Furniture Renters of Amer. v. NLRB ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
9-27-1994
Furniture Renters of Amer. v. NLRB
Precedential or Non-Precedential:
Docket 93-3336
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Recommended Citation
"Furniture Renters of Amer. v. NLRB" (1994). 1994 Decisions. Paper 143.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 93-3336, 93-3395
FURNITURE RENTORS OF AMERICA, INC.
Petitioner/Cross-Respondent
v.
NATIONAL LABOR RELATIONS BOARD,
Respondent/Cross-Petitioner
ON APPEAL FROM THE NATIONAL LABOR RELATIONS BOARD
(5--CA--20933, 21021, 21038)
Argued: February 28, 1994
Before: STAPLETON, and SCIRICA, Circuit Judges
and SMITH, District Judge*
(Opinion Filed: September 27, 1994)
Larry J. Rappoport, Esquire (Argued)
Stevens & Lee
Four Glenhardie Corporate Center
P. O. Box 236
Wayne, Pennsylvania l9087-0236
Attorney for Petitioner/Cross-Respondent
David A. Fleischer, Senior Attorney (Argued)
Charles P. Donnelly, Esquire
Jerry M. Hunter, Esquire
Yvonne T. Dixon, Esquire
Nicholas E. Karatino, Esquire
Aileen A. Armstrong, Esquire
National Labor Relations Board
Washington, D. C. 20570
Attorneys for Respondent/Cross-Petitioner
* Honorable D. Brooks Smith, United States District Judge for
the Western District of Pennsylvania, sitting by designation.
OPINION OF THE COURT
SMITH, District J.
Petitioner Furniture Rentors of America, Inc. ("FRA")
appeals from a National Labor Relations Board ("NLRB" or "the
Board") order holding that it violated Sections 8(a)(1) and (5)
of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(1) and
(5) ("NLRA" or "the Act") by withdrawing recognition from its
union without having reasonable grounds for doubting its majority
status, and by failing to notify and bargain with the union
before subcontracting out delivery services. Cross-petitioner
NLRB seeks enforcement of its order. We will enforce the Board's
order only in part.
I. Background
Withdrawal of Recognition
Furniture Rentors of America, Inc. ("FRA"), a Delaware
corporation, is a regional renter of residential and office
furniture in Virginia, Maryland, and Delaware. The company
negotiated its initial collective bargaining agreement ("CBA")
with International Brotherhood of Teamsters Union Local Nos. 639
and 730 ("Union") on November 1, 1986. As drafted, the CBA was
to expire on October 31, 1989; however, on October 21, 1987, a
side-letter agreement was reached which increased wages and
extended the CBA until December 31, 1989, and provided that the
contract could be reopened "only to discuss wages."
In October 1988, FRA leased a warehouse in Jessup,
Maryland, implementing its decision to move its center of
operations from Alexandria, Virginia to a point between
Baltimore, Maryland and Washington, D.C., more centrally located
within its market. FRA continued to operate from its Alexandria
warehouse until late 1989 because its lease there did not expire
until the summer of 1990 and its Jessup facility was being
renovated. Due to the longer commute from northern Virginia to
Jessup, Maryland, FRA lost several Washington area employees and
hired new ones from Baltimore, including Calvin Wilson, who was
hired as a new warehouse manager.
FRA and the Union began negotiating their next CBA in
the autumn of 1989. Petitioner contends that by that time, fewer
of FRA's employees than ever before were Union members, as
evidenced by dues check-off records. On October 6, 1989, a
decertification petition was filed by Frederick Brown, one of the
new employees who had been hired by warehouse manager Wilson.
Prior to the filing of the petition, Brown had posted a notice in
the Alexandria warehouse which asked employees to sign "for the
Union" or "not for the Union." Only six employees signed "for
the Union." There were also discussions between warehouse
manager Wilson and other employees regarding their lack of
interest in Union representation and discontent over having to
pay Union dues and initiation fees. At a December 7, 1989
bargaining session, FRA Vice-President James Senker ("Senker")
questioned the Union's majority status. The Union
representatives responded that they did enjoy majority support.
