Caterpillar, Inc. v. Fehrenbacher

No. 2--96--0128
___________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
___________________________________________________________________

CATERPILLAR, INC., ) Appeal from the Circuit Court
) of Kendall County.
Plaintiff-Appellee, )
)
v. ) No. 95--MR--9
)
)
JAMES G. FEHRENBACHER, )
)
Defendant-Appellant )
)
(Lynn Q. Doherty, Director of )
the Department of Employment )
Security, and The Board of )
Review of the Department of ) Honorable
Employment Security, ) James M. Wilson,
Defendants). ) Judge, Presiding.
_________________________________________________________________

JUSTICE RATHJE delivered the opinion of the court:

In October 1993, plaintiff, Caterpillar, Inc., fired
defendant, James Fehrenbacher (defendant), for violating a rule
against displaying the term "scab" on company property. Defendant
applied for unemployment benefits. Plaintiff argued that, under
section 602(A) of the Unemployment Insurance Act (section 602(A))
(820 ILCS 405/602(A)(West 1992)), defendant was not entitled to
benefits because he was discharged for "misconduct."
After an administrative hearing, a referee of the defendant
Illinois Department of Employment Security (Department) agreed with
plaintiff and affirmed the local office's denial of benefits. The
Department's Board of Review (Board) reversed and awarded
benefits. Plaintiff appealed, and the circuit court reversed the
Board. Defendant appeals. He argues that the court erred in
holding that section 602(A) bars his receipt of benefits, as (1)
the rule he broke was not reasonable; and (2) his disobedience was
not misconduct because it resulted from his reasonable good-faith
belief that he had a legal right to display the sign.
As pertinent here, section 602(A) states:
"A. An individual shall be ineligible for benefits for
the week in which he has been discharged for misconduct
connected with his work and, thereafter, until he has become
reemployed ***. *** For purposes of this subsection, the
term 'misconduct' means the deliberate and willful violation
of a reasonable rule or policy of the employing unit,
governing the individual's behavior in performance of his
work, provided such violation has harmed the employing unit
*** or has been repeated by the individual despite a warning
or other explicit instruction from the employing unit."
(Emphasis added.) 820 ILCS 405/602(A) (West 1992).
We set out the procedural history of this case, incorporating
the evidence of the events that preceded defendant's firing.
Defendant's application for unemployment insurance stated that he
was fired because he refused to remove a sign from the window of
his truck, which he parked in the company parking lot. The sign
read, "Support S--55 Stop Scabs From Taking Union Jobs." S--55 was
proposed legislation to bar hiring permanent replacements for
striking union workers. As an employee of plaintiff, defendant
belonged to Local 145 of the International Union, United
Automobile, Aerospace & Agricultural Implement Workers of America
(UAW or the union).
Defendant placed the sign in his truck on October 5, 1993. On
October 21, 1993, and October 22, 1993, his foreman asked him to
remove the sign. Defendant refused and was discharged on
October 22, 1993. According to defendant's application for
benefits, he believed he should not have been fired because "I fel
[sic] I have the Right to support the Bill S--55."
Plaintiff protested the benefits application, agreeing with
defendant's account of his firing but asserting that defendant was
discharged for misconduct. The Department's local office agreed.
Defendant moved to reconsider, arguing that merely placing a sign
in his truck in the parking lot could not be equated with forbidden
behavior in the workplace. He explained that, at the time of the
incident, his union was working without a contract, and plaintiff
had planned "to replace us with scab labor so I [thought] Bill S 55
is inportant [sic] to save are [sic] jobs." After the claims
adjudicator rejected his motion, defendant sought review by the
Department's appeals division.
On December 22, 1993, the appeals division heard evidence on
defendant's claim. The hearing was taped, but, owing to faulty
equipment, part of the evidence was not recorded. Apparently, most
of this missing evidence came from plaintiff's two witnesses. We
summarize the surviving evidence and arguments.
Ken Docett, plaintiff's supervisor, told the referee that
plaintiff's parking lot is separated from its plant by a lane or
road; a worker exiting the plant must pass through a gate to get to
his car. Docett admitted that the sign in defendant's vehicle
window included a reference to S--55 as well as "Stop Scabs From
Taking Union Jobs." However, Docett maintained that "Support S--
55" was "so small you can't [sic] hardly see it." The referee also
examined several copies of photographs of defendant's truck.
