National Labor Relations Board v. Economics Laboratory, Inc.

857 F.2d 931, 129 L.R.R.M. (BNA) 2476, 1988 U.S. App. LEXIS 13012

• Court: Court of Appeals for the Third Circuit
• Decided: September 27, 1988
• Docket: 88-3040
• Status: Published

Opinions

OPINION OF THE COURT

ROSENN, Circuit Judge.

Petitioner National Labor Relations Board (the Board) applies for enforcement of an order directing respondent Economics Laboratory, Inc. (Ecolab or the Company)¹ to bargain with the Highway and Local Motor Freight Drivers, Dockmen and Helpers, Local Union No. 701 a/w International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (the Union) as Ecolab’s exclusive employee representative.

Ecolab, a manufacturer of industrial detergents, consented to a decertification election to determine the representative status of the Union. Four of the ballots cast at the election were challenged, two by the Company and two by the decertification petitioner, each alleging that the challenged voters were ineligible because they were on Long Term Disability (LTD). The Acting Regional Director (RD) declared the challenged voters eligible, counted their votes, and certified the Union. Ecolab nonetheless refused to bargain with the Union, arguing that the Board’s RD had arbitrarily and capriciously determined that LTD recipients were eligible to vote. The Board rejected Ecolab’s objections, and held that Ecolab’s refusal to bargain constituted an unfair labor practice. We deny the Board’s petition for enforcement.²

I.

Under the consent agreement, eligible voters included employees who were employed during a specified pay period as well as employees “who did not work during said payroll period because they were ill.” Employees who resigned or were discharged for cause were excluded.

One hundred four individuals cast ballots at the January 1987 election. Ecolab challenged the votes of Marcello Cruz and Barbara Sturman, while the decertification petitioner, John Galya, challenged the votes of Christine Person and Victor Hunt.³ A count of the remaining ballots revealed fifty votes for, and fifty votes against, the Union. Because the four challenged ballots affected the election results, the Acting Regional Director conducted an ex parte administrative investigation. Ecolab presented documentary evidence to support its contention that the individuals were no longer employees. The RD considered Eco-lab’s submissions, refused to hold a hearing on the employment status of the challenged voters, and concluded that the votes should be counted because the employees had not resigned or been discharged. Each of the challenged votes favored the Union, and, as a result, the RD certified Local 701 as the bargaining unit’s exclusive representative.

A. The LTD Program and Indicia of Employee Status

The LTD program is funded by employee and employer contributions to a trust administered by an insurance company.⁴ Employees are eligible for LTD after a six month waiting period during which they receive Short Term Disability (STD) benefits.⁵ To be eligible for LTD benefits, an employee must be (1) totally disabled, (2) under the care of a doctor, and (3) unable to work for pay. LTD payments continue after twelve months only if the claimant is unable to become qualified for any subsequent job. As long as eligibility is maintained, benefits continue to age sixty-five or seventy, depending upon the employee’s age at the time of the disability.

Ecolab’s written description of the LTD program suggests that the participants are no longer employees. It states:

If it is medically possible for you to go through retraining in a rehabilitation center to learn a new skill or return to your old job, EL wants to provide this opportunity and give you top priority in returning to work with EL. However, returning you to work with the company will depend on your successful rehabilitation and the availability of a job.

Ecolab asserts that it reemployed only one of twenty-three LTD recipients, and that the returning employee was treated as a new applicant. Two other individuals who completed LTD status sought, but were denied, reemployment.

The collective bargaining agreement (CBA) in force before the election required Ecolab to “post as a permanent bid the job of any employee who has been on disability for six (6) months and goes on Long Term Disability.” (Emphasis added). Thus, this provision empowered the employer to permanently replace any employee who, after six months, went on LTD. The CBA also provided that individuals retained their accumulated seniority for up to three years of “no work,” including three years of disability. LTD participants received credit for accumulated seniority only after returning to work. Because seniority was not a consideration in determining whether an LTD recipient would be rehired, a returning employee could not displace a less senior employee from his position.

