National Labor Relations Board v. Pan American Grain Co. , 432 F.3d 69 ( 2005 )

BOUDIN, Chief Judge.

We have before us an application by the National Labor Relations Board (“the Board” or “NLRB”) for enforcement of the order it issued against a grain processing company, Pan American.¹ Pan American cross-petitions to set aside portions of the Board’s order.

Pan American is a Puerto Rican company that manufactures animal feed and processes rice for human consumption. Congresso de Uniones Industriales de Puerto Rico (“the Union”) has been the collective-bargaining representative of Pan American’s production and maintenance employees for many years, but the last collective-bargaining agreement between the Union and Pan American expired in 2000 for two Pan American facilities (the Amelia and Corujo facilities) and 2002 for the other (the Arroz Rico facility).

From 1996 to 2002, Pan American undertook a long-term project designed to modernize and automate some of its facilities; it initiated this project to help offset the cost of complying with an Environmental Protection Agency consent decree. These upgrades caused the company’s staffing needs gradually to decline, and Pan American laid off one or two employees each year during the modernization.

In January 2002, employees at the Amelia and Corujo facilities went on strike. The strike caused a decline in sales. The following month, the company president met with two managers and the group decided that, because of the decline in sales and the increased efficiency resulting from the modernization, fifteen employees should be permanently laid off. On February 27, 2002, Pan American told fifteen of the striking employees that their positions had been permanently eliminated. Pan American was later charged with committing various unfair labor practices in violation of the National Labor Relations Act (“the Act” or “NLRA”), 29 U.S.C. §§ 151 et seq. (2000).

In the proceedings that followed, the NLRB found that Pan American had engaged in numerous unfair labor practices, but the only such finding challenged on petition to this court was that Pan American had violated section 8(a)(5) and (1) of the Act, 29 U.S.C. § 158(a)(5), (1), by failing to give the Union notice and an opportunity to bargain as to the layoff decision and its effects before laying off these fifteen employees.² To remedy this violation, the Board ordered Pan American to reinstate the fifteen employees and compensate them with back pay.

Pan American challenges the Board’s finding as to the section 8(a)(5) and (1) violation and the remedy imposed in connection with this violation. It argues first that it was not required to bargain with the dismissed employees regarding the decision to dismiss them, conceding that it ivas required to bargain regarding the effects of the layoff decision. Second, Pan American asserts that in light of its limited bargaining duty, the remedy of reinstatement and full back pay was improper, and under Board precedent in Transmarine Navigation Corp., 170 N.L.R.B. 389, 1968 WL 18792 (1968), only limited back pay could be required.

The Board asserts that Pan American is precluded from making its first argument on this petition because it did not present it to the Board in the proceedings below. As for Pan American’s second argument, the Board urges that we should dispose of it by finding that the facts of this case do not warrant the limited remedy Pan American seeks. We conclude that Pan American’s arguments are interrelated, were presented to the Board, and cannot be resolved without further explanation by the Board.

To understand both the waiver argument and the merits of the case requires a brief explanation of the background law. Under section 8(a)(5) of the NLRA, 29 U.S.C. § 158(a)(5), an employer’s “refus[al] to bargain collectively with the representatives of his employees” constitutes an “unfair labor practice”; section 8(d) of the Act, id. § 158(d), specifies that the duty “to bargain collectively” includes the obligation to “confer in good faith with respect to wages, hours, and other terms and conditions of employment.” Absent contrary provisions in a collective bargaining agreement, there are thus some decisions as to which a unionized employer must bargain with the union (e.g., wages and hours); others as to which it normally need not, “such as choice of advertising and promotion, product type and design, and financing arrangements,” which “have only an indirect and attenuated impact on the employment relationship,” First Nat’l Maint. Corp. v. NLRB, 452 U.S. 666, 676-77, 101 S.Ct. 2573, 69 L.Ed.2d 318 (1981); and yet others entailing obligations that fall somewhere in between.

The present case may or may not fall in this “in between” category. In certain situations, a decision to order layoffs may be the prerogative of management but an obligation may still exist to bargain with the union as to “effects” of the layoffs; in other words, management may have to bargain about whether and to what extent to provide severance to the laid-off employees even though it may not have to discuss whether to make the layoffs. Both the courts (e.g., Providence Hospital)³ and the Board (notably in Transmarine)⁴ have endorsed such a qualified duty in certain circumstances.

Before the Board, Pan American argued that it did not have to bargain with the Union at all so no relief was proper; but in the alternative it argued that at most its bargaining obligation was limited to the “effects” of the layoffs and therefore back pay for a limited period would be the most that should be awarded. The latter argument depends upon two elements: that only effects bargaining was required in this case, and that where only effects bargaining is required, the limited back pay remedy prescribed in Transmarine is appropriate for a breach of the bargaining duty (because reinstatement would defeat the layoff prerogative).

