The Laidlaw Corporation v. National Labor Relations Board

414 F.2d 99

• Court: Court of Appeals for the Seventh Circuit
• Decided: September 2, 1969
• Docket: 17033
• Status: Published

Opinions

SWYGERT, Circuit Judge.

The principal question presented in this review is whether the rule enunciated in NLRB v. Fleetwood Trailer Co., 389 U.S. 375, 88 S.Ct. 543, 19 L.Ed.2d 614 (1967), should be applied to the facts in this case.

The Laidlaw Corporation is engaged in the manufacture of wire and related products. It petitioned this court to review an order of the Labor Board issued June 13, 1968. The Board cross-petitioned for the enforcement of its order.

The violations of the National Labor Relations Act which the Board found were: section 8(a) (1) by threatening to deny employment forever to its employees if they struck and were replaced and by maintaining an invalid no-distribution rule; and section 8(a) (3) and (1) by failing and refusing to offer a replaced striker full reinstatement to his former job, by terminating the employment status of a large number of other replaced strikers following their unconditional offer to return to work, and by later failing and refusing to offer them reinstatement.

The factual background giving rise to these violations is as follows. In June 1962, as a result of a representation election, the International Brotherhood of Pulp, Sulphite and Paper Mill Workers, AFL-CIO, was certified as the collective bargaining representative of Laidlaw’s production and maintenance employees at its Peru, Indiana plant. Since then Laidlaw and the union have operated under successive collective bargaining agreements, the most recent covering the period December 14, 1964 to December 13, 1966. The contract contained a provision for mid-term negotiations with respect to wages. Such negotiations, if requested by either party, were to take place during the period from December 14, 1965 to January 13, 1966.

In October and November 1965 the union notified Laidlaw of its desire to reopen the contract pursuant to the wage-reopener clause in order to renegotiate wages. Thereafter the parties met at various times in December 1965 and January 1966. At a meeting on January 7, 1966 the company refused to offer any wage increase, asserting that it had lost money in previous years and wanted to see whether its operations, which had been profitable for the first two months of its current fiscal year, would continue to show a profit for the next three months. The company said that it would agree to new wage negotiations in three months if the union would abandon its demands.

On January 8, 1966 the employees rejected the company’s proposal and voted to strike in support of their demand for a wage increase.

On January 11 the union sent the company a telegram stating that the strike would begin at noon on January 12. That afternoon, plant manager Johnston read a prepared speech to about seventy-five of the company’s employees. He said in part:

The Company has decided to continue to operate through the strike, and in doing so will provide work for all employees who decide to work and will hire new employees to replace those on strike.

Mr. Wentz has told those of you at the Union meeting last Saturday that our attorney Mr. Duck lied to you on last Friday when he told you that under Federal Law if you do go on strike and the Company hires a replacement for you you Lose Forever your right to employment by this company. I want to assure you that such IS the law. Mr. Duck told you the absolute truth. Let me suggest that before you take action that can seriously and permanently affect your future here, you cheek with any lawyer of your own choice or with the Indianapolis Office of the National Labor Relations Board. You will find Mr. Wentz has misled you and Mr. Duck has told you the absolute truth. (Emphasis in original text.)

The following day, seventy of the company’s ninety-nine employees went on strike. Picket lines were immediately set up with signs reading, “Local 681 on strike for fair wages.”

William Massey, an employee of the company since June 1961, was one of the strikers. On February 14 he telephoned his supervisor and asked to return to work and was told to report the next morning. When Massey arrived, he was informed by the employment manager that his job was “filled” at that time as were the jobs of all male employees. He was also told that if the company were to reemploy him, it would be as a “new employee” at the minimum contract starting wage. Three days later the employment manager telephoned Massey and asked him to return to work. Massey was assured that he would receive the same pay he was earning when he went on strike, but that he “would have to be reinstated as a new employee.” Later that afternoon, Massey spoke with the plant manager about the loss of his accrued seniority and vacation rights. He was told that he would be denied his seniority and vacation pay. Massey refused to return to work under these circumstances and continued to strike.

During the strike, plant manager Johnston told foreman Bridges that they should replace the strikers “as fast as we can” and to get rid of the employees with the most senority because they were the “troublemakers.” On February 10 approximately fifty of the striking employees met and voted to abandon the strike and return to work. The following morning about forty strikers appeared at the plant and conveyed their desire for reinstatement. The union representative informed Johnston of the vote taken the preceding day and handed him a sheet of paper which “outlined briefly” the employees’ decision to return to work. Additionally, each of the employees present gave to Johnston a printed form letter stating:

On January 12, 1966 I, along, with some 70 other Laidlaw employees, went on strike in protest of certain unfair labor practices.