Finally, Ecolab’s policy and practice was to delete the names of LTD recipients from both its payroll and its “Status of Employees Report.” Ecolab contends that individuals removed from the report are not considered employees for any purpose.

B. The Challenged Voters

Ecolab submitted undisputed documentary evidence regarding the contested voters’ medical conditions and disability status. The RD’s investigator also interviewed the voters to determine whether, at the time of the election, they intended to return to work.

Marcello Cruz, a chemical compound operator, began receiving STD payments in February 1984, almost three years prior to the election. He additionally received LTD and Social Security Disability Income (SSDI) benefits effective August 1984. Undisputed medical evidence demonstrates that Cruz, who suffers from “severe bilateral venous insufficiency of [the] lower extremities,” “leg ulcers,” and “essential hypertension,” is totally disabled and will never recover sufficiently to return to work. Because Cruz was unavailable during the investigation, it is unknown whether he had an intention to attempt to return to work.

Victor Hunt, a fork lift operator, began receiving STD benefits in February 1986, and LTD benefits in August of that year. There is no evidence that he received SSDI benefits. Hunt suffers from liver dysfunction, bradycardia, bronchial asthma, viral syndrome, mitral valve prolapse, paroxysmal atrial fibrillation, and panic attacks. According to undisputed medical evidence, Hunt’s ailments are non-cur able and he is totally disabled. However, Hunt informed the Board investigator that at the time of the election, he still intended to return to work.

Christine Person, a custodian/scrubber, worked at Eeolab until April 1985 when she became eligible for SSDI payments. Person has been on LTD since October 1985. Uncontested medical evidence disclosed that Person has fatal lung cancer and is permanently disabled. During the investigation, Person nonetheless stated that she ultimately intended to return to work.

Barbara Sturman, a chemical compound operator, worked at Eeolab until February 1986, and has been on LTD since August 1986. She suffers from a compression of the cervical spinal cord. Undisputed medical evidence shows that Sturman’s disability permanently disqualifies her from any occupation. At the time of the election, Sturman asserted that she also intended to return to work.

II.

A. Scope of Review

The Board charged that Ecolab’s refusal to bargain with the certified Union constituted an unfair labor practice in violation of 29 U.S.C. § 158(a)(5) and (1). Eeolab asserts that its refusal was predicated upon the RD’s inclusion of non-eligible voters in certifying the Union’s status.⁶ If Ecolab’s contentions are correct, then the Board’s order cannot be enforced; Eeolab is not obligated to bargain with a non-representative Union.

The Board conducted the disputed election pursuant to the terms of the consent agreement which provided that objections and challenges would be investigated by the RD, “whose decision shall be final and binding.” We may reverse the RD’s eligibility determination only if it is arbitrary, capricious, or violative of due process. NLRB v. Staiman Brothers, 466 F.2d 564, 566 (3d Cir.1972). That we might have reached a contrary result based upon the evidence presented is irrelevant; “ ‘something more than error is necessary to spell out arbitrary or capricious actions.’ ” Id. (quoting Carlisle Paper Box Co. v. NLRB, 398 F.2d 1, 6 (3d Cir.1968)).

B. Ecolab’s Claims

Generally, an employee must be employed on the election date and on the last day of the preceding payroll period to vote in an NLRB certification election. NLRB v. Newly Weds Foods, Inc., 758 F.2d 4, 7 (1st Cir.1985). Employees who are laid off or placed on sick or maternity leave pose special problems. The Board has developed different standards to determine whether such persons still “retain their employment status and are therefore considered to have sufficient interest in the outcome of the election to be permitted to vote.” Newly Weds, 758 F.2d at 8 (quoting Whiting Corp., 99 N.L.R.B. 117, 123, rev’d, 200 F.2d 43 (7th Cir.1952)).

Here, the RD applied the Red Arrow standard to the contested voters, noting that:

[t]he Board has long recognized that an employee on sick or maternity leave is presumed to continue in employee status unless and until the presumption is rebutted by an affirmative showing that the employee has been discharged or has resigned.