On January 17, 1990, Senker sent a letter to the Union
withdrawing recognition based on his doubt that the Union
represented a majority of FRA employees. The Union failed to
respond. A January 20, 1990 bargaining session was cancelled,
and the parties did not meet again.
Decision to Subcontract Delivery Services
Senker knew first-hand that FRA had experienced serious
problems with employee theft and carelessness. In May and June
of 1989, FRA investigated the theft of furniture by Union members
at a loss to the company of $10,000. The investigation led to
arrests and resignations of employees. Delivery service also was
the cause of numerous customer complaints, and FRA experienced
problems with furniture packing, delivery of damaged furniture,
insurance claims and late deliveries. FRA delivery teams
averaged three deliveries per day, compared to the industry
standard of four or five deliveries per day. In August 1989, FRA
fired three employees who raided a customer's refrigerator while
relaxing in his apartment during what was supposed to be a
routine delivery.
In mid-February 1990, Senker accepted a proposal by
Sullivan Services, a contractor who provides trucking services,
to share delivery services on a trial basis. For approximately
one week, Sullivan Services made deliveries using a single crew
and its own truck. Senker gave the Sullivan Services crew the
hardest jobs, monitored their performance, spoke daily with
Sullivan Services' President, Kent Sullivan, and visited job
sites in order to talk with customers about the Sullivan Services
crew's work. Senker did not retain Sullivan Services beyond that
trial period.
On February 27, 1990, Senker received a tip that
several FRA employees planned to steal furniture early the next
morning. With the assistance of the Howard County (Maryland)
Police, Senker apprehended a driver, a helper and a supervisor
attempting to load furniture onto a delivery truck. The next
day, without notifying the Union, Senker retained Sullivan
Services to perform FRA's delivery work on an exclusive basis.
FRA then terminated four drivers and three helpers, but continued
to employ its warehousemen, several of whom were Union
supporters. By using Sullivan Services to perform delivery
services, FRA's delivery costs increased from $160 to $210 per
day.
Union member Alvin Jones, Jr. and the Union filed
charges against FRA on March 2, 1990 and March 12, 1990
respectively. On March 28, 1991, the NLRB issued Complaints
against FRA in 5--CA--20933 and 5--CA--21038. These Complaints,
which were subsequently consolidated for hearing, alleged that
FRA committed unfair labor practices when it posted a petition
requesting that its employees indicate their union sympathies,
unlawfully withdrew recognition from the Union, and subcontracted
its delivery work to Sullivan Services without first notifying
and bargaining with the Union.
An Administrative Law Judge ("ALJ") held a hearing from
October 1-3, 1991. On May 13, 1992, the ALJ issued a decision
that FRA had committed unfair labor practices in violation of
Section 8(a)(1) and (5) of the NLRA when it interrogated
employees about their union sympathies and withdrew recognition
of the Union on January 17, 1990. The ALJ, however, relying upon
the NLRB's decision in Dubuque Packing Company, Inc., 303 N.L.R.B.
386 (1991), concluded that FRA's decision to subcontract its
delivery work was not a mandatory subject of collective
bargaining and that therefore FRA did not violate Section 8(a)(5)
of the Act when it decided to subcontract without first
bargaining with the Union. The ALJ's decision with respect to
mandatory bargaining particularly hinged upon his finding that
FRA's decision to subcontract delivery services "did not turn on
labor costs in any way." App. 684
On May 28, 1993, the Board issued a Decision and Order
reversing the third part of the ALJ's decision, holding that FRA
violated Sections 8(a)(1) and (5) of the Act by failing to
provide notice and to bargain with the Union concerning its
decisions to subcontract delivery work and to lay off seven
employees as a result of that decision. The Board also held that
FRA violated Section 8(a)(1) through statements made by warehouse
manager Wilson to new employee Alvin Jones, Jr. threatening to
fire Wilson because of his association with the Union. FRA
petitioned for review of the Board's order and the Board cross-
petitioned for enforcement of its order.