As of this date I am unconditionally offering to return to work immediately.

Please advise me immediately.

Following a telephone conversation with the company’s attorney, Johnston read the following statement to the gathered employees:

Many of you have been permanently replaced and are not entitled to reinstatement. As soon as we can determine if there are job openings today, those of you for whom there are such openings, if any, will be notified on or before Monday to report to work.

The union representative emphasized to Johnston that although many of the strikers were not present that morning, “our unconditional offer to return did apply to all of the members of the local union.”

Following this meeting with the employees, the company determined that, as of February 11, all but five of the strikers had been replaced and, hence, only five employees were needed to bring the work force up to its prestrike level. On February 11 five of the striking employees were notified by telegram of the vacancies and offered reinstatment.

On February 15 the company received five additional requests for reinstatement from striking employees. Again, the company checked its vacancies and determined this time that it had nine openings. Accordingly, it sent employment offers to all five. Four of the five returned to work the next day. The fifth requesting employee made no response. The other four openings were “filled with new hires,” whose applications the company had “on file.” The new employees also reported for work the next day. In deciding how to fill the remaining four openings, the company gave no consideration to any of the striking employees who had applied for work on February 11 because, according to Johnston, “We were handling this on the basis of the dates they applied for reinstatement,” and “if they didn’t apply on the right day [the company was not] going to call them the next day, so to speak.”

On February 16 the company received four more requests for reinstatement from strikers. At this time, however, the company had no openings, and it, therefore, made no offers. On the same day, the company began mailing to the Indiana Employment Security Division printed “termination” notices, setting forth the “date of separation” of each striking employee to whom it had not offered reinstatement, which in each case was the date on which the company received the striker’s request for reinstatement. Each notice stated, “This person permanently replaced while on economic strike and no job available on [date of application for reinstatement].” Copies of these notices were also sent to each affected employee.

On February 18 the company received applications for reinstatement from three more strikers. Johnston again reviewed the company’s needs for that day and determined that four jobs were available. The three employees whose applications were received that day were offered reinstatement. Again, none of the strikers whose application for reinstatement had been received on previous days was considered for the additional vacancy; the opening was considered for the additional vacancy; the opening was filled with a new employee.

During the week of February 14 to 18, the employees who were not reinstated continued to picket outside the company’s premises, but when the reinstated employees approached the plant to go to work, the picketing employees took the picket line down in order to allow them to enter without having to cross a picket line.

On February 20 a group of approximately eleven employees who had been reinstated or offered reinstatement met with the union representative. These employees protested the company’s act of terminating many of the strikers and its failure to reinstate numerous strikers despite job openings. The representative told the employees that they had the right to file unfair labor practice charges based on the termination of union members’ employment and that if they did not wish to return to work, they did not have to do so. The employees then decided that they would “go on strike under the sign of an unfair labor practice strike.”

The next day, the picket signs were changed to read, “Local 681 International Brotherhood of Pulp and Sulphite on strike protesting unfair labor practices.” After February 21 the company continued to advertise for new employees, as it had done from the beginning of the strike on January 12. From February 12 to March 21, the company hired a total of some fifty new employees. The company made'no further offers of employment to any of the strikers.

The Board found that the company violated section 8(a) (3) and (1) of the Act by refusing to reinstate striker Massey when his former job became available unless he agreed to return as a new employee without accrued seniority and vacation rights. The Board also found that the company violated section 8(a) (3) and (1) of the Act by terminating the employment status of strikers whose jobs were held by permanent replacements on the date they applied to return to work. The Board held that, absent substantial business justification, the company was required to offer reinstatement to these strikers as vacancies arose because of the departure of permanent replacements. Alternatively, the Board held that the company did not seek out these strikers as vacancies arose because it sought to penalize them for participating in the strike and that such a motive for filling vacancies with new employees was impermissible under section 8(a) (3) and (1) of the Act.

Laidlaw had posted, distributed to its employees, and otherwise maintained a set of plant rules. “Minor” Plant Rule Number 7 prohibited “Circulating petitions or printed matter of any kind on company premises.” A “violation” of this rule subjected the offender to disciplinary warnings and possible dismissal. The Board found that the company violated section 8(a) (1) of the Act by maintaining the unduly broad no-solicitation rule and by threatening employees that if they went on strike, they would be replaced and would lose their employment rights forever.