(citing Red Arrow Freight Lines, Inc., 278 N.L.R.B. 965, 965 (1986)). The RD considered the submitted evidence and, without holding a hearing, concluded that Eco-lab failed to rebut the presumption of continued employment status. After Ecolab’s refusal to bargain, the Board granted summary judgment against it, holding that the RD’s voter eligibility determinations were not arbitrary and capricious.

Ecolab renews its challenge to the Union’s certification on four grounds. First, it vigorously contends that the Red Arrow test is a departure from long established precedent which determined only whether an employee had “a reasonable expectation of returning to work within a reasonable time.” Ecolab asserts that the Board has arbitrarily and capriciously adopted the Red Arrow standard without “analysis, rationale, or meaningful explanation.” Second, Ecolab contends that the RD arbitrarily and capriciously applied Red Arrow to employees on long-term disability, although LTD recipients ordinarily have serious and permanent medical disabilities readily distinguishable from the temporary illnesses suffered by employees on sick leave. Third, the Company contends that the RD acted arbitrarily, capriciously, and in violation of due process when it refused to accord Ecolab a hearing on the employee status question. Finally, it argues that the RD arbitrarily and capriciously concluded that the presumption of eligibility was not rebutted.

Ecolab’s first three contentions have much to commend them. It is not clear that the Red Arrow test deserves judicial deference⁷ or that the RD correctly applied the test to determine the status of LTD recipients.⁸ However, we need not reach these issues⁹ because we believe that our resolution of Ecolab’s fourth issue asserting that RD acted arbitrarily and capriciously in finding that the contested voters were eligible to vote, even under the Red Arrow test, is dispositive.

C. The Employee Status of the Contested Voters

Under the rebuttable presumption test applied by the RD, the voter eligibility of individuals on sick leave may be challenged only by “an affirmative showing that the employee has been discharged or resigned.” Red Arrow, 278 N.L.R.B. at 965. Here, the RD reviewed the evidence sub-mitted¹⁰ and concluded:

In the instant case, neither the evidence proffered by the Employer nor that adduced by the investigation revealed that the challenged voters had been terminated or resigned from employment. While their physicians have not declared them well enough to return to work, with the exception of Cruz, who was unavailable during the investigation, the other three employees have all expressed an intent to return to work when able to do so. Further, they all receive monthly disability benefits from the Employer’s disability insurance carrier and are covered by the Employer’s health insurance benefit program. Accordingly, in the absence of evidence that they have been terminated or resigned, I conclude that Marcello Cruz, Victor Hunt, Barbara Sturman, and Christine Person were employed in the unit during the voter eligibility period and that their ballots should be opened and counted.

Ecolab contends that the RD made his determination arbitrarily and capriciously.

Although our scope of review is limited, Staiman Brothers, 466 F.2d at 566, the RD’s determination cannot stand. Even under the arguably invalid Red Arrow standard, the RD arbitrarily and capriciously ignored past Board precedent and permitted an important union decertification vote to rest upon the votes of individuals who were no longer Ecolab employees.

A party seeking to preclude a vote at a Board-conducted election bears the burden of establishing ineligibility. Bo-ed, Inc., 281 N.L.R.B. No. 85 (Aug. 29, 1986). Employment status generally continues until there has been “a manifestation of the intent to terminate which is clearly communicated to the other party.” Staiman Brothers, 466 F.2d at 566. A comprehensive review of the Board’s treatment of employees on sick and maternity leave reveals, however, that the Board has considered a variety of factors in determining whether contested voters remain eligible to vote in union elections. The Board has examined whether the employer’s payroll or personnel records manifest termination; whether the contested voter has been permanently replaced; whether communications between the employer and employee suggest termination or resignation; whether the contested voter has retained his or her seniority; and whether the contested voter’s medical status will permit a return to work. See Voter Eligibility, 85 A.L.R. Fed. 188 (1987). The Board’s past practices disclose that no single factor is controlling. In no case, however, has the Board found that a person retained employment status on facts similar to those presented here.

