National Labor Relations Board v. Advanced Stretchforming International, Inc.

233 F.3d 1176

Opinions

Opinion by Judge BOOCHEVER; Dissent by Judge O’SCANNLAIN.

ORDER

Both Advanced Stretchforming International, Inc. (“ASI”) and the National Labor Relations Board (the “Board”) filed petitions for rehearing and rehearing en banc. The panel requested a response to these petitions and that response was filed and circulated to panel members and to all active judges. A judge of the court called for a vote on whether the case should be reheard en banc, but voting was suspended on the panel’s indication that its opinion would be amended.

By unanimous vote, the panel hereby GRANTS ASI’s petition for rehearing and GRANTS the Board’s petition for rehearing. Accordingly, the original opinions filed on April 4, 2000 as NLRB v. Advanced Stretchforming Int’l, Inc., 208 F.3d 801 (9th Cir.2000), are hereby AMENDED.

OPINION

BOOCHEVER, Circuit Judge:

We decide whether a successor employer forfeits its unilateral right to set initial terms of employment when it announces to the former employees of its unionized predecessor that there will be no union at the new company should they apply to work there.

I

Advanced Stretchforming International, Inc., (“ASI”) manufactures structural body components used in the aerospace industry at a facility in Gardena, California. Prior to ASI’s tenure, Aero Stretch, Inc. (“Aero”) engaged in the same operations at the same site. Aero and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, Local No. 509 (“UAW” or “Union”) entered into a collective bargaining agreement (“CBA”) for production and maintenance employees effective August 19,1991 through August 19,1994.

On June 11, 1992, Aero filed for bankruptcy under Chapter 11 of the Bankruptcy Act. Aero continued to operate, but gradually laid off employees. UAW representative Duane LaMothe contacted Aero’s management over the ensuing months to check on Aero’s bankruptcy status. At a November 19, 1992, hearing, the bankruptcy court converted Aero’s bankruptcy to a Chapter 7 case and auctioned its assets.

Stephen Brown submitted the successful bid. As a condition of the sale, the bankruptcy judge ordered Aero to cease operations and to terminate all employees by November 30. On November 30, Brown called Aero’s Manufacturing Director, Eric Cunningham, and told him to inform Aero employees that they could report to the plant the next day to interview for positions with ASI, which Brown incorporated on December 1. Cunningham called a meeting of Aero’s employees and informed them that the plant had been purchased, and that all employees would be terminated at the end of the day, but that they should report to the plant the next day to interview for positions if they were interested in working for ASI. Two employees present at the meeting, and LaMothe, who was also present at the meeting, testified that Cunningham told the employees that there would be “no union, no seniority, no nothing” at ASI. Cunningham denied making such a statement, but testified that at some point he told the employees that ASI would not assume Aero’s CBA.

On December 1, Brown interviewed and hired Cunningham as ASI’s general manager. Brown and Cunningham then interviewed Aero’s former employees who came to the plant that day. Brown required each applicant to sign the following statement:

I UNDERSTAND THAT I WILL BE WORKING UNDER NEW TERMS AND CONDITIONS WHICH IS NOT A CONTRACT AND IS SUBJECT TO CHANGE.

NEW COMPANY IS NOT ASSUMING COLLECTIVE BARGAINING AGREEMENT.

YOU MAY BE EMPLOYED BY NEW COMPANY ON AN AT WILL BASIS. DETAILED LIST OF TERMS AND CONDITIONS IS TO FOLLOW.

During the interviews, Brown informed each applicant that the new terms of employment would include different wages, no 401(k) plan, less vacation time, fewer holidays, no medical or dental benefits and at-will employment.

ASI hired eight of the seventeen former Aero production and maintenance employees. Four were hired at Aero’s hourly rate; two received more and two received less.

UAW sent certified letters to ASI on December 3, 7, and 11, demanding that ASI recognize the Union as its employees’ bargaining representative. UAW filed an unfair labor practice charge against ASI on December 11. On December 14, ASI conducted a poll of its employees regarding their desire for continued union representation. The employees voted against union representation. That same day, ASI’s counsel wrote the union a letter advising that ASI did not recognize the UAW as the representative of its employees. On April 30, 1993, the National Labor Relations Board (“NLRB” or “Board”) issued a complaint and notice of hearing against ASI.