The Board’s order requires the company to cease and desist from the unfair labor practices found and from in any other manner interfering with, restraining or coercing its employees in the exercise of their section 7 rights. Affirmatively, the company is directed to rescind the invalid no-distribution rule; to offer Massey and the fifty other strikers whose employment was terminated immediate and full reinstatement with back pay from the dates on which the company should have hired them as their jobs became available, with the order of hiring to be determined by departmental seniority; to offer the reinstated employees who resumed striking on or before February 21 immediate and full reinstatement upon their unconditional offer to return to work; and to post the customary notices.

In its decision, the Board held that economic strikers “who unconditionally apply for reinstatement at a time when their positions are filled by permanent replacements” not only remain employees, but are entitled to full reinstatement upon the departure of replacements unless they have in the meantime acquired regular and substantially equivalent employment or unless the employer has sustained his burden of proof that the failure to offer full reinstatement was for legitimate and substantial business reasons. In so holding, the Board said that it was following the underlying principle enunciated in both NLRB v. Fleetwood Trailer Co., 389 U.S. 375, 88 S.Ct. 543, 19 L.Ed.2d 614 (1967), and NLRB v. Great Dane Trailers, 388 U.S. 26, 87 S.Ct. 1792, 18 L.Ed.2d 1027 (1967). It noted that the Supreme Court in Fleet-wood had held that the hiring of new employees at a time when there are outstanding applications for reinstatement from striking employees is presumptively a violation of the Act, regardless of intent, unless the employer demonstrates a “legitimate and substantial business reason” for his failure to hire the strikers. The Board concluded that the situations in Fleetwood and the present case are parallel and that the Fleetwood rule should be applied against Laidlaw. The Board said: “when job vacancies arose as the result of the departure of permanent replacements, Respondent [Laid-law] could not lawfully ignore outstanding applications for reinstatement from strikers and hire new applicants. * * ” We agree with the Board’s views and its holding.

After the strike ended on February 10 Laidlaw adopted a fixed policy with reference to strikers who sought reinstatement. It considered only those striker-applicants who applied for reinstatement on the very day vacancies occurred. If there were no vacancies at the time the strikers applied, the company considered the employee status of those striker-applicants as terminated. The company admitted that this was its policy.¹

In Fleetwood, a similar position was asserted by the employer with respect to openings occurring during the time the employer gradually returned to his pre-strike level of production. The Supreme Court unequivocally rejected the contention that the strikers lost their right to reinstatement because no openings were available at the time they asked to return to work. On this point the Court said:

It was clearly error to hold that the right of the strikers to reinstatement expired on August 20, when they first applied. This basic right to jobs cannot depend upon job availability as of the moment when the applications are filed. The right to reinstatement does not depend upon technicalities relating to application. On the contrary, the status of the striker as an employee continues until he has obtained “other regular and substantially equivalent employment.” (29 U.S.C. § 152(3).) Frequently a strike affects the level of production and the number of jobs. It is entirely normal for striking employees to apply for reinstatement immediately after the end of the strike and before full production is resumed. If and when a job for which the striker is qualified becomes available, he is entitled to an offer of reinstatement. The right can be defeated only if the employer can show “legitimate and substantial business justifications.” NLRB v. Great Dane Trailers. NLRB v. Fleetwood Trailer Co., 389 U.S. at 380-381, 88 S.Ct. at 547.

In defense of its position, Laidlaw contends that permanent replacement of economic strikers constitutes a legitimate and substantial justification for not offering the strikers reinstatement. Once jobs are filled by “permanent” employees during an economic strike, the company maintains that the strikers have no right to reinstatement even though the replacements depart from their jobs. For support of this proposition, the company relies on the Fleetwood decision and NLRB v. Mackay Radio & Tel. Co., 304 U.S. 333, 58 S.Ct. 904, 82 L.Ed. 1381 (1938). Its reliance is misplaced.