II. Discussion
Withdrawal of Recognition
FRA argues that its proper withdrawal of recognition
from the Union ended any duty to bargain over its decision to
subcontract delivery services. Whether petitioner properly
withdrew recognition from the Union turns on the factual question
whether FRA had reasonable grounds for doubting the Union's
continued majority status.1
FRA avers that its move from Alexandria, Virginia to
Jessup, Maryland caused considerable employee turnover, and by
January 17, 1990, the date Senker withdrew recognition, only six
of 17 employees, all transferees, were members of the Union. No
newly hired employee had executed a dues checkoff or expressed an
interest in union representation. Therefore, FRA argues, the
composition and attitude of its workforce had changed, supporting
Senker's good faith doubt about continued majority status.
Employee turnover alone, however, is not sufficient to establish
good-faith doubt, NLRB v. Oil Capital Elec., Inc., 5 F.3d 459,
462 (10th Cir. 1993), for without objective evidence of
1
After one year beyond the date the NLRB certifies a union as
the collective-bargaining representative of employees, the
presumption of the union's continued majority status becomes
rebuttable; the employer may withdraw recognition if it can show
that the union has lost majority support or that it has a good
faith, reasonable doubt of the union's continued majority status.
NLRB v. Wallkill Valley Gen. Hosp., 866 F.2d 632, 636 (3d
Cir.l989).
dissatisfaction, "there is nothing to rebut the presumption that
the [company's] newly hired employees supported the Union in the
same ratio as the employees they replaced." Spillman Co. and
Sheet Metal Workers' Int'l Assoc., Local Union No. 24, AFL-CIO,
311 N.L.R.B. 18. See also NLRB v. W.A.D. Rentals Ltd., 919 F.2d 839,
841-42 (2d Cir. 1990)(500 percent employee turnover did not
overcome presumption of majority employee support for union where
employer was found to be "stalling" to avoid bargaining with the
union). Therefore, petitioner must adduce evidence of
dissatisfaction with Union representation among its employees.
Petitioner's evidence of FRA employees' dissatisfaction
with Union representation consists of the low number of employees
who executed the dues checkoff and the petition signed by a
majority of employees stating that they were "not for the Union."
Instantly, only six of 17 or 20-262 employees had executed dues
checkoffs at the time petitioner withdrew recognition. A high
number of resignations or a low number of dues checkoff
authorizations will not without more justify withdrawal of
recognition, although they may be considered when assessing
majority support for a union. Bickerstaff Clay Prods. Co. v.
NLRB, 871 F.2d 980, 989 (11th Cir. 1989), cert. denied 493 U.S.
924 (1989). As this court has said, "the issue is 'not how many
employees belong to the union or paid dues but rather whether the
2
Petitioner's brief is not consistent with respect to the
number of employees working for FRA on January l7, l990. Compare
Petitioner's Brief at 7 (20-26 employees) with Petitioner's Brief
at 36 (l7 employees).
majority desired union representation for purposes of collective
bargaining.'" NLRB v. Walkill Valley General Hosp., 866 F.2d at
637 (quoting Retired Persons Pharmacy v. NLRB, 519 F.2d 486, 491
(2d Cir. 1975)). As the ALJ noted, the fact that less than a
majority of employees have dues checked off does not ipso facto
indicate opposition to union representation. See Colonna's
Shipyard, 293 N.L.R.B. 136, 139 (1989). In order to overcome the
presumption of majority union support, the employer must produce
affirmative evidence of dissatisfaction sufficient to ground a
good faith doubt of continued majority status.
Substantial evidence supports the Board's determination
that FRA's petition was tainted because it was posted by FRA,
albeit indirectly, rather than spontaneously by the employees
themselves. An employer may only conduct polls to determine
whether a union's majority status still exists if it "possesses
substantial, objective evidence to establish that it reasonably
doubts the union's majority status before conducting the poll."
Hajoca Corp. v. NLRB, 872 F.2d 1169, 1173 (3d Cir. 1989)(emphasis
added). An employer may not use its petition/poll as evidence of
its good faith doubt, because in order not to engage in unfair
labor practices, it must have had such doubt supported by
independent evidence before posting the petition. Cf. NLRB v.
Laverdiere's Enterprises, 933 F.2d 1045, 1051 (1st Cir.
1991)(employee contact with employer regarding union
representation lessens finding of taint).