After conducting a hearing, an Administrative Law Judge (“ALJ”) found that ASI had violated sections 8(a)(1) and (5) of the National Labor Relations Act (“NLRA”), 29 U.S.C. §§ 158(a)(1), (5), by (1) making the “no union” statement at the November 30 meeting, (2) improperly polling its employees regarding union representation on December 14, and (3) refusing to recognize and to bargain with UAW, as ASI was required to do as an alleged “successor” employer to Aero. The ALJ, however, rejected the General Counsel’s claim that ASI had further violated the NLRA by setting the initial terms of employment on December 1. The ALJ reasoned that under NLRB v. Burns Int’l Sec. Serv., Inc., 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972), ASI had the right to establish initial employment terms when it hired Aero’s former employees.

The NLRB’s General Counsel appealed the ALJ’s decision that ASI did not violate the NLRA by setting the initial hiring terms, and the Board reversed. The Board reasoned that ASI had forfeited its right to set the initial terms of employment because it unlawfully “block[ed] the process by which the obligations and rights” of a successor are incurred when it made the “no union” statement. Advanced Stretchforming Int’l, Inc., 1997 WL 208070, 323 N.L.R.B. 529, 530-31 (1997). Thus, the Board held that ASI unlawfully and unilaterally changed the employment terms without first bargaining with the union. Id. at 531.

Based on its conclusions, the Board adopted the ALJ’s recommended order, but added to it, directing ASI, “in order to remedy [the] unlawful unilateral changes,” to

rescind any changes in employees’ terms and conditions of employment unilaterally effectuated and to make the employees whole by remitting all wages and benefits that would have been paid absent [ASI’s] unlawful conduct, until [ASI] negotiates in good faith with the Union to agreement or to impasse.

Id.

The Board timely applied to this court for enforcement of its order. ASI does not challenge the Board’s rulings on the “no union” statement, the union representation poll and the refusal to bargain with UAW. Accordingly, the Board’s “finding of those unfair labor practices violations must be taken as established.” Idaho Falls Consol. Hosp., Inc. v. NLRB, 731 F.2d 1384, 1386 (9th Cir.1984). We grant summary enforcement of the Board’s order with respect to those findings. See Gardner Mech. Serv., Inc. v. NLRB, 115 F.3d 636, 643 n. 2 (9th Cir.1997).¹ ASI does dispute the Board’s determination that it committed separate violations of NLRA sections 8(a)(1) and (5) by unilaterally changing the terms of its carryover workforce’s employment.

II

When ASI employed a majority of its workforce from Aero’s former employees and carried on Aero’s business essentially unchanged, ASI became a “successor” employer to Aero. See Kallmann v. NLRB, 640 F.2d 1094, 1100 (9th Cir. 1981). A successor is obligated to recognize and bargain with the representative of its predecessor’s former employees. See NLRB v. Burns Int’l Sec. Serv., Inc., 406 U.S. 272, 280-81, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972). Ordinarily, however, a successor is not bound by its predecessor’s collective bargaining agreement, and is free to set the initial terms of employment for its workers without first consulting with their union. See Burns, 406 U.S. at 294-95, 92 S.Ct. 1571. Nevertheless, the Board found that ASI “forfeited” its right to set initial terms without first bargaining when it made the statement that there would be “no union” at the new company.²

The Board “often possesses a degree of legal leeway when it interprets its governing statute, particularly where Congress likely intended an understanding of labor relations to guide the Act’s application.” NLRB v. Town & Country Elec., Inc., 516 U.S. 85, 89-90, 116 S.Ct. 450, 133 L.Ed.2d 371 (1995). We defer to the Board’s interpretation of the NLRA if it is “reasonable and not precluded by Supreme Court precedent.” Mesa Verde Constr. Co. v. Northern Cal. Dist. Council of Laborers, 861 F.2d 1124, 1134 (9th Cir.1988) (en banc).

The forfeiture doctrine deprives a successor of its rights under Bums when the successor has failed to fulfill its corresponding Bums obligations. The Board has explained:

The fundamental premise for the forfeiture doctrine is that it would be contrary to statutory policy to confer Bums rights on an employer that has not conducted itself like a lawful Bums successor because it has unlawfully blocked the process by which the obligations and rights of such a successor are incurred .... In other words, the Bums right to set initial terms and conditions of employment must be understood in the context of a successor employer that will recognize the affected unit employ ees’ collective-bargaining representative and enter into good-faith negotiations with that union about those terms and conditions.

Advanced Stretchforming Int’l, Inc., 323 N.L.R.B. 529, 530 (quotation marks, citation omitted).