Ecolab presented abundant evidence of termination, including the removal of LTD participants from the payroll and Employee Status Report,¹¹ and their replacement, according to the terms of the CBA, with permanent employees.¹² Further, Ecolab’s LTD program plainly communicated an intention to terminate LTD recipients by stating that, although they would be accorded “top priority,” their return “to work with the company will depend on [their] successful rehabilitation and the availability of a job.”

In the face of this overwhelming evidence of employment termination, the RD cryptically concluded that the evidence did not reveal “that the challenged voters had been terminated or [had] resigned from employment.” In so holding, the RD seems to have transformed Red Arrow’s rebuttable presumption of continued employment into an irrebuttable presumption that employees on disability leave remain employees absent specific termination letters.¹³ The Board admits, however, that under some circumstances, constructive terminations might be sufficient to rebut the Red Arrow presumption, but the RD apparently failed to consider that possibility here.

The RD relied on a number of additional factors in finding that LTD recipients remained employees. At best, these factors provide equivocal or insignificant evidence of a continued employment relationship. For example, the RD noted that LTD recipients continued to receive health benefits from both the employer’s insurance carrier and from the employer itself.¹⁴ Although these facts, including the absence of a specific discharge letter, are consistent with Ecolab’s adoption of a humane disability program, they are not necessarily indicative of continued employment status. Retirees, for example, who are no longer employees eligible to vote, often retain similar benefits.

The RD noted that LTD recipients retained seniority rights for three years, but he failed to recognize that these rights were limited. Employees could not assert seniority rights to obtain employment reinstatement should they terminate LTD. Only if a job became available with the company and the employee were rehired would seniority rights regain their vitality. At that point, seniority rights were restored retroactively. The RD also relied upon LTD participants’ retention of the ID cards and uniforms which terminated employees were asked to return. No significance may be ascribed to retention of ID cards and uniforms by employees absenting themselves for LTD because the employer had no way of knowing on their last work day that they would thereafter never return to work. Although considered by the Board, these factors are not determinative.¹⁵

Finally, the RD refused to consider the relevance of Cruz’s and Person’s receipt of SSDI benefits, holding that evidence of their permanent disability was irrelevant under the rebuttable presumption test. This refusal was arbitrary and capricious, even assuming that the Board’s rejection of the “reasonable expectation” test in Red Arrow was proper. See supra note 7. Cruz’s and Person’s SSDI benefit applications are indeed objective evidence of their inability to return to work and therefore relevant; in applying for benefits, an applicant has the burden of proving an inability to engage in any substantial gainful activity for at least twelve months. See 42 U.S.C. § 423(d)(1), (d)(2)(A) (1982 & Supp. III 1985); Staiman Brothers, 466 F.2d at 566-67 n. 3; NLRB v. Connecticut Foundry Co., 688 F.2d 871, 878 (2d Cir.1982) (receipt of disability benefits is relevant factor in determining eligibility).

The RD appeared to rely upon the Board’s decisions in Red Arrow, 278 N.L.R.B. 965, and in Atlanta Dairies Cooperative, Inc., 283 N.L.R.B. No. 51. In Red Arrow, the Board found that an employee on sick leave remained eligible to vote where she remained on the payroll and continued to receive benefits such as holiday pay and vacation accrual, and where her position remained open. 278 N.L.R.B. at 965. In Atlanta Dairies, 273 N.L.R.B. No. 51, the employer’s own credit manager testified that the employer’s policy mandated that disabled employees be carried on the company’s employment rolls until retirement. Both cases are thus wholly distinguishable on their facts.

We therefore hold that the RD arbitrarily and capriciously determined that the contested voters remained Ecolab employees eligible to vote in the decertification election. Because the RD’s determination had no basis in either fact or law, it constituted reversible error.

III.

In summary, we deny the Board’s petition for enforcement of its order against Ecolab because the RD arbitrarily and capriciously concluded that the employer had not rebutted the presumption of eligibility.

Costs taxed against the Board.

1 . In the course of this litigation. Economics Laboratory, Inc. has changed its name to Eco-lab, Inc.