Defendant testified that, on October 5, 1993, he placed the
sign in his truck to demonstrate his support for S--55. He never
took the sign with him into the workplace. From then on, he
performed his work as a lathe operator no differently from before.
When he placed the sign in his car, he knew plaintiff banned the
display on its property of any sign saying "Stop Scabs." On
October 21 and October 22, Docett told defendant to remove the sign
from company property, but defendant refused. Plaintiff suspended
defendant and held a disciplinary hearing at which defendant was
advised that if he removed the sign he would be reinstated.
Defendant refused the offer and was fired.
The administrative hearing proceeded to closing arguments.
Plaintiff's counsel observed that defendant admitted that, despite
several warnings, he persisted in violating the company rule
against "Stop Scabs" signs. Furthermore, counsel asserted, the
National Labor Relations Board (NLRB) ruled in March 1993 that
plaintiff's ban on such displays was not an unfair labor practice
because workers who crossed the picket line during the recent
bitter strike had faced coercion, intimidation, and harassment from
the union. Counsel added that, after the strike, some union
employees still were harassing some co-workers. Finally, counsel
observed that, a few months earlier, the appeals division affirmed
the denial of unemployment benefits to a worker who was fired
because his vehicle displayed a banner reading "NO CONTRACT STOP
SCABS NO PEACE." See Rudolph Gerhardt, Ill. Dep't Empl. Sec. No.
AR. 3037628(A) (September 15, 1993) (Gerhardt). The record includes
copies of Gerhardt and a letter, from the NLRB to counsel for the
UAW, explaining the agency's approval of the rule.
In reply, defendant's counsel argued that plaintiff's rule and
defendant's violation thereof did not relate to defendant's work,
which was unaffected by what he may have put in his truck outside
the plant. Thus, according to his counsel, defendant was not fired
for misconduct "connected with his work" or for violating a rule
"governing the individual's behavior in performance of his work"
(820 ILCS 405/602(A) (West 1992)). Also, counsel noted that
plaintiff had not alleged that defendant's sign provoked any
incidents or that defendant had ever harassed anyone who crossed
the union's picket line. Finally, counsel asserted that denying
defendant unemployment benefits because he expressed a political
opinion violated his first amendment rights.
The referee found that defendant knowingly and repeatedly
violated plaintiff's ban on "No Scabs" signs. The referee rejected
defendant's first amendment argument, observing that defendant
cited no authority that the denial of unemployment benefits
converted plaintiff's restriction on speech into state action.
Defendant appealed. On April 1, 1994, the Board remanded the
matter for a new hearing because the incomplete transcript of the
hearing frustrated proper review of the decision. On remand,
however, the parties did not present any evidence but stipulated to
the facts "obtained in [the referee's] previous decision" from the
December 22, 1993, hearing.
Defendant made further arguments for reversing the denial of
benefits. He observed that, in January 1994, the NLRB's regional
counsel brought a complaint against plaintiff, alleging that the
company's actions against Gerhardt and two other workers (Arendt
and Kolzow) who displayed "Stop Scabs" signs amounted to an unfair
labor practice. Furthermore, the NLRB filed a similar complaint on
defendant's behalf. Finally, the Board had just reversed the
referee's decision in Gerhardt. See Janet E. Kolzow, Bd. of
Review, Ill. Dep't of Empl. Sec. No. ABR--93--15346 (July 29,
1994)(Kolzow). (Defendant submitted copies of these complaints and
of the Board's decision.) From this, defendant argued that
plaintiff could no longer maintain that its rule against "No Scabs"
signs was reasonable.
The referee disagreed, explaining that he was not bound by the
NLRB's complaint. In May 1994, the referee rejected defendant's
request for a rehearing so that he could introduce more evidence
that plaintiff's rule was unreasonable. The referee affirmed the
denial of benefits, and defendant appealed to the Board.