Management Rights Clause
The employer argues that the original CBA contained a
broad management rights clause giving FRA the absolute right to
subcontract work at any time until December 31, 1989, the date of
contract expiration. Furthermore, FRA avers, when the CBA was
reopened in October 1987, the parties to the contract agreed that
renegotiations on December 31, 1989 would be limited to the
discussion of wages only, and that all other contract terms were
to continue beyond the expiration date. Therefore, petitioner
concludes, FRA's contractual right to subcontract continued
beyond December 31, 1989, the Union having waived its right to
bargain over subcontracting.
We conclude that when the CBA was reopened in October
1987, the Union did not waive its right to bargain after December
3l, l989 over every contract term except wages. The 1987
reopener language states in pertinent part that, "The contract
shall ... remain in effect through December 31, 1989, but the
parties will agree to meet to reopen the contract to discuss only
wages." This language can most sensibly be read to mean that
prior to the expiration of the contract on December 31, 1989,
only wages could be changed, but when the contract expired, all
terms were subject to bargaining. Although it is possible to
derive FRA's construction from the reopener langugage, we decline
to make the inference, for waivers of statutorily protected
rights must be clearly and unmistakably articulated.
Metropolitan Edison Co. v. NLRB, 460 U.S. 693, 708 (1983).
Without such a clear waiver, the management rights clause does
not survive the expiration of the CBA. Control Services, Inc.,
303 N.L.R.B. 481, 484 (1991), enforced 961 F.2d 1568 (1992).
Statutory Duty to Bargain
Finally, FRA argues that the Board employed the wrong
legal standard and thus erred when it determined that FRA's
decision to subcontract its delivery work was a mandatory subject
of bargaining. Sections 8(a)(5) and 8(d) of the Act, 29 U.S.C.
§§ 158(a)(5) and 158(d), require employers to bargain in good
faith with employee representatives about, inter alia, "wages,
hours, and other terms and conditions of employement." Relying
on its recent decision in Torrington Industries, 307 NLRB No. 129
(1992), the Board held that FRA's decision to subcontract
delivery work fell within the range of decisions that require
bargaining.
Subcontracting may be a mandatory subject of collective
bargaining under the Act, but it is not necessarily so. In
Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203 (1964), the
Court determined that an employer violated Section 8(a)(5) of the
Act when it contracted out maintenance work in order to reduce
labor costs without first bargaining with its maintenance
workers' union. The Court noted that the employer subcontracted
its maintenance work in order to reduce costs by "reducing the
work force, decreasing fringe benefits, and eliminating overtime
payments," and stressed that these factors were customarily
regarded within the industry as "peculiarly suitable for
resolution within the collective bargaining framework." Id. at
213-14.
 The Supreme Court further defined the requirements for
mandatory bargaining over subcontracting when it held, in First
National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981), that an
employer is not obligated to bargain with the union before
closing a part of its business and discharging the employees who
worked in that part of the operation. In First National, the
Court identified three types of management decisions: (1) those
with "only an indirect and attenuated impact on the employment
relationship"; (2) those that "are almost exclusively 'an aspect
of the relationship' between employer and employee," such as "the
order of succession of layoffs and recalls ... [and] work rules";
and (3) those "that [have] a direct impact on employment ... but
have as [their] focus only the economic profitability of" non-
employment-related concerns. Id. at 677. Because the First
National employer's decision to terminate one part of its
business affected employment but was motivated by considerations
unrelated to the employment relationship, it fell into the third
category of management decisions. Whether decisions within that
category require mandatory collective bargaining, the Court
reasoned, depends upon the extent to which "the subject proposed
for discussion is amenable to resolution through the bargaining
process." Id. at 678. Accordingly, bargaining over "management
decisions that have a substantial impact on the continued
availability of employment should be required only if the
benefit, for labor-management relations and the collective
bargaining-process, outweighs the burden placed on the conduct of
the business." Id. at 679.
 The First National balancing test was not conceptually
novel, and the Court noted that the Fibreboard Court performed
the same analysis "implicitly." Id. The Court in First
National, reached the opposite result from Fibreboard because the
employer's decision to close part of its business was not driven
by labor costs. The Court concluded that because the union had
no control over the factors motivating the company's decision to
subcontract, collective bargaining would have been futile and was
therefore not required.