2 . This court had jurisdiction over the Board’s application for enforcement under 29 U.S.C. § 160(e), § 151.

3 .The names of all LTD participants were included in a list of employees submitted by Eco-lab. Ecolab admits that it erred in submitting a list that included LTD participants and in failing to challenge the votes of at least two other LTD participants. It asserts, however, that these errors arose from excusable neglect rather than from inconsistent policy.

4 . LTD participants are paid 60% of their monthly earnings, an amount which may be reduced by any sum paid or payable pursuant to other federal, state, or private disability programs. Thus, participants are warned that "[i]t is very important that you apply for Social Security benefits, since your LTD benefit will be reduced by the amount of any disability benefit for which you are eligible — regardless of whether you actually receive the benefit."

5 . The Short Term Disability program ceases "after six consecutive months of disability or upon the employee's qualifying for LTD, whichever occurs first.”

6 . The RD also considered and rejected other Eeolab objections to the election procedures. Eeolab has not pursued these objections and they are therefore waived. NLRB v. Browning-Ferris Industries, Inc., 691 F.2d 1117, 1125 (3d Cir.1982).

7 .Ecolab argues that the RD should have determined only whether the challenged employees have a “reasonable expectancy of reemployment within a reasonable time in the future.” See, e.g., Price’s Pic-Pac Super Markets, Inc., 256 N.L.R.B. 742, 743 (1981) (reasonable expectation test applied to determine status of individual on sick leave), enf'd, 707 F.2d 236 (6th Cir.1983); Whiting Corp. v. NLRB, 200 F.2d 43, 45 (7th Cir.1952) (same). The Board contends that the reasonable expectation test is used to determine the status of laid-off employees but that the rebut-table presumption test has ordinarily been applied to determine the status of individuals on sick or maternity leave. See Red Arrow, 278 N.L.R.B. at 965; Atlanta Dairies Cooperative, Inc., 283 N.L.R.B. No. 51 (Mar. 25, 1987). The Board asserts that the Red Arrow standard is not arbitrary and capricious because it merely reiterates and clarifies long-standing Board policies mandating differential treatment of employees who are laid off and those on sick or maternity leave. See Medline Industries, Inc. v. NLRB, 593 F.2d 788, 791 (7th Cir.1979) (collecting cases utilizing rebuttable presumption rule). The Board admits, however, that these tests of employee status have not been consistently applied, Red Arrow, 278 N.L.R.B. at 965 n. 5, and therefore we believe that they may not be accorded the traditional degree of judicial deference granted to agency determinations, INS v. Cardoza-Fonseca, 480 U.S. 421, 107 S.Ct. 1207, 1221 n. 30, 94 L.Ed.2d 434 (1987). Further, where the voter’s employee status is uncertain, the Red Arrow rebuttable presumption standard appears to directly conflict with prior precedent and the policies underlying federal labor law to the extent that it precludes consideration of the employees' reasonable expectation of future employment. See, e.g., Red Arrow, 278 N.L.R.B. at 965 n. 4; Newly Weds, 758 F.2d at 8; Annotation, Voting Eligibility of Employees Absent Because of Illness, Injury, or Maternity Leave, 85 A.L.R.Fed. 188 (1987). Red Arrow may also conflict with our decision in Staiman Brothers, 466 F.2d at 567, if, as the Board appears to contend, it precludes consideration of the disability status of contested voters.

8 . The Board's adoption of a rebuttable presumption test for employees on sick or maternity leave is based upon two assumptions: "in those situations, a more definite time frame is established ... and there is a much greater chance that the employees will return to the same place of employment. Thus, there exists in those situations ... a reasonable expectation of return to work.” Sid Eland, Inc., 261 N.L.R.B. 11, 11 (1982) (contrasting injury or maternity leave with other leaves of absence). Where these assumptions are not true — as where an employee is permanently disabled — application of the rebuttable presumption test may be arbitrary and capricious because there simply is no "reasonable expectation of return to work."

