faith of the parties in dealing with American’s financial dilemma. American has asserted that the APA has shown bad faith by abandoning negotiations with American while pursuing an agreement with U.S. Airways. Given that negotiations subsequently resumed and continued even after the close of the trial, however, the court did not find bad faith on the side of either party and this factor is in equipoise. For all these reasons, the court concluded that the balance of the equities clearly favored the rejection of the APA agreement. However, the court concluded that American’s proposed changes to furlough and codesharing have not been justi- fied by either reference to the Business Plan or the prac- tices of American’s competitors. Given the significance of these two provisions collectively to American’s proposal, the court found that American has not shown that the proposal is necessary as required by Section 1113. Because of this the court initially denied American’s motion to reject the collective bargaining agreements of the APA. The court did allow American the option to remedy those two factors and submit new application under Section 1113. Note: American did submit a new application addressing the factors identified by the court, and pursuant to that application, the court did authorize American to reject the collective bargaining agreement with the APA, effective as of September 5, 2012 [In re AMR Corp., 2012 WL 3834798 (Bkrtcy. S.D.N.Y., Sept. 5, 2012)].

where the employer did not give any persuasive rationale for asking the unionized employees to take disproportionate cuts for a five-year period without any provision for improvement if the employer’s position improved. In Teamsters Local 807 v. Carey Trans.,45 the Second Circuit Court of Appeals upheld rejection of the agreement where unionized employees were expected to take cuts greater than those for non-union employees because the union wages were 60 percent higher than industry average, whereas the other employees’ compen- sation was barely competitive. The NLRB has made it clear that filing a petition for bankruptcy protection does not affect the employer’s obligation to recognize and bargain with the union, according to Airport Bus Service.46 In Willis Elec.,47 the NLRB held that an employer unilaterally abrogating an agreement without obtaining bankruptcy court relief is guilty of violating Section 8(a)(5); economic necessity is not a defense for such conduct. In NLRB v. Superior Forwarding, Inc.,48 the court of appeals held that a bankruptcy court may enjoin the NLRB from proceeding with hearings on unfair labor practice charges that arise from an employer’s unilateral modification of a collective agreement, when the unfair labor practice proceedings would threaten the assets of the employer. 17-4a Bankruptcy and retiree Benefits From the 1950s through the 1970s, employers were willing to negotiate with unions for generous health care benefit provisions for retired employees; this was particularly true in the automobile and steel industries. But from the 1980s on, the costs of such retiree benefits, known as “legacy costs,” became a significant financial burden on the employers. The steel and automobile industries began to face strong competition from foreign firms, the costs of medical care increased substantially, and the number of retirees grew. It was estimated that the costs of retiree health care benefits added $1,400 to the cost of each car produced by General Motors,49 while the European and Japanese automakers were not saddled with such legacy costs. The huge retiree medical costs added to the other finan- cial problems that forced General Motors and Chrysler into bankruptcy.50 In many cases, firms facing bankruptcy unilaterally stopped paying the retiree benefits. In response to such actions, Congress amended the Bankruptcy Code to include Section 1114, which creates a procedure for modification or rejection of retiree benefit obligations similar to that under Section 1113 for the rejection of collective agreements. Section 111451 requires that the bankrupt employer make a proposal for modification to the representative of the retirees (either a labor union or a committee appointed by the trustee in bankruptcy). The employer must also provide the retirees’ representative with the information upon which the proposal is based and demonstrate the necessity of the modification for the reorganization of the employer. The employer must negotiate in good faith with the representative over the proposed modification. If the representative does not agree to the modification, the employer can ask the bankruptcy court to order the modification. Before the court can order the modification, the employer must convince the court that the modification is necessary to permit the reorganization of the employer, that the proposed modification treats all affected parties fairly and equitably, and that the retirees’ representative refused to accept the proposal without good cause. In the case of General Motors, the company and the United Auto Workers Union agreed to have the retiree benefits assumed by a VEBA. However, some of the retirees of some subsidiaries of the “old General Motors” were represented by other unions (non-UAW unions) and were not included in the agreement setting up the VEBA. As part of its emer- gence from bankruptcy, the productive assets of the former General Motors Corporation were purchased by a newly created firm (“new General Motors”), while the liabilities, including those for retiree benefits, remained with the old General Motors. The non-UAW unions objected to the proposal for the new General Motors to emerge from bankruptcy, because the new General Motors would only agree to pay reduced benefits to their retirees. The bankruptcy court, in In re General Motors Corp.,52 held that the obligation to comply with the requirements of Section 1114 applied only to the bankrupt employer (old General Motors in this case) and not the corporation purchasing the productive assets of the firm (new General Motors). The court stated that old General Motors had complied with the requirements of Section 1114. If, in the future, old General Motors fails to comply with its obligations under the modification, the unions could ask the court to take appropriate action. The court noted: The Court fully realizes that UAW retirees will get a better result, after all is said and done, than . . . [non-UAW] Retirees will, but that is not by reason of any violation of the Code or applicable case law. It is because as a matter of reality, the Purchaser [“new GM”] needs a properly motivated workforce to enable New GM to succeed, requiring it to enter into satisfactory agreements with the UAW—which includes arrangements satisfactory to the UAW for UAW retirees. And the Purchaser is not similarly motivated, in triaging its expenditures, to assume obligations for retirees of unions whose members, with little in the way of exception, no longer work for GM. The Court has also considered . . . that in pre-bankruptcy planning, GM and the U.S. Treasury focused on the duties to . . . [non-UAW] Retirees, and made a conscious decision that . . . [non-UAW] retirees would not be offered as good a deal as others. . . . The U.S. Treasury, in making hard decisions about where to spend its money and make New GM as viable as possible, made business decisions that it was entitled to make, and the fact that there were so few . . . [non-UAW] employees still working for GM was an understandable factor in that decision. The Court’s responsibility is not to make fairness judgments as to those decisions, but merely to gauge those decisions under applicable law.53