Standard Fittings Company, Petitioner Cross-respondent, v. National Labor Relations Board, Respondent Cross-petitioner, 845 F.2d 1311 (5th Cir. 1988)

Standard Fittings Company, which was losing money dramatically, failed to implement a wage increase called for under its collective bargaining agreement. The Oil, Chemical & Atomic Workers International Union, representing the bargaining unit, filed an unfair labor practice for refusal to bargain. The National Labor Relations Board (NLRB) affirmed an administrative law judge's "make-whole" remedy against Standard Fittings, since its unilateral change in the collective bargaining agreement constituted a refusal to bargain. Standard Fittings petitions this court to review and set aside the NLRB's order; the NLRB cross-petitions for enforcement of its order. Standard Fittings argues that there is legal error in the administrative fact-findings (1) that the union's counterproposal on postponing the raise was legally conditioned on ratification by the union membership; (2) that non-union bargaining unit members could properly be excluded from the ratification process; (3) that the employer had not reached "impasse" in the negotiations; and (4) that the employer had an obligation to "continue to talk with the union." However, it is clear that Standard Fittings did not have a unilateral right to change a contract term that is a mandatory subject of bargaining, even if Standard Fittings bargained to an impasse with the union over the wage increase. Bargaining directly with the employees and ignoring the union was, therefore, an equally blatant violation of the employer's duty to bargain. Accordingly, we deny Standard Fittings' petition for review and grant the NLRB's cross-petition for enforcement.

Standard Fittings' Problem and the Impermissible Solution It

Implemented.

Production and maintenance employees at Standard Fittings' Opelousas, Louisiana, facility are represented by the Oil, Chemical & Atomic Workers International Union. Standard Fittings and the union had agreed to a collective bargaining agreement that ran from March 1, 1984, through March 1, 1986. According to the terms of that agreement, Standard Fittings agreed to raise the wages of the employees whom the union represented by $.35/hour on March 1, 1985.

Standard Fittings felt itself financially unable to increase the employees' wages by the agreed amount on March 1, 1985. Standard Fittings manufactures and distributes forged steel and pipe fittings, but its business in the early 1980s was apparently quite poor. Its president, Erwin Davlin, met with the union's negotiating committee on February 20, 1985, in an effort to obtain union consent to delaying the $.35/hour wage increase for nine months. He told the committee that if it did not agree to his proposal, Standard Fittings would be forced to take drastic action: The company would either have to lay off a large number of workers, or reduce their hours from 40 per week to 30 or 32 hours per week. Davlin told the union officials that if he did not take one of these courses of action, Standard Fittings would be forced to file for bankruptcy.

Understanding the gravity of the situation and that Standard Fittings had a specific contractual right to schedule hours of work and to reduce the number of employees by layoff, the union was cooperative. After examining the company's books, the union negotiating committee again met with Davlin on March 6. They explained that the union would be willing to accept a six-month delay in the $.35/hour increase, but conditioned this counter-proposal on ratification "by the membership."

Davlin accepted the union's offer and its terms. He later testified that he thought that all unit members, including nonunion employees, would be voting. On March 14, at the union local's monthly meeting, 119 of the bargaining unit's 300 members voted on the counterproposal. These union members defeated that proposed modification by a margin of 97-22. This lopsided result represented a majority of those present and voting, but a minority of the total employees affected by the decision.

The next morning, the union informed Davlin that the membership had rejected the counterproposal offered by the leadership. Davlin insisted that the union negotiating committee call a special membership meeting to reconsider the postponement. The members of the negotiating committee informed Davlin that they could not call a special meeting without twenty signatures of members of the local. Davlin then told the committee that he was going to talk to the employees directly regarding his request to delay the $.35/hour wage increase.

On Monday, March 18, the officials of the local called the international headquarters of the union and obtained permission to call a special meeting. But when the local's officers informed Standard Fittings that they were calling another vote, Davlin told them that he was not going to wait for the special meeting, but would instead meet directly with the union employees that day.

Throughout the week beginning March 18, Davlin held meetings with Standard Fittings' employees. There were two series of such direct appeals to the labor force--meeting all the employees, union and non-union, but in groups of approximately twenty persons each. In the first series of meetings on March 18 and 19, Davlin described the company's financial situation and explained why the company wanted to delay the scheduled wage increase. During the second series of meetings, on March 21 and 22, Davlin told the employees that each employee individually was to choose to accept a delay in the promised raise, with no reduction in hours, or receive the scheduled wage increase knowing that the company would be forced to reduce that employee's hours from 40 to 30 hours per week.