In Otis Elevator Co., 269 N.L.R.B. 891 (1984), and Dubuque
Packing Co., 303 N.L.R.B. 386 (1991), the Board followed the teaching
of Fibreboard and First National by fashioning standards for
mandatory bargaining that focused generally on the amenability of
the disputed issue to resolution through the collective
bargaining process, and specifically on the role of labor costs
in the employer's decision. See Dubuque Packing Co., 303 N.L.R.B. at
391; Otis Elevator Co., 269 N.L.R.B. at 892, 897 (Dennis,
concurring). The Dubuque decision in particular contained a
thoughtful discussion of the bargaining obligation imposed by the
Act that accurately reflected the framework established by
Fibreboard and First National, see United Food and Commercial
Workers Int'l Union, Local No. 150-A v. NLRB, 1 F.3d 24, 32 (D.C.
Cir. 1993)(NLRB's finding that the Dubuque test "accords with
precedent is fully defensible"), but its holding was expressly
limited to decisions to relocate unit work. Dubuque Packing Co.,
303 N.L.R.B. at 390 n.2.
In the matter sub judice, the ALJ applied the Dubuque
burden-shifting test,3 concluding that because labor costs did
not prompt FRA to subcontract, its decision was not a subject of
mandatory bargaining. App. 684-86. Within days after the ALJ
issued his opinion, however, the Board issued its decision in
Torrington Industries, 307 N.L.R.B. 809 (1992), which abandoned the
flexible approach of Dubuque for a more rigid standard in
subcontracting cases. When the ALJ's decision was appealed to
the Board, therefore, the panel applied the more recent
Torrington standard.
In Torrington, the employer unilaterally replaced two
union truck drivers with non-bargaining unit drivers and
independent contractor haulers. The Board rejected the
employer's argument that its decision to replace the union
truckers was entrepreneurial and did not turn on labor costs,
holding that Dubuque's burden-shifting analysis is limited to
relocation decisions and does not apply to "other types of
management decisions that affect employees." Torrington, 307
N.L.R.B. at 810. Finding that "all that is involved is the
3
Under the test announced by the Board in Dubuque, the General
Counsel must initially establish a prima facie case for mandatory
bargaining by showing that the employer's decision involved a
transfer of unit work unaccompanied by a basic change in the
nature of its operation. Then, the burden of production shifts
to the employer, who can rebut the prima facie case by showing
that its decision involved a change in the direction of the
business, or by showing "(l) that labor costs (direct and/or
indirect) were not a factor in the decision or (2) that even if
labor costs were a factor in the decision, the union could not
have offered labor cost concessions that could have changed the
employer's decision... ." Dubuque, 303 N.L.R.B. at 39l.
substitution of one group of workers for another to perform the
same work at the same plant under the ultimate control of the
same employer," id. (quoting Fibreboard), the Board held that the
employer had an obligation to bargain. In so doing, the Board
established the following test for subcontracting cases:
[W]hen the record shows that essentially
[Fibreboard] subcontracting is involved,
there is no need to apply any further tests
in order to determine whether the decision is
subject to the statutory duty to bargain.
The Supreme Court has already determined that
it is....
Id. (citation omitted). The Torrington Board did not reject
outright the employer's argument that Fibreboard could be
distinguished because labor costs were not a factor in its
decision; rather, it chose not to reach that issue, "because the
[employer's] reasons had nothing to do with a change in the
'scope and direction' of its business. Those reasons, thus, were
not matters of core entrepreneurial concern and outside the scope
of bargaining." Id. (citation omitted). Unwilling to consider
the specific facts of the case, the Board simply determined that
FRA had engaged in "Fibreboard subcontracting," triggering the
mandatory duty to bargain.