Courts have approved the Board’s application of the forfeiture doctrine in instances where an employer seeks to avoid obligations of successorship by strategically refusing to hire its predecessor’s employees based on their union membership. See, e.g., Kallmann, 640 F.2d at 1102-03; Capital Cleaning Contractors, Inc. v. NLRB, 147 F.3d 999, 1008 (D.C.Cir.1998); NLRB v. Horizons Hotel Corp., 49 F.3d 795, 806 (1st Cir.1995); U.S. Marine Corp. v. NLRB, 944 F.2d 1305, 1320 (7th Cir. 1991). In Kallmann, for example, we enforced the Board’s finding that a successor forfeited its right to set initial terms of employment when it refused to hire a certain number of its predecessor’s union employees in order to avoid application of a rule that would have required it to bargain before setting terms.

The rule whose application the successor sought to avoid in Kallmann was the so-called “perfeetly-clear” exception to the ordinary rule of Bums. Under this exception, a successor must bargain before setting terms when it hires all or substantially all of its initial workforce from the ranks of a represented bargaining unit of its predecessor, it being then “perfectly clear” that a carryover majority desires representation. See Kallmann, 640 F.2d at 1102-03; Bellingham Frozen Foods, Inc. v. NLRB, 626 F.2d 674, 678-79 (9th Cir.1980) (“When it is ‘perfectly clear’ that the employer intends to hire a majority of his workforce in a unit represented by a union from the ranks of his predecessor, his duty to bargain with the union commences immediately.”). Had the successor in Kallmann not discriminated against its predecessor’s unionized employees, the “perfectly clear” exception would have required it to bargain before setting initial terms. We therefore found it appropriate to treat the successor as if the “perfectly clear” exception had applied, as it would have but for the successor’s anti-union conduct. Kallmann, 640 F.2d at 1102-03.

The question before us is whether ASI’s “no union” statement “blocked the process by which the obligations of a successor are incurred” in a manner similar to the discriminatory hiring practices to which the forfeiture doctrine previously has been applied. We believe that it did. In Kallmann, the successor employer’s discriminatory hiring practices prevented the initial workforce from being constituted from the ranks of the predecessor, preempting the employees’ right to bargain through their union prior to imposition of initial terms. Here, no discriminatory hiring practices prevented ASI’s “perfectly clear” obligation from arising.³ Instead, the “no union” statement chilled the invocation of that obligation once it had arisen. Having been informed when invited to apply for work with ASI that there would be no union at the new company, Aero’s workers may well have believed that employment with ASI was contingent on abstaining from union representation, including insistence on the right to bargain before ASI imposed initial terms. It was not unreasonable for the Board to conclude, as a practical matter, that the “no union” statement blocked the process by which ASI’s obligations as a successor were incurred.

Ill

To remedy ASI’s failure to consult with the Union before imposing terms, the Board ordered ASI to recognize the Union, and to pay back wages and benefits under the CBA from the time of the violation until ASI negotiated in good faith to a bargain or impasse. Though a successor may forfeit its right to set initial terms unilaterally when it engages in improper activities to evade the obligations of suc-cessorship, the successor has “no obligation to accept his predecessor’s labor agreement.” Kallmann, 640 F.2d at 1103. Consequently, when employees are awarded back pay running from the time the successor acquires the business until it finally bargains to an agreement or an impasse pursuant to a duty to bargain imposed after lengthy proceedings, employees may receive far more than they would have if'the violation had never occurred. Thus we have held that “to the extent that a back pay order requires payment at the higher rate for the entire period of ownership, it acts as a penalty.” Id. Rather, “an appropriate back pay remedy cannot require [the successor] to pay the higher rate beyond a period allowing for a reasonable time of bargaining.” Id.

This limitation on the period for which back pay may be awarded applies, however, only when it is clear that the successor “lawfully would not have agreed to the wage scale provided by the predecessor’s labor agreement, and the resulting impasse would have resulted in reduced wages.” Neiv Breed Leasing Corp. v. NLRB, 111 F.3d 1460, 1467 (9th Cir.1997). Whether bargaining would have resulted in impasse had the violation not occurred will often be a matter of some uncertainty. In New Breed we held that any such uncertainty “should be resolved against the employer who discriminates,” and we therefore placed the burden of persuasion on the successor to show that it would not have agreed to the higher wages. Id. at 1468.