The Board reversed the referee's decision, holding that
defendant's action was not misconduct. The Board relied on Kolzow,
in which it decided that the claimant was not guilty of misconduct
when she wore a "No Scabs" button on the job at plaintiff's plant.
The Board acknowledged that a 1956 federal appellate decision
upheld plaintiff's authority to ban the display of the term "scab"
in the workplace. See Caterpillar Tractor Co. v. National Labor
Relations Board, 230 F.2d 357 (7th Cir. 1956). However, according
to the Board, this decision was now "superseded" by the complaint
the NLRB brought against plaintiff in January 1994. Thus, the
Board overruled Gerhardt. Applying Kolzow, it ruled that
defendant's display of the sign was not misconduct; therefore, he
was entitled to unemployment benefits.
Plaintiff appealed to the circuit court. On cross-motions for
summary judgment, the court reversed the Board and held that
defendant must be denied benefits because he was fired for
misconduct. The court could not accept the Board's premise that
Caterpillar Tractor had been "superseded" by the NLRB's complaint
against plaintiff. As Caterpillar Tractor controlled, defendant
was properly discharged for violating a reasonable rule, and he
could not collect benefits. The court granted plaintiff summary
judgment. Defendant appealed.
Defendant argues that the circuit court erred in reversing the
Board because (1) the Board properly found that he was not guilty
of misconduct; and (2) in any event, he is entitled to benefits
because he acted in the reasonable good-faith belief that he had a
legal right to display his sign. Although we cannot accept the
Board's reasoning, we believe it properly found that defendant's
peaceful display of the sign outside the workplace was not
misconduct. Therefore, we reverse the circuit court without
considering defendant's "good-faith" argument.
On review of an administrative agency's decision, a court
determines only whether the agency's decision is against the
manifest weight of the evidence or legally erroneous. Hoffmann v.
Lyon Metal Products, Inc., 217 Ill. App. 3d 490, 497 (1991); Adams
v. Ward, 206 Ill. App. 3d 719, 723 (1990). However, the reviewing
court need not give the same deference to the agency's conclusions
of law, such as the construction of a statute, as it must give to
the agency's factual findings. Adams, 206 Ill. App. 3d at 723.
We agree with the circuit court and plaintiff that the Board
erred in using the NLRB's complaint against plaintiff as authority
here. Apparently, the Board believed that the NLRB's challenge to
plaintiff's ban on "No Scabs" signs overrode a federal court's
finding that the policy is reasonable. Thus, in the Board's view,
as federal law now outlaws plaintiff's policy, defendant's
violation thereof cannot be "misconduct" because misconduct
includes only violations of reasonable work rules. See 820 ILCS
405/602(A) (West 1992).
The Board's reasoning is plainly unsound. If Caterpillar
Tractor is good law, it cannot be "overruled" by an NLRB ruling--
much less by the mere filing of a complaint by a regional office of
the NLRB's prosecutorial arm. As an administrative agency, the
NLRB is bound by applicable judicial interpretations of the
controlling law. Mary Thompson Hospital, Inc. v. National Labor
Relations Board, 621 F.2d 858, 863-64 (7th Cir. 1980); Allegheny
General Hospital v. National Labor Relations Board, 608 F.2d 965,
969-71 (3d Cir. 1979). The Board inexplicably slighted this
elementary principle. Thus, if plaintiff's rule is unreasonable,
it cannot be so on the ground on which the Board relied.
Defendant urges that the rule is unreasonable and that
Caterpillar Tractor does not dictate otherwise. He also maintains
that case law since Caterpillar Tractor casts doubt on the legality
of plaintiff's flat ban on the display of the "s-word" anywhere on
its property. We agree with defendant that Caterpillar Tractor
does not control and that its vitality is dubious.
In Caterpillar Tractor, about 250 of plaintiff's employees,
while on the shop floor, wore buttons saying "Don't be a Scab."
