DuPont Specialty Products USA v. NLRB

• Court: Court of Appeals for the Third Circuit
• Decided: August 13, 2021
• Docket: 20-3179
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ______________

Nos. 20-3179 & 20-3480 ______________

DUPONT SPECIALTY PRODUCTS USA, LLC, As Successor to E.I. duPont de Nemours and Company,

Petitioner in No. 20-3179

v.

NATIONAL LABOR RELATIONS BOARD

Cross-Petitioner in No. 20-3480 ______________

On Petition for Review and Cross-Application for Enforcement of an Order of the National Labor Relations Board (No. 05-CA-222622) ______________

Argued: July 7, 2021 ______________

Before: SHWARTZ, KRAUSE, and FUENTES, Circuit Judges.

(Opinion filed: August 13, 2021)

David R. Broderdorf Michael E. Kenneally [ARGUED] Morgan, Lewis & Bockius LLP 1111 Pennsylvania Avenue, NW Washington, DC 20004

Theresa A. Queen David G. Barger Greenberg Traurig LLP 1750 Tysons Boulevard, Suite 1000 McLean, VA 22102

Justin F. Keith Greenberg Traurig LLP One International Place, Suite 2000 Boston, MA 02110

Robert M. Goldich Greenberg Traurig LLP 1717 Arch Street, Suite 400 Philadelphia, PA 19103

Counsel for Petitioner/Cross-Respondent

David Habenstreit Kira Dellinger Vol Eric Weitz [ARGUED] National Labor Relations Board 1015 Half Street, SE Washington, DC 20570

Counsel for Respondent/Cross-Petitioner ______________

OPINION* ______________

FUENTES, Circuit Judge.

DuPont Specialty Products (“DuPont”) petitions for review of an Order of the

National Labor Relations Board (the “Board”) directing it to engage in decision bargaining

before subcontracting its paid, volunteer Emergency Response Team (the “ERT”). The

Board cross-petitions for enforcement of the Order. On the record before us, we find that

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. 2 substantial evidence supports the Board’s Order. We will therefore deny the petition for

review and grant the cross-petition for enforcement.

I.

DuPont produces synthetic fibers at its Spruance Plant in Chesterfield County,

Virginia (the “Plant” or “Spruance”). Because of the inherently dangerous nature of this

process, DuPont has elected to maintain an internal cadre of first responders since at least

1974. Until 2018, this service was provided by the ERT. The ERT was comprised of

volunteers who held other positions throughout the Plant but could be called at any time to

respond to emergencies. This team was made up of both non-union and union members,

the latter represented by the Ampthill Rayon Workers, Inc. Local 992 (the “ARWI”) and

the International Brotherhood of Electrical Workers (the “IBEW”). ERT volunteers were

compensated for their work and for attending required trainings, often resulting in

significant overtime pay.

In 2018, about a year after Richard Lukhard was appointed the new Chief of

Emergency Services at Spruance, ARWI and IBEW were informed that DuPont would be

replacing the ERT with dedicated subcontractors. According to Lukhard, who oversaw the

ERT, this decision was motivated by significant safety concerns. For example, he noted

that recruiting and training volunteers for the ERT was growing increasingly difficult,

particularly as more senior members retired. He also noted the difficulty of ensuring that

ERT members passed trainings and obtained the required experience to perform their duties

effectively given the relatively sparce occurrence of emergencies at the Plant.

3 At a meeting with union representatives, DuPont indicated that it would not bargain

over its decision to subcontract, but that it was willing to bargain over the effects of its

decision. ARWI accordingly filed a charge with the Board’s regional office, alleging that

DuPont had violated Sections 8(a)(5) and (1) of the National Labor Relations Act (the

“Act”)1 by refusing to engage in collective bargaining over a “term[] and condition[] of

employment.”2 Several months later, the Board’s General Counsel issued an unfair-labor-

practice complaint based on this charge.

An ALJ held a three-day evidentiary hearing, ultimately concluding that DuPont

had violated the Act as alleged. Specifically, it discredited Lukhard’s testimony that he

was motivated by safety concerns when he recommended subcontracting the ERT, finding

that this rationale was not present in any of the contemporaneous documentary evidence

and that there was no evidence that Lukhard had shared this concern with the senior

management ultimately responsible for making the subcontracting decision. The Board

adopted the ALJ’s factual findings in full, and entered an Order directing DuPont to engage

in decision bargaining and to, among other things, compensate the ERT members for lost

overtime.