In reaching this conclusion, we were persuaded by the Seventh Circuit’s reasoning in U.S. Marine, 944 F.2d at 1321, that a successor should not benefit from an ambiguity that results from its own wrongdoing. Thus in New Breed, where the successor “failed to shoulder its evidentia-ry burden,” we found that “the Board’s grant of back pay based on the predecessor Union’s pay scale restores as nearly as possible the employment situation that would have occurred absent” the unfair labor practice. New Breed, 111 F.3d at 1468-69. But where, as in Kallmann, “[t]he facts demonstrate that [the successor] would not have agreed to union demands to pay the higher rate,” the successor may not be required “to pay the higher rate beyond a period allowing for a reasonable time of bargaining.” Kallmann, 640 F.2d at 1103.

In fashioning its remedy in this case, the Board attempted to put the parties in the place they would have been had ASI not made the “no union” statement. This may literally be impossible as “The Moving Finger writes; and, having writ, Moves on: nor all your Piety nor Wit Shall lure it back to cancel half a Line, Nor all your Tears wash out a Word of it.” Edward Fitzgerald, The Rubaiyat of Omar Khayyam, st. 71 (4th ed. 1879). One reasonable hypothesis is that, had ASI not made the “no union” statement, the union and ASI would have bargained to impasse before ASI set the new employment terms. We must give deference to the remedy fashioned by the Board. See New Breed, 111 F.3d at 1464-65. Here, the forfeiture of the right to set the new terms before bargaining to impasse was a permissible method of placing the parties where they would have been had ASI not made the “no union” statement.

The Board applied the presumption that an award of back pay and benefits under the repudiated bargaining agreement restores the status quo ante, but did not consider whether ASI had rebutted that presumption with evidence that it would have bargained to an impasse and imposed less favorable terms. See New Breed, 111 F.3d at 1468; see also U.S. Marine, 944 F.2d at 1323 (“[I]t is for the employer to demonstrate that it is not appropriate [to award back pay]. U.S. Marine has failed to do so”) (quotation marks, citation, and original alterations omitted). Nor did the ALJ make any findings in this regard, as the ALJ did not award back pay and benefits under any exception to the Bums rule.

Those facts that are in the record and bear on this question are equivocal. The ALJ found that of the eight Aero unit employees originally hired on December 1, 1992, four received the same hourly wage they had previously been paid by Aero, two received significantly more, and two received significantly less. ASI provided less vacation time and paid holidays, however, and no medical or dental benefits. Nevertheless, the ALJ found little to indicate that ASI could have found a qualified workforce outside of Aero’s ranks had ASI not been able to come to terms with the incumbent union. The ALJ noted that ASI had rejected transferring employees from a machine shop that Brown owned in Gardena due to the unacceptable commute, and found that, to continue Aero’s business, ASI needed a workforce with specialized skills that were not readily available in the marketplace.

The mere fact that ASI provided fewer benefits under the terms that it imposed provides little indication of what ASI might have agreed to had it fulfilled its obligation to bargain with the Union. The apparent unavailability of qualified workers outside of the Aero unit and the need to complete Aero’s work in progress indicate that the Union might have brought significant negotiating power to the table. On the other hand, the fact of Aero’s bankruptcy indicates that ASI might have been unwilling or even unable to continue to operate the business without significant labor concessions, and might have chosen to liquidate the company’s assets rather than continue operating under the terms of the previous CBA.

Were the question regarding what would have happened had ASI recognized and bargained with the Union presented to us on a record that was ambiguous despite having been fully developed under the correct legal standard, we would resolve any uncertainty by affirming the Board’s award under New Breed. See New Breed, 111 F.3d at 1468. Because the record was not fully developed on this point, however, we remand to permit ASI and the UAW to present evidence on whether ASI would have bargained to impasse and imposed terms, even had ASI honored its obligation to bargain with the Union.

IV

The Petition for Enforcement is GRANTED IN PART and REMANDED IN PART. Each party shall bear its own costs.

Footnotes

1

. To remedy these violations, the Board's order requires that ASI (1) cease and desist these unfair labor practices; (2) recognize and bargain with UAW; (3) make various company records available for Board inspection; (4) post notices at its facilities informing its employees that it will no longer engage in any unfair labor practices; and (5) file a sworn certification with the NLRB's Regional Director that it has taken steps to comply with the order. ASI does not challenge these remedies.

2

. The dissent engages in a semantical attempt to equate the “forfeiture” of the right to set initial employment terms with a “penalty.” The “forfeiture” in this case, however, merely places the parties in the position where they would have been had ASI refrained from engaging in improper conduct. Thus, the "forfeiture” qualifies as a permissible remedy.

3

. To the contrary, ASI hired its entire initial complement of workers from the ranks of a represented unit of its predecessor. The Board’s order, however, was not based on the "perfectly clear” exception to Burns. We therefore do not address the applicability of that exception.