Inflexibly applied, the holding in Torrington is at
odds with the principles of Fibreboard and First National. Those
cases discussed the statutory duty to bargain as a means of
obtaining, when appropriate, the benefits presumed to attend the
collective bargaining process, see Fibreboard, 379 U.S. at 213-14
(bargaining over particular economies potentially derived from
subcontracting deemed "peculiarly suitable for resolution within
the collective bargaining framework"); First National, 452 U.S.
at 681 (relevant question is "whether requiring bargaining over
this sort of decision will advance the neutral purposes of the
Act"), not as an end in itself.
The Board's decision in Torrington to limit the scope
of Dubuque to relocations of unit work is essentially a policy
choice "subject to limited judicial review." NLRB v. Local Union
No. 103, Int'l Ass'n of Bridge, Structural & Ornamental Iron
Workers, 434 U.S. 335, 350 (1978)(citations omitted). However,
the Board's virtual per se rule that subcontracting decisions
must be the subject of bargaining is fundamentally an
interpretation and application of Supreme Court precedent, and
while it must be upheld if reasonably defensible, we may not give
it "rubber stamp" approval if it is "inconsistent with a
statutory mandate or ... frustrate[s] the congressional policy
underlying [the NLRA]." Bureau of Alcohol, Tobacco & Firearms v.
FLRA, 464 U.S. 89, 97 (1983)(quoting NLRB v. Brown, 380 U.S. 278,
292-92 (1965)).
Under the Torrington standard, if an employer
subcontracts some work to nonunion workers without changing the
scope and direction of its enterprise, and the nonunion workers
perform essentially the same work as the bargaining unit workers
did, the Board labels the employer's action "Fibreboard
subcontracting" and requires bargaining. But the Torrington
manner of examining the decision to subcontract only to see
whether it is analogous to Fibreboard's general factual framework
is simplistic and, as this case demonstrates, potentially ham-
handed.4 The focus in determining whether a particular
management decision requires bargaining under Section 8(a)(5) is
not the employer's decision to subcontract, but whether
"requiring bargaining over this sort of decision will advance the
neutral purposes of the Act." First National, 452 U.S. at 681.
In order to determine that, it is necessary to look behind the
subcontracting decision itself to the reasons motivating the
decision. If the employer's decision was prompted by factors
that are within the union's control and therefore "suitable for
resolution within the collective bargaining framework,"
Fibreboard, 379 U.S. at 214, then bargaining is mandatory. As
the Board recognized in Dubuque, 303 N.L.R.B. at 392 n. 14, it is
therefore imperative to "evaluate the factors which actually
motivated the employer's" decision.
Fibreboard itself counsels against strict
categorization according to the form of subcontracting. The
4
Although conceptually simple, the Torrington approach is not
well-fitted to the statutory duty to bargain, which, after all,
is not simply a theoretical catchphrase, but implies real give
and take negotiations. If during a bargaining session an
employer were to broach the subject of contracting work out
(whether or not in a manner similar to what the Board calls
"Fibreboard subcontracting"), the negotiations would necessarily
turn to the employer's reasons for wanting to contract the work
out. The contracting out decision itself, regardless of what
form it might take, is just a response to some underlying cost or
other challenge that makes doing the work with bargaining unit
employees relatively less attractive. Therefore, focusing on the
form that the employer's decision takes (does it fit into the
Fibreboard piegonhole?) is unhelpful, for the form of
subcontracting bears little on the bargaining process encouraged
by the Act.
Fibreboard Court expressly noted that the employer's decision to
subcontract turned on its desire to lower "the high cost of its
maintenance operation," which, independent contractors had
promised, could be reduced by eliminating employees and benefits.
Fibreboard, 379 U.S. at 213-14. In determining whether a
subcontracting case is legally similar to Fibreboard, it is
important to consider not just the employer's decision to
contract work out, and how that decision affects its operations,
but whether, as in Fibreboard, the employer's decision was driven
by labor costs or some other difficulty that can be overcome
through collective bargaining. Those courts that have held an
employer's decision to subcontract unit work was a mandatory
subject of collective bargaining under Fibreboard have invariably
made this finding. See e.g., Olivetti Office U.S.A., Inc. v.
NLRB, 926 F.2d 181, 186 (2d Cir. 1991), cert. denied 112 S. Ct.