In Mackay, the Supreme Court was faced with a situation where all but five of the employees who had struck for higher wages were rehired after the strike ended. The Board had found the employer guilty of an unfair labor practice because it had failed to reinstate these five strikers, holding that this failure was motivated by antiunion animus. The Supreme Court, in reversing the Ninth Circuit, affirmed the Board. The Court made it clear, however, that the basis of its holding was the employer’s antiunion motivation and that the Act did not require an employer to discharge permanent striker replacements. The Court said that it is not “an unfair labor practice to replace the striking employees with others in an effort to carry on the business”; that the employer retains “the right to protect and continue his business by supplying places left vacant by strikers”; and that the employer “is not bound to discharge those hired to fill the place of strikers, upon the election of the latter to resume their employment, in order to create places for them.” 304 U.S. at 345-346, 58 S.Ct. at 910-911. In conclusion, the Court said that so long as the employer was not antiunion motivated, he might “resort to any one of a number of methods of determining which of its striking employees would have to wait because [other] men had taken permanent positions during the strike.” 304 U.S. at 347, 58 S.Ct. at 911. (Emphasis added.)

In Fleetwood, the Supreme Court said that “unless the employer who refuses to reinstate strikers can show that his action was due to ‘legitimate and substantial business justifications,’ he is guilty of an unfair labor practice.” 389 U.S. at 378, 88 S.Ct. at 546. The Court went on to observe:

In some situations, “legitimate and substantial business justifications” for refusing to reinstate employees who engaged in an economic strike have been recognized. One is when the jobs claimed by the strikers are occupied by workers hired as permanent replacements during the strike in order to continue operations. Id. at 379, 88 S.Ct. at 546.

The justification for not discharging replacements in order to reinstate strikers, found in Mackay and mentioned in Fleetwood, is the need of the employer to assure permanent employment to the replacements so that the necessary labor force can be obtained to maintain operations during a strike. But such a justification is not present in the instant case.. There is no question about the retention of the replacements who were hired during the strike on a permanent basis. The only question is whether the strikers are to be considered employees after the strike, having rights to reinstatement if the replacements depart from their jobs. The legitimate business reason for not discharging replacements in order to reinstate strikers, mentioned in Mackay and Fleetwood, did not authorize denying the Laidlaw strikers reinstatement after the replacements had for one reason or another departed from their jobs subsequent to the strike’s termination. Although there is a “legitimate and substantial business justification” for requiring replaced economic strikers to wait for reinstatement until a vacancy occurs in the labor force, no justification was advanced by Laidlaw for its decision to consider the employment status of striker-applicants terminated if, on the day they applied for reinstatement, their former positions were still occupied by permanent replacements.

Laidlaw argues that the Board’s decision “creates in perpetuity a vested interest of an employee in the job, or any substantially equivalent job, he held when he first went on strike.” It asks: “When does a striker’s right to reinstatement expire, if ever?” The answer to this argument is that here the employer refused to consider reinstatement only days after the strikers applied and vacancies occurred. In these circumstances, the Board was not required to determine what the impact of the passage of time or inability to notify applicants of vacancies might have on the employer’s duty to honor applications for reinstatement.²

Laidlaw advances an additional argument why the Board’s decision is erroneous. It says that “the Board’s decision and order requires it to seek out strikers after February 11, 1966, and offer them reinstatement as jobs become available.” This duty, according to Laidlaw, was based on the Board’s finding that the strikers’ requests to return were continuing in nature. The company argues that this finding is not supported by the record. In our opinion, an examination of the record does support the finding made by the Board.

The strikers not only applied for reinstatement through their union representative; they applied individually through form letters.³ Moreover, they continued to picket at the company’s plant. Finally, a week after the wage-demand strike had ended, the reinstated strikers joined the picket line with signs expressly protesting the company’s failure to offer reinstatement to their fellow strikers. The company could not possibly have entertained any reasonable doubts that the strikers wanted their jobs back.

But Laidlaw argues that since the strikers’ requests for reinstatement on February 11 stated, “I am unconditionally offering to return to work immediately,” the use of the word “immediately” meant now, at this moment, and not some time in the future. Therefore, it says the Board was wrong in inferring that the demand for reinstatement was a continuing one. We are not impressed by this argument. The use of the word “immediately” was reasonably intended to mean that the striker-applicant was ready to go to work at the time he applied for reinstatement and thereafter.⁴

The Board based its finding that section 8(a) (3) and (1) was violated on alternative grounds. Not only did the Board hold that, regardless of Laidlaw’s motivation, the company unlawfully discriminated against the strikers when it terminated their employment if there were no vacancies on the very day they applied for reinstatement, but the Board also held that Laidlaw was discriminator-ily motivated when it failed to reinstate the economic strikers when vacancies occurred after February 11.

In its decision, the Board said, “Moreover, we find in accord with the Trial Examiner, that Respondent [Laidlaw] was in fact discriminatorily motivated when it implemented its avowed policy of not considering the strikers once they had been replaced or if no vacancy existed on the date of application.” This finding is supported by substantial evidence.