When they persisted in wearing the buttons during work hours,
plaintiff sent them home. The appellate court held that the
employees' behavior was not protected by federal law because the
employer's right to maintain discipline included the power to curb
activities tending to disrupt the efficient operation of the
business. Declaring that "[p]erhaps no greater disruptive force
can be found in the field of labor relations than that innate in
the application of the term 'scab' to one employee by his fellow
workman" (Caterpillar Tractor, 230 F.2d at 358), the court
concluded that the ban was valid because plaintiff justifiably
anticipated the buttons would "prove disruptive of employee harmony
in its plant and destructive of discipline in production" (emphasis
added) (Caterpillar Tractor, 230 F.2d at 359). The court cautioned
it was not holding that an employer could prohibit displays which
did not interfere with discipline or efficiency. Caterpillar
Tractor, 230 F.2d at 359.
Unlike defendant here, the employees in Caterpillar Tractor
displayed their signs in the workplace itself, not merely on
company property, while they and other employees were working.
From the language we have quoted and emphasized, it appears the
court placed great weight on this fact. The relationship between
displays and disruptions in production is likely greatest when the
displays occur at the same time and place as the production, and a
ban on controversial signs that is proper if limited to the
workplace may be improper if applicable to all company property.
Thus, in Asociacion Hospital Del Maestro, Inc. v. National
Labor Relations Board, 842 F.2d 575, 577-78 (1st Cir. 1988), the
court wholly invalidated the employer's ban on union insignia
anywhere on its property. The court struck down the rule even
though it would have been proper had it been limited to immediate
patient care areas.
In National Labor Relations Board v. Pratt & Whitney Air
Craft Division, United Technologies Corp., 789 F.2d 121 (2d Cir.
1986), the union conducted a membership drive in which it
distributed literature calling nonunion workers "scabs" and
"freebies" and quoting Jack London's (unfavorable) comparison of
such people to rattlesnakes and vampires. The union also posted
lists of nonunion workers employed at the plant. In response, the
employer banned the distribution or display of such literature
anywhere on company property, even outside working hours. The
court held that applying the ban to nonwork areas or nonworking
hours was allowable only if the employer showed special
circumstances, i.e., the use of words "so offensive on their face
as to create a reasonable expectation that plant discipline will be
disrupted" (Pratt & Whitney, 789 F.2d at 128) or language so
provocative as to threaten plant peace or safety (Pratt & Whitney,
789 F.2d at 128). Taking note of recent case law (which we shall
discuss shortly), the court concluded that the terminology was not
facially offensive because, as courts had long recognized, epithets
such as "scab" are routinely used in labor disputes and are not
necessarily outside the protection of federal labor law. As the
employer had not shown that the union's language was so provocative
as to threaten a breach of peace in the workplace, the NLRB
properly invalidated the ban. Pratt & Whitney, 789 F.2d at 128.
In light of this authority, we believe that Caterpillar
Tractor is distinguishable, as it involved a restriction only on
displays in the workplace during working hours. Moreover, the
reasoning of Caterpillar Tractor has been undermined, if not
repudiated, by later cases recognizing that, because labor disputes
are inherently bitter affairs, strong words such as "scab" are
commonplace and may be protected. See Linn v. United Plant Guard
Workers of America, Local 114, 383 U.S. 53, 58-61, 15 L. Ed. 2d 582, 587-89, 86 S. Ct. 657, 660-62 (1966); Pratt & Whitney, 789 F.2d at 128. One federal appellate court has openly rejected
Caterpillar Tractor insofar as it suggests a flat ban on displaying
the term "scab" is per se reasonable. See National Labor Relations
Board v. Mead Corp., 73 F.3d 74, 79-80 (6th Cir. 1996).
The foregoing suggests that plaintiff's reliance on federal
law to establish that its rule is "reasonable" under section 602(A)
may be misplaced. Federal authority holds that employers'
restrictions on pro-union speech require "special circumstances"
and that the use of the term "scab" is not in itself a special
circumstance. Thus, the wide-ranging rule at issue here might well
fail a federal challenge, especially a claim of overbreadth.
In so saying, we agree with plaintiff's premise that the
acceptability of an employer's rule under federal law is highly
probative of whether the rule is "reasonable" under state law. The
criteria for whether a rule is a fair labor practice, e.g., its
relationship to workplace efficiency, safety, or discipline, its
clarity and precision, and the extent to which it infringes on
legally protected behavior--are also among the major considerations
in a determination of whether it is a "reasonable" rule under
section 602(A). See generally Garner v. Department of Employment
Security, 269 Ill. App. 3d 370, 373-74 (1995); Bochenek v.