1 Sections 8(a)(5) and (1) are codified at 29 U.S.C. § 158(a)(5) and (1). 2 AR 575. While the charge was pending, DuPont proceeded to implement its subcontracting decision in September of 2018, as scheduled.

4 DuPont timely filed this petition for review, and the Board cross-petitioned for

enforcement of its Order. For the reasons that follow, we will deny DuPont’s petition for

review and grant the Board’s cross-petition for enforcement.

II.3

Decisions to subcontract fall into a grey area between those that “have only an

indirect and attenuated impact on the employment relationship” and therefore are never

subject to mandatory collective bargaining, and those that “almost exclusively” affect “an

aspect of the relationship between employer and employee” and are therefore always

subject to collective bargaining.4 Instead, they are categorized as decisions that have “a

direct impact on employment,” but that are focused on concerns “wholly apart from the

employment relationship.”5 As such, they only trigger mandatory collective bargaining

under the Act when “the benefit, for labor-management relations and the collective-

bargaining process, outweighs the burden placed on the conduct of the business.”6

Consistent with this framework, “[t]he focus in determining whether a particular

management decision requires bargaining under Section 8(a)(5) is not the employer’s

decision to subcontract, but whether ‘requiring bargaining over this sort of decision will

3 The Board had jurisdiction pursuant to 29 U.S.C. § 160(a), and this Court has jurisdiction over a final Order of the Board pursuant to 29 U.S.C. § 160(e), (f). 4 First Nat’l Maint. Corp. v. NLRB, 452 U.S. 666, 677 (1981) (internal quotation marks omitted). 5 Id. 6 Id. at 679.

5 advance the neutral purposes of the Act.’”7 The relevant inquiry, then, is whether “the

employer’s decision was prompted by factors . . . within the union’s control and therefore

‘suitable for resolution within the collective bargaining framework.’”8

On appeal, however, DuPont maintains that decisions to subcontract only require

mandatory collective bargaining when labor cost is their “sole” motivating factor. In

support, it looks to language from Dorsey Trailers, Inc. v. NLRB.9 In that case, we stated

that “[a] company’s decision to subcontract which is based solely on a desire to eliminate

or reduce overtime is subject to mandatory union bargaining since to require the employer

to bargain about the matter would not significantly abridge his freedom to manage the

business.”10 Because the company’s “sole motivation” was not a desire to eliminate

overtime, the Court concluded that the decision was not subject to mandatory decision

bargaining.11 However, this language did not displace our longstanding balancing test for

determining whether a subcontracting decision triggers mandatory bargaining. Instead, it

merely contrasted a hypothetical subcontracting decision based purely on cost, which

would clearly be subject to mandatory bargaining, with the employer’s rationale in that

case, which was based on “a need to fill orders and maintain a healthy, viable business” in

7 Furniture Rentors of Am., Inc. v. NLRB, 36 F.3d 1240, 1248 (3d Cir. 1994) (quoting First Nat’l, 452 U.S. at 681). 8 Id. (quoting Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 214 (1964)). 9 134 F.3d 125 (3d Cir. 1998). 10 Id. at 133 (internal quotation marks and citation omitted). 11 Id. 6 the face of a backlog of orders and an inability “to find a qualified pool of experienced

welders.”12 It is not the case, then, that labor costs must be the company’s “sole”

motivating factor in order to trigger mandatory bargaining. At the same time, the

hypothetical about a decision based solely on labor costs in Dorsey Trailers—which would

certainly be subject to bargaining—also makes it clear that merely considering some labor

costs as part of a decision does not automatically make the decision subject to mandatory

bargaining. Instead, where labor costs are one among many motives, we employ the fact-

intensive balancing test from First National.