Although all the strikers unconditionally asked to return to work immediately, the company continued to advertise for and hire new workers. At the time of the hearing, approximately fifty new workers had been hired to fill vacancies resulting from employee turnover. There is no showing that these fifty openings could not have been filled by striker-applicants.

But more important on this issue was the company’s announced attitude toward the union members before the strike. Two days before the strike, foreman Krile told employee Lempke that he had orders to replace the four or five union members in his department. On the day of the strike, plant manager Johnston read the speech to employees in which he emphasized that if they went on strike and were replaced, they would “lose forever” their right to employment by the company. And during the strike, Johnston told foreman Bridges that they should replace strikers “as fast as we can” so that they could get rid of the “troublemakers.”

This evidence, when considered with the fact that not one striker who had been replaced was recalled and in light of the company’s advertising for permanent unskilled help and its hiring of approximately fifty new employees to fill vacancies, is sufficient to establish a prima facie showing of unlawful motive. The company failed to offer any reason for preferring new workers as opposed to strikers. For these reasons, the finding of unlawful motive must stand.

We are also convinced that the record, when considered as a whole, warrants the Board’s finding that Laidlaw violated section 8(a) (1) of the Act by threatening employees prior to the strike that if they struck they would be replaced and would forever lose their employment rights and by its maintaining a rule which prohibited circulating petitions or printed matter of any kind on company premises.

Laidlaw’s final contention relates to the scope of the Board’s order. It argues that even if the Board’s holding is correct, the imposition of back pay liability is improper because the revised Board policy is being applied to conduct which was lawful at the time the conduct was performed. In support of its position, the company cites section 10(e) of the Administrative Procedure Act which requires the reviewing court to set aside agency action which is arbitrary, capricious or an abuse of discretion. It also refers us to a number of decisions, including NLRB v. E & B Brewing Co., 276 F.2d 594 (6th Cir. 1960); NLRB v. Guy F. Atkinson Co., 195 F.2d 141 (9th Cir. 1952); and NLRB v. Local 176, United Brotherhood of Carpenters, 276 F.2d 583 (1st Cir. 1960). These cases stand for the proposition that in certain situations the Board’s adoption of a new rule or policy may not be applied retroactively where its practical effect is to create a hardship on the employer disproportionate to the public ends to be accomplished.

The Board maintains that remedial relief ordered in this case should stand. To justify retroactive relief, it cites the statement of the Supreme Court in SEC v. Chenery Corp., 332 U.S. 194, 203, 67 S.Ct. 1575, 1760, 91 L.Ed. 1995 (1947), to the effect that retroactivity “must be balanced against the mischief of producing a result which is contrary to a statutory design as to legal and equitable principles.”

In the case before us, we believe that the importance of protecting the statutory rights of Laidlaw’s employees outweighs the fact that the company may have relied on a prior Board rule or policy. We are in agreement with the statement made by the General Counsel in his brief: “Unless the disadvantaged strikers are compensated, they will have been penalized for exercising statutorily protected rights and the effect of discouraging future such exercises will not be completely dissipa+ed. In these circumstances, it was not arbitrary or capricious for the Board to conclude that complete vindication of employee rights should take precedence over the employer’s reliance on prior Board law.”

The Board’s order will be enforced.

1 . Plant Manager Johnston testified before the trial examiner as follows:

Q. You felt no obligation whatsoever on the 15th [of February] to fill these other five slots with people who applied just two or three days before that, when they were former employees?

A. We were handling this on the basis of the dates they applied for reinstatement.

Q. If they didn’t apply on the right day you weren’t going to call them the next day, so to speak? * * *

A. Yes, sir.

2 . We do not view the employer’s duty to seek out replaced economic strikers to be a severe burden in practice. “Employers, who presumably retain the addresses and phone numbers of the strikers, should not find it overly burdensome to give them notice that a position has fallen vacant.” 82 Harv.L.Rev. 1777, 1779 (1969).

3 . The union representative’s request was sufficient to constitute an offer on behalf of each striker. NLRB v. Brown & Root, Inc., 203 F.2d 139, 147 (8th Cir. 1953).

4 . The employer argues that our decision in Sax v. NLRB, 171 F.2d 769 (7th Cir. 1948), is controlling here. To the extent that case is applicable, we view it as inconsistent with the Supreme Court’s subsequent Fleetwood decision.