Many of the employees agreed to postpone their $.35/hour raise. A few, however, did not accept the appeal to delay the increase; the company cut those employees' work week back to 30 hours, but implemented the contractual wage increase for such reduced hours. Standard Fittings did eventually increase all the employees' wages by $.35/hour, but not until October 1, 1985. The eventual raise was not retroactive for those workers whose hours had not been cut but who forewent the increase for seven months.

The NLRB Proceeding.

The union thereafter filed an unfair labor practice complaint, in which it charged that Standard Fittings, in violation of section 8(a) (5) of the National Labor Relations Act (NLRA), had refused to bargain collectively with the union and had violated the employees' rights to engage in a protected, concerted labor activity under section 8(a) (1) of the NLRA. After a hearing on these unfair labor practice charges, the administrative law judge (ALJ) agreed with the union.

The ALJ imposed a "make whole" remedy on Standard Fittings. A "make-whole" remedy imposes upon the employer the obligation to pay each employee the difference between what the employee would have made had the employee received the scheduled wage increase on time and what the employee actually made. On appeal to the NLRB, a three-member panel affirmed the ALJ's findings of fact and conclusions of law.

The standard of review for questions of law determined by the NLRB is de novo, but if an NLRB construction of the statute is "reasonably defensible," its decisions are to be confirmed. See, e.g., Pattern Makers' League v. NLRB, 473 U.S. 95, 105 S. Ct. 3064, 87 L. Ed. 2d 68 (1985); NLRB v. Local Union 103, Iron Workers, 434 U.S. 335, 350, 98 S. Ct. 651, 660, 54 L. Ed. 2d 586 (1978); NLRB v. Katz, 369 U.S. 736, 82 S. Ct. 1107, 8 L. Ed. 2d 230 (1962). The ALJ's findings of fact, which include his finding that Standard Fittings accepted the counterproposal and did not bargain to impasse with the union, must be reviewed under the substantial evidence standard of review. NLRA Sec. 10(e); NLRB v. Strong Roofing & Insulating Co., 393 U.S. 357, 361, 89 S. Ct. 541, 545, 21 L. Ed. 2d 546 (1969) (section 10(e) allows only limited judicial review); Capital-Hustling Co. v. NLRB, 671 F.2d 237, 243 (7th Cir. 1982). Under that standard of review, the ALJ's decision must be upheld if a reasonable person could have found what the ALJ found, even if the appellate court might have reached a different conclusion had the matter been presented to it in the first instance. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S. Ct. 456, 465, 95 L. Ed. 456 (1951); Georgia Kraft Co. v. NLRB, 696 F.2d 931, 936 (5th Cir. 1983); Central Freight Lines, Inc. v. NLRB, 666 F.2d 238, 239 (5th Cir. 1982).

Mandatory Subjects of Bargaining and the Duty To Bargain.

This case is a textbook example of the most serious kinds of problems which an employer faces in meeting its duty to bargain. Section 8(a) (5) of the NLRA makes it an unfair labor practice for an employer "to refuse to bargain collectively with the representatives of its employees." Section 9(a) of the NLRA says that a union properly chosen to represent a bargaining unit "shall be the exclusive representative of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment."

The Supreme Court, reading these provisions together, has interpreted them to mean that an employer must bargain with a union representing its employees before unilaterally changing any term of employment, whether a mandatory or a permissive bargaining provision. NLRB v. Katz, 369 U.S. 736, 743, 82 S. Ct. 1107, 1111, 8 L. Ed. 2d 230 (1962). If the mandatory subject of bargaining which the employer wishes to change is the subject of a provision in a collective bargaining agreement, the employer commits an unfair labor practice if it changes that condition without the permission of the union. Section 8(d) of the NLRA prohibits either party from insisting upon a modification of the agreement during its term. While a contract is in force, section 8(d) permits the union to refuse, even unreasonably, an employer's proposal to modify the terms established by the collective bargaining agreement.