Pan American made this alternative two-part argument both in its exceptions to the findings of the administrative law judge (“ALJ”) and in its request for rehearing before the Board. In its exceptions, for example, Pan American sought to qualify its bargaining obligation, focusing on the difference between a layoff decision for “economic reasons” and a layoff decision resulting from a successful modernization program. Pan American then concluded its argument against the ALJ’s remedy by stating:

[W]e contend that inasmuch as the record does show that the layoffs were an effect of an employer’s decision, based primarily on operational reasons as well as staffing needs, the determination was related to the scope and direction of business and accordingly the proper remedy would be that of a limited back pay. See Transmarine Navigation Corp., 170 NLRB 389 [1968 WL 18792] (1968).

A petitioner is barred from making in court arguments not presented to the Board. NLRB v. Saint-Gobain Abrasives, Inc., 426 F.3d 455 (1st Cir.2005), explained that under section 10(e) of the Act, 29 U.S.C. § 160(e), the reviewing court has jurisdiction to decide an issue on a petition to set aside an NLRB order only if an objection made below, “fairly read, apprises the Board that the objector intended to pursue the issue later presented to the court.” Saint-Gobain, 426 F.3d at 459 (citing Marshall Field & Co. v. NLRB, 318 U.S. 253, 255, 63 S.Ct. 585, 87 L.Ed. 744 (1943) (per curiam)).

However, we cannot agree with the Board’s brief that Pan American failed to make its argument to the Board. The “scope and direction of business” language and the attempted distinction between “economic” and “modernization” reasons for discharge bear directly on the extent of the employer’s duty to bargain. Indeed, the seope-and-direction phrase resembles language in Justice Stewart’s oft-cited concurrence in Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 223, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964) (Stewart, J., concurring), dealing with just such line-drawing as to the extent of the duty to bargain.

Furthermore, Transmarine is the common citation for the view that a limited back pay remedy is the proper answer where the employer breached only a duty to bargain about effects. E.g., Melody Toyota, 325 N.L.R.B. 846, 846, 1998 WL 289059 (1998); see also NLRB v. Emsing’s Supermarket, Inc., 872 F.2d 1279, 1289-91 (7th Cir.1989). To rely on Transmarine, as Pan American did, for the view that “the proper remedy would be that of a limited back pay” makes sense only if the predicate is the employer’s claim that its duty to bargain was limited (i.e., because the layoffs were assertedly a management prerogative). The two elements are parts of an embracing claim that there was only a limited duty warranting only a limited remedy.

We agree that Pan American could have done a better job at the Board level in clarifying its position. In part, Pan American invited confusion by arguing (permissibly' — but perhaps not with perfect lucidity) that it had no duty to bargain at all but, if it did, it was a limited duty justifying only the Transmarine remedy. Yet contributing to the confusion is the fact that the Board has not made clear where the full duty to bargain leaves off and the limited “effects” duty supercedes it. Anyway, enough was said to alert the Board to the employer objection that only a limited duty and the Transmarine remedy applied in this ease.

No answer to the objection is provided in the Board’s decision. In rejecting a claim of retaliatory firings under section 8(a)(3) and (1) of the Act, 29 U.S.C. § 158(a)(3), (1), the ALJ had explicitly credited Pan American’s claim that the layoff of the fifteen employees was motivated (at least in part) by the modernization and automation project dating from 1996. In summarizing his factual findings on this question, the ALJ stated:

The evidence substantiating [Pan American’s] position that an ongoing modernization and automation project had reduced staffing needs was detailed, plausible, and uncontroverted; it outweighs the evidence casting doubt on the veracity of [Pan American’s] explanation. [Pan American] has shown1 that it more likely than not would have decided to implement its February 2002 layoff because its staffing needs decreased, even absent the employees’ protected activities.

The ALJ also found that another possible motivation for the layoffs was a “dip in sales.”

Yet when the ALJ discussed the failure to bargain charges, he simply said that “layoff decisions are a mandatory subject of bargaining,” failure to bargain violates the Act, and “the traditional and appropriate Board remedy for an unlawful unilateral layoff based on legitimate economic concerns” includes reinstatement and full back pay. He did not so much as mention the issue of the possible motivation of the layoffs as pertinent to whether full reinstatement or only the limited back pay remedy should be adopted.

Pan American responded, as described and quoted above, by arguing to the Board that Pan American’s rationale for the layoffs — accepted by the ALJ himself — warranted at most only the Transmarine remedy of limited back pay. The Board, faced with Pan American’s objection, explained the difference between the full and limited back pay remedies and then continued with two sentences that explain very little:

Here, we have found that [Pan American’s] decision to lay off employees was a mandatory subject of bargaining, and that [Pan American] violated Section 8(a)(5) and (1) by failing to satisfy its obligation to bargain both over the decision and its effects. Accordingly, we find that the full backpay and reinstatement remedy is appropriate.