9 . Ecolab contends that its medical and documentary evidence was sufficient to raise a substantial and material question as to whether the challenged voters were in fact employees. Eco-lab’s undisputed submissions demonstrated that the contested voters were permanently disabled, that they would never be able to return to work, that they had been removed from the Company payroll and Employee Status Report, and that their employer no longer treated them as employees. Ecolab asserts that it therefore met its burden of presenting a prima facie case of voter ineligibility and that the RD acted arbitrarily and capriciously in refusing to hold a hearing on the employee status question.

10 . The RD summarized the evidence of employment status as follows:

The Employer contends that once employees are on LTD they are no longer part of its regular employee complement. In this regard, they are not counted in the budget, their jobs are permanently bid out, they do not participate in bidding or bumping, they do not appear on the payroll, they do not receive vacation or holiday pay, nor are they affected by wage increases or decreases negotiated with the Union.... The Employer proffered the opinion of Gary Goldstein, M.D., whose opinion, after viewing medical records and consulting with the employees’ personal physicians, was that these employees were permanently disabled and could not reasonably be expected to return to work.

It is undisputed that employees on LTD retain their seniority for three years.... They receive life insurance and dental coverage provided by the Employer and they retain their I.D. cards and uniforms, which terminated employees are required to return. Further, as of the date of the election, these employees had neither been terminated by the Employer nor had they resigned.

11 .It is undisputed that Ecolab’s Employee Status Report is the document issued by it for all personnel actions. Layoffs, recalls, and job bidding are determined by the information in this report. A person whose name does not appear on this report is not deemed an employee. Compare Sterling Cotton Mills, Inc., 74 N.L.R.B. 1274, 1276 (1947) (employment status ceases when name removed from payroll); Cone Mills Corp., 107 N.L.R.B. 866, 869-70 (1954) (where employer’s personnel records indicate termination, employee declared ineligible); Hercules, Inc., 225 N.L.R.B. 241, 241-42 (1976) (employee ineligible where internal company documents indicate termination); Harry Lunstead Designs, Inc., 270 N.L.R.B. 1163, 1164 (1984) (ineligible where employee removed from payroll pursuant to company procedure); with Newly Weds, 758 F.2d at 7, 9 (eligible where employee remains on payroll); National Medical Hospital, Inc., 210 N.L.R.B. 894, 894 (1974) (eligible where employee’s name not removed from payroll), enf’d, 528 F.2d 938 (9th Cir.1975); Sexton Welding Co., 96 N.L.R.B. 454, 455 (1951) (eligible where employer’s payroll contained penciled notation manifesting intent not to rehire where employer had misled employee as to status); Gastonia Combed Yarn Corp., 73 N.L.R.B. 169, 174 (1947) (eligible where employer did not have a policy of removing names from payroll).

12 . The Board has previously considered the effect of replacement of injured or sick employees. See, e.g., Whiting Corp. v. NLRB, 200 F.2d at 45 (ineligible where permanently replaced); Tampa Sand & Material Co., 137 N.L.R.B. 1549, 1550 (1962) (same). Compare Armour & Co. of Delaware, 36 N.L.R.B. 306, 310 (1941) (eligible where not replaced); Keeshin Charter Service, Inc., 210 N.L.R.B. 780, 792-93 (1980) (eligible where employee not told of replacement).

13 . Under the Board’s interpretation, a paraplegic on LTD status for ten years • who never resigned and to whom the employer did not send a notice of discharge would remain eligible to vote and could determine the status of the employees’ labor relations, even if the paraplegic is no longer physically capable of performing any job task available with the employer.

14 . The Board notes that LTD recipients appeared on the list submitted by the employer and that some of these individuals voted without challenge. However, Ecolab contended before the RD that the list was a list of union members, not of employees, and that names were not removed from the list until Ecolab received notification that the individual was not a union member. The votes of other LTD recipients are therefore not determinative of the status of the contested voters.

15 . The RD also relied upon the expressed intention of the voters to return to work. While this evidence may be relevant to determine whether the employees had resigned from employment, it does not determine whether they had been terminated.