The union thus need not assent to proposed changes in the contract, no matter how necessary to the survival of the enterprise. The result may be harsh, but the law is clear that a party may not escape its obligations under a collective bargaining agreement because of financial difficulties. NLRB v. L.B. Priester & Son, Inc., 669 F.2d 355 (5th Cir. 1982) (restricting when an employer may withdraw from a unit because of financial circumstances, in order to ensure the continued vitality of multi-employer bargaining); George E. Light Boat Storage, Inc. v. NLRB, 373 F.2d 762, 765-66 (5th Cir. 1967) (economic adversity does not justify an employer's unilateral midterm modification of a collective bargaining agreement); NLRB v. Lambert, 211 F.2d 91, 92-94 (5th Cir. 1954) (unilateral changes in contract terms relating to employees' fringe benefits because of "not having finances to pay them," and refusal to bargain because employer could not "afford to operate under a union agreement any longer," both violate the Act); A & W Foods, Inc., 276 N.L.R.B. 20 (1985); Manley Truck Line, Inc., 271 N.L.R.B. 679 (1984), enf'd, NLRB v. Manley Truck Line, Inc., 779 F.2d 1327, 1329-32 (7th Cir. 1985) (temporary withholding of portion of wages due to employees under collective bargaining agreement held unlawful despite financial hardship).

Regardless of whether terms or conditions of employment are explicitly covered by contract provisions, a mid-term, unilateral alteration by either the union or the employer breaches the agreement and gives rise to a civil action seeking contract remedies. But when the term is a mandatory subject of bargaining, the parties can also seek to have the NLRB enforce the agreement through its power to remedy violations of the duty to bargain under section 8(a) (5). Allied Chemical & Alkali Workers, Local 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 92 S. Ct. 383, 30 L. Ed. 2d 341 (1971); NLRB v. C & C Plywood Corp., 385 U.S. 421, 87 S. Ct. 559, 17 L. Ed. 2d 486 (1967) (emphasizing that though there is no general jurisdiction for the NLRB to enforce collective bargaining agreements, where there has been an unfair labor practice NLRB adjudication is speedier than suit for breach of contract).

The collective bargaining agreement established the March 1, 1985, wage increase as an explicit "term or condition of employment," which Standard Fittings could not change without bargaining with the union--and obtaining its assent--regarding the proposed postponement. Katz, 369 U.S. at 742, 82 S. Ct. at 1111. Because the $.35/hour raise was a mandatory subject of bargaining, Standard Fittings could neither insist that the union agree to the mid-term alteration of the contract, nor delay the pay increase without the union's consent.¹ 

Impasse and the Asserted Waiver of Section 8(d) Rights.

The union was under no obligation to consider Standard Fittings' request to modify the terms of the unexpired collective bargaining agreement. Because the wage increase was a mandatory term of that contract, Standard Fittings may not claim that it bargained to impasse with the union.²  Since section 8(d) prohibits the employer from forcing the union to alter the agreement during its term, whether impasse with the union was reached is irrelevant; the union need not have agreed to the proposal, and Standard Fittings could not legally make the change without the union's consent. Allied Chemical, 404 U.S. at 188, 92 S. Ct. at 402. The ability of the NLRB, by virtue of the Katz decision, to order cessation of refusals to negotiate or other obstructionist tactics does not extend to subjects protected under section 8(d), and it would have been an unfair labor practice for Standard Fittings to have attempted to coerce union acceptance of the postponement.

Standard Fittings argues that the union waived its right to refuse to bargain over delaying the wage increase by, in fact, beginning to bargain over the wage increase. However, not only would such a view be contrary to common sense and public policy, but only a contractual agreement to reopen some of the terms of a collective bargaining agreement for renegotiation suffices as a waiver of the right under section 8(d) to refuse to negotiate. A party to a collective bargaining agreement does not waive its right to refuse midterm contract modifications by agreeing to discuss modification proposals.³  Absent an express reopener, neither the union nor the employer ever waives the statutory right to refuse to consider, or to continue to consider, changes in the collective bargaining agreement while the agreement is still in force. Herman Brothers, 273 N.L.R.B. at 126.