Applying the appropriate test here, substantial evidence supports the Board’s

conclusion that DuPont’s decision to subcontract was motivated by factors entirely within

the union’s control. Specifically, the Board and the ALJ pointed to PowerPoint slides and

internal email correspondence showing that though “the actual decision-making process of

upper management . . . [was] opaque,” the evidence demonstrated “that the anticipated

savings in overtime and training costs were significant factors, repeatedly emphasized in

the explanations for the contracting out.”13 The ALJ also credited ARWI’s testimony that

cost savings was offered as a rationale for the subcontracting decision when the two parties

met. As a result, the ALJ found that, although “the substantial evidence of labor cost

motivation in the decision to subcontract was met with the insistence of [DuPont’s]

witnesses that cost savings had nothing to do with the matter,” labor costs “were manifestly

12 Id. at 132-33. 13 App. at 14.

7 a factor in the decision to contract out.”14 Although DuPont “began to omit the cost savings

rationale from its discussions” once the unfair-labor-practice charge was filed, “[b]ehind

the scenes, the cost savings to be netted from the contracting of the ERT remained

important to DuPont.”15 Because of our extremely deferential standard of review,16 and

because labor costs are traditionally subject to collective bargaining,17 we will deny

DuPont’s petition for review.

But that is not to say that we accept all of the ALJ’s factual findings at face value.

In particular, we note that despite the ALJ’s conclusion that Lukhard’s proposed safety

rationale was merely “contrived for litigation,”18 various contemporaneous documents

show that safety was a concern for Lukhard and at least some DuPont employees at the

outset. The problem for DuPont, rather, is that none of this evidence shows that safety was

actually contemplated by the relevant decisionmakers—in other words, by the upper

management that was ultimately responsible for deciding to subcontract the ERT. Had

DuPont wished to rebut the substantial evidence that labor cost was what prompted its

decision, it could have introduced either documentary or testimonial evidence to this effect.

14 App. at 14. 15 App. at 14. 16 See 1621 Route 22 W. Operating Co., LLC v. NLRB, 825 F.3d 128, 144-45 (3d Cir. 2016). 17 See Fibreboard, 379 U.S. at 213-14. 18 App. at 15.

8 To be clear, we do not mean to suggest that bargaining is required every time a

company considers labor costs in its decision-making process; indeed, it is difficult to

imagine a decision that would not weigh economic factors to some extent. And where

safety is concerned, the Board has recognized that if an employer’s subcontracting decision

is meant to prevent safety risks to the public or to company property, that decision may not

be subject to mandatory bargaining19—a point which the Board reiterated here.20 We need

not decide the issue because, based on the record before us, DuPont did not produce

evidence of a safety rationale on the part of the actual decisionmakers, as it would have

needed to in order to rebut the evidence showing that labor costs prompted the

subcontracting decision. Substantial evidence therefore supports the Board’s finding that

DuPont’s decision was, in fact, amenable to bargaining.

III.

DuPont raises two additional arguments, neither of which is meritorious. First, it

argues that the Board misapplied its “contract coverage” test, as set out in MV

Transportation, Inc.21 In other words, DuPont maintains that it was not required to bargain

because its decision to subcontract the ERT was governed by its existing collective

bargaining agreement (“CBA”) with ARWI. But the CBA contains no provision covering

DuPont’s right to unilaterally eliminate ERT work opportunities. Total silence on the issue

19 See Oklahoma Fixture Co., 314 NLRB 958, 960 (1994). 20 See App. at 15 (citing Oklahoma Fixture, 314 NLRB at 960). 21 368 NLRB No. 66 (Sept. 10, 2019).

9 is the opposite of “granting the employer the right to act unilaterally.”22 Second, DuPont

argues that the ALJ erred by excluding two pieces of safety-related evidence. We review

an ALJ’s evidentiary rulings for abuse of discretion.23 Here, the ALJ committed no such

abuse where this evidence would have been cumulative of Lukhard’s testimony and, more

importantly, went to issues that were never in dispute and would have had minimal

probative value. We are therefore unpersuaded that the Board’s decision was unsound for

any of the reasons proffered by DuPont.

IV.

For the foregoing reasons, we will deny DuPont’s petition for review and grant the

Board’s cross-petition for enforcement.

22 Id. at *2. And, as a practical matter, DuPont routinely bargained with the union over changes to the ERT, further undercutting its argument that the unilateral decision to suspend the program was covered by the CBA. 23 See NLRB v. Louton, Inc., 822 F.2d 412, 416 (3d Cir. 1987).