Department of Employment Security, 169 Ill. App. 3d 507, 509
(1988); Neville v. Board of Review of the Department of Labor, 143
Ill. App. 3d 548, 550 (1986). Moreover, both employers and
employees have a right to rely reasonably on what federal courts
declare they may or may not do. The problem here is that, contrary
to plaintiff's assumptions, it is far from obvious whether federal
law would permit the rule at issue. Thus, we cannot accept
plaintiff's assertion that federal law proves that the rule is
reasonable under section 602(A).
Moreover, the incomplete record before the referee, the Board,
and this court makes it impossible to determine whether plaintiff
demonstrated special circumstances that would demonstrate that
plaintiff's rule was reasonable to control the violence or
harassment (on plaintiff's property). The lack of this evidence
was the result of a technical malfunction at the original hearing
before the referee. Nevertheless, after the Board remanded the
matter for a new hearing because of the incomplete transcript, the
parties stipulated to the "facts obtained in [the referee's]
previous decision from a hearing dated 12/22/93." While
plaintiff's counsel's closing argument referred specifically to
breaches of peace at the plant, as did the NLRB's letter to counsel
for the union, the referee's decision did not reference any facts
demonstrating special circumstances in support of his conclusion
that plaintiff's rule was reasonable.
Were conditions at plaintiff's facility as the NLRB appears to
have believed, plaintiff's rule could have been found to be
reasonable. However, in the absence of such facts in the record
before the Board, the Board's finding that the plaintiff's rule was
unreasonable is not against the manifest weight of the evidence.
Even assuming, arguendo, that plaintiff's rule was
reasonable, we agree with the defendant that he is entitled to
benefits under section 602(A) because his alleged misconduct was
not "connected with his work" and that the rule did not govern his
"behavior in [the] performance of his work." See 820 ILCS
405/602(a) (West 1992).
The claimant has the burden of establishing his legal right to
unemployment insurance, but the statute must be construed liberally
in favor of awarding benefits. Hoffmann, 217 Ill. App. 3d at 498;
Adams, 206 Ill. App. 3d at 723. The case law does not appear to
address a situation similar to this one. Of course, it is settled
that not every violation of a company rule is misconduct, as there
must be "some nexus between the rule and the employment." Jackson
v. Board of Review of the Department of Labor, 105 Ill. 2d 501, 512
(1985); see also Neville, 143 Ill. App. 3d at 550-51; Profice v.
Board of Review of the Illinois Department of Labor, 135 Ill. App.
3d 254, 258-59 (1985). However, these cases (and the others the
parties cite) involve conduct, such as on-the-job intoxication,
that demonstrably had a direct effect on how the employee did her
or his work. The application of the statutory language to a rule
that lacks such a straightforward connection to job performance (or
to the workplace) is less clear. We believe the statute is
ambiguous and that benefits must be awarded in this case.
Defendant's behavior was "connected with his work" in that it
took place on his employer's property, related generally to his
employment and the conditions thereof, and had the reasonable
potential to affect the performance of his duties. However,
placing the sign in the window of his truck was not "connected with
his work," in the sense that it occurred outside the actual place
of work, did not relate directly to the performance of his job as
a lathe operator, and had no actual direct or indirect effect on
the performance of his duties (other than, of course, leading to
his discharge).
Similarly, it is questionable whether the regulation as it
was applied here governed defendant in the performance of his work.
In some general way, almost any employer's regulation might do so.
However, the rule governed defendant only in his use of the
company's parking lot, which (at least under the facts here) was
only an adjunct to the performance of his work. Giving section
602(A) the required liberal construction, we hold that, at least
under the facts here, the rule did not govern defendant in the
performance of his work.
The Board's mixed findings of law and fact that defendant was
not discharged for misconduct is supported by the record submitted
to the Board. Therefore, defendant is entitled to unemployment
insurance benefits.
The judgment of the circuit court of Kendall County is
reversed, and the decision of the Board is reinstated.
Judgment reversed; award reinstated.
GEIGER, P.J., and McLAREN, J., concur.