Standard Fittings relies on cases concerning unilateral implementation of final offers where parties have reached impasse concerning matters not governed by an existing contract.⁴  But at issue in this case are discussions of possible modifications of a mandatory subject of bargaining in an existing contract, for which there was no reopener provision. The union, again, had no obligation even to discuss, much less to agree to, any modification.⁵ 

In any event, as the NLRB found, in this case there was no showing of impasse. As Standard Fittings must recognize, this is an issue "particularly amenable to the expertise of the [NLRB] as fact finder." Huck Manufacturing Co. v. NLRB, 693 F.2d 1176, 1186 (5th Cir. 1982). The ALJ below, as confirmed by the NLRB, considered whether the initial agreement to bring the postponement of the automatic raise to a union vote constituted a reopening of the wage increase provision. While there was no waiver of the right to refuse to consider, or to continue to consider, proposed modifications of the terms of employment, the ALJ's finding that Standard Fittings failed to bargain to impasse with the union would easily survive review under the substantial evidence standard. Nothing short of a union's refusal to bargain excuses an employer from refusing to bargain or from unilaterally changing contract terms affecting mandatory subjects of bargaining; the union's cooperativeness here falls far short of such a refusal to bargain.⁶ 

Illegally Bargaining Directly with the Workers; the Union's

Alleged Unfair Labor Practice.

Standard Fittings argues that the union breached its duty of fair representation, giving the company the right to appeal directly to its employees.⁷  Recognizing, however, that a union's duty of representation is owed solely to its members, the Court in Brooks v. NLRB, 348 U.S. 96, 75 S. Ct. 176, 99 L. Ed. 125 (1954), held that an employer may not rely on its employees' rights to justify refusing to bargain with a formally designated union.⁸  Thus, since no breach of a union's duty of fair representation can negate an employer's duty to bargain, Standard Fittings would have no defense, even if it could establish an unfair labor practice on the part of the union.

Attempting to justify its illegal direct negotiation⁹  by invoking the "rights" of its non-union employees, Standard Fittings relies on Branch 6000, National Association of Letter Carriers v. NLRB, 595 F.2d 808 (D.C. Cir. 1979), for the proposition that the union acted illegally in prohibiting non-members from voting on ratification of the union's counter-proposal.¹⁰  Even if Standard Fittings were in a position properly to assert this alleged unfair exclusion of non-union employees, the company's reading of the easily distinguishable authority does not materially advance its case.

The company's claim that any union that agrees to membership ratification of a contract proposal must permit non-union employees to vote on the issue is contrary to well established law. While Letter Carriers and International Brotherhood of Teamsters v. NLRB, 587 F.2d 1176, 1181 (D.C. Cir. 1978), said that "once a certified representative has determined to gain membership approval before it accepts a contract, it must accord the opportunity to vote equally to all unit members [or it] fails to represent them fairly," the Supreme Court recently observed in NLRB v. Financial Institution Employees, 475 U.S. 192, 205, 106 S. Ct. 1007, 1015, 89 L. Ed. 2d 151 (1986), that the NLRA permits union members to make many decisions affecting the employment rights of non-member unit employees. " [T]he Act allows union members to control the shape and direction of their organization and ' [n]on-union employees have no voice in the affairs of the union.' " Id. (quoting NLRB v. Allis Chalmers Manufacturing Co., 388 U.S. 175, 191, 87 S. Ct. 2001, 2012, 18 L. Ed. 2d 1123 (1967)). The Court specifically cited the right to "ratify a collective-bargaining agreement or select union officers and bargaining representatives" as examples of internal union matters concerning which non-union employees may be excluded from voting. 475 U.S. at 205.

Where the employer in Childers Products Co., 276 N.L.R.B. 709, 710-11 (1985), enf'd mem., 791 F.2d 915 (3d Cir. 1986), had accepted the union's proposal "subject to ratification," but did not discuss the meaning of this phrase, "the method of ratification was within the [u]nion's exclusive domain and control," and the employer had no standing to question the union's internal procedure.¹¹  Neither could Standard Fittings have insisted to impasse that the union change either Article III, section 5 of its constitution (which does not permit non-union members to vote) or the procedure for the proposed postponement's ratification (which was to be in accord with the union constitution). NLRB v. Cheese Barn, Inc., 558 F.2d 526, 529-31 (9th Cir. 1977) (citing cases).

Consequently, the Board's view here, that neither member nor non-member employees of Standard Fittings ever had a legal right to vote on union proposals, is absolutely correct. The inclusion of a right to ratification created only a contractual right. There is no claim--and no evidence--that the union ever agreed that non-members had a right to vote on its proposal. And Standard Fittings could do no more than request alternate ratification procedures. The union was free to condition its response to the company's needs however it desired, if it wished to negotiate at all.

Standard Fittings has committed unfair labor practices in refusing to bargain with the union and in appealing directly to its workers. The petition of Standard Fittings for review of the NLRB's order is therefore DENIED, and the Board's order is hereby ENFORCED.