In substance the Board treats a breached obligation to bargain over the decision as well as its effects as warranting the “full” (as opposed to the Transmarine) remedy. What is missing is any explanation why, in light of the ALJ’s own factual findings, Pan American’s “decision to lay off employees was a mandatory subject of [full scale] bargaining” rather than bargaining solely about effects. Yet some explanation is needed precisely because where the line should be drawn is far from clear.

Justice Stewart’s concurrence in Fibreboard eschewed mandatory bargaining for decisions that “lie at the core of entrepreneurial. control,” such as “[decisions concerning the commitment of investment capital and the basic scope of the enterprise.” Fibreboard, 379 U.S. at 223, 85 S.Ct. 398 (Stewart, J., concurring). It was followed by First Nat’l, a case involving a partial shutdown of an employer’s business, which offered three separate categories of managerial decisions and a balancing test, noting that “other types of management decisions” — including “automation” — “are to be considered on their particular facts.” First Nat’l, 452 U.S. at 667, 676-79, 686 n. 22, 101 S.Ct. 2573.

We do not know whether the NLRB now views layoff decisions prompted by modernization to be mandatory subjects of bargaining, resolving the issue seemingly left open in First Nat’l, and, if so, why, or whether it decided this ease on its “particular facts,” and, if so, what those facts were. Possibly, the Board attributed importance to the fact that- the layoffs owed something to the loss of business due to the strike but, if so, this too is unexplained, nor do we know how multiple motives for layoffs should be analyzed.

The issue appears to be one of considerable importance. To say that an employer must bargain about whether to make layoffs caused by modernization does not seem far from saying, in substance, that it must bargain about whether to modernize. Perhaps there is some reason to distinguish between the two, but it is easy to see how the two steps are linked in practice. Often enough, an employer who cannot recoup costs of modernizing by reducing employment will have little reason to invest.

In all events, we do not understand the Board’s rationale for classifying this case as one where the employer had (in- the Board’s words) an “obligation to bargain both over the decision [the layoffs] and its effects.” The result may or may not be sound, but until we understand its basis, we cannot effectively review it. See NLRB v. Auciello Iron Works, Inc., 980 F.2d 804, 812-13 (1st Cir.1992). And if there is an obvious explanation, it has not been supplied by the Board’s brief on appeal.

The application of the Board for enforcement of its order is granted in part, as to paragraphs (l)(a), (b), (d), (e) (except as it applies to the employees laid off on February 27, 2002), (f), and (g), and paragraphs (2)(a), (b), (e) (except as it applies to the employees laid off on February 27, 2002), (f) (except as it applies to the employees laid off on February 27, 2002), (g), (h), (i) (except for paragraphs in the notice pledging to bargain with the. Union as to the February 27, 2002, layoffs, and to reinstate and make whole the employees laid off on that day), and (j).

As to paragraphs (l)(c) and (e) (insofar as it applies to the employees laid off on February 27, 2002), and paragraphs (2)(c), (d), (e) (insofar as it applies to the employees laid off on February 27, 2002), (f) (insofar as it applies to the employees laid off on February 27, 2002), and those portions of (2)(i) requiring the posted notice to include a pledge to bargain with the Union as to the February 27, 2002, layoffs, and to reinstate and make whole the employees laid off on that day, the order is vacated and the case remanded to the Board for further proceedings consistent with this opinion. Each side to bear its own costs on appeal.

It is so ordered.

1 . Pan American is two corporate entities, Pan American Grain Co., Inc. and Pan American Grain Mfg. Co., Inc., whose brief states that they .are "affiliated business enterprises with common officers, directors, management and supervision, formulating and administering a common policy affecting operations."

2 . As Pan American did not contest the other findings by the Board, the Board is entitled to summary enforcement of those portions of its order related to these findings. See E.C. Waste, Inc. v. NLRB, 359 F.3d 36, 41 (1st Cir.2004).

3 . See Providence Hosp. v. NLRB, 93 F.3d 1012, 1018 (1st Cir.1996) (''[U]nions generally enjoy the right to bargain over the effects of decisions which are not themselves mandatory subjects of collective bargaining.”); NLRB v. New England Newspapers, Inc., 856 F.2d 409, 413 (1st Cir.1988) (“Although the employer is not obligated to bargain regarding the decision to sell its business, the effects of that sale are ... a mandatory subject of bargaining. ...").

4 . Transmarine, 170 N.L.R.B. at 390 (requiring employer to bargain over effects of shutdown, and imposing “a limited backpay requirement”); see also Melody Toyota, 325 N.L.R.B. 846, 846, 1998 WL 289059 (1998) (noting that the ALJ's order “provides, inter alia, for the Board's standard backpay remedy in effects bargaining cases as modeled after the remedy set forth in Transmarine Navigation Corp.”).