168, 116 L. Ed. 2d 132 (1991)(employer transferred work in order to
"reduce manufacturing costs by $2.6 million, $2 million of which
would be directly attributable to cheaper labor.... Obviously,
labor costs were the driving force behind the Company's action");
NLRB v. Plymouth Stamping Div., Eltec Corp., 870 F.2d 1112, 1116
(6th Cir. 1989), cert. denied 493 U.S. 891 (1989)(decision to
subcontract motivated by failure to successfully negotiate
economic concessions); W.W. Grainger, Inc. v. NLRB, 860 F.2d 244,
248 (7th Cir. 1988)(decision to subcontract delivery services
motivated by the desire to reduce the cost of "branch time," or
time drivers' spent at depots rather than in truck, and thus was
a "direct labor cost"); NLRB v. Westinghouse Broadcasting and
Cable, 849 F.2d 15, 22 (1st Cir. 1988)(decision to subcontract
prompted by a directive from employer's parent company to reduce
its "body count" by eleven persons).
In this case, the ALJ found that,
From the time [FRA Vice-President] James
Senker started with [petitioner] he noted
that [petitioner] had a serious employee
theft problem. Indeed two employees, Payton
Finch and Terry Walls, were arrested in mid-
1989 for larceny from [petitioner]. In
addition, service was, in Senker's opinion,
horrible and Senker demonstrated part of the
basis for this conclusion by producing
correspondence from three customers,
TravCorps, NV Property and North Park Ave,
complaining about Respondent's services. In
August 1989 three employees were fired for
misconduct during a delivery, i.e., they
"hung out" in the customer's residence and
ate food which they took from the customer's
refrigerator. Senker also observed that
because of careless handling of furniture and
improper padding of furniture by
[petitioner's] delivery crew employees that
too much of the furniture [petitioner] rented
was being damaged. It was also Senker's
opinion that [petitioner's] delivery crews
were unreasonably slow in doing their job
since they were making an average of three
and one-half stops per day rather than four
or five which was the industry standard.
The straw that broke the camel's back and
motivated Senker to subcontract all the
delivery work began in late February 1990
when Senker received information from a
confidential informant that some of his
employees were planning to steal some
furniture....
The cost of delivery services by Sullivan
Services was more expensive than the cost to
[petitioner] of doing the delivery work with
its own employees, i.e., $160 per day for one
of [petitioner's] crews versus $210 per day
for a Sullivan Services Crew....
Labor costs were not a factor in the
subcontracting decision. The decision was
made because of [FRA Vice-President] Senker's
dissatisfaction with the delivery crews,
e.g., lower than expected productivity,
unacceptable damage to furniture, complaints
by customers, and thievery.
App. 685-86. The Board purported to leave these findings
unchanged, App. 691, n.1, but stated that because all of
petitioner's stated reasons for subcontracting delivery services
"involved employee conduct, an issue which would be of concern to
the Union as well as to [petitioner] and an issue over which the
Union was in a strong position to take action," App. 692,
petitioner's decision to subcontract delivery services was
subject to mandatory bargaining. The ALJ's phrase
"lower than expected productivity," standing alone, rings of
labor costs, a subject suitable for resolution through collective
bargaining. However, the ALJ's decision read as a whole
indicates that Senker's principal reason for turning to Sullivan
Services was his exasperation over the irresponsibility and
dishonesty of some of his delivery employees, not labor costs as
traditionally understood. Petitioner argues that labor costs
could not possibly have been the basis of its decision since it
paid fifty dollars per day more to contract out its delivery
services than it paid to employ its own delivery crews. The
Board responds by characterizing even "employee work habits and
conduct" as "labor costs in the broad sense of the term" because
they "affect the employer's costs and thus the profitability of
the business." NLRB Brief at 38-39.
Anything employees do, or do not do, that ultimately
bears on their employers' economic condition may be designated a
"labor cost" in some broad sense, but there is no reason to so
expand the term beyond its ordinary meaning as used in Fibreboard
and First National, which contemplates subjects such as wages,
fringe benefits, overtime payments, size of workforce and
production goals. As the United States Court of Appeals for the
Fourth Circuit recognized in Arrow Automotive Indus., Inc. v.
NLRB, 853 F.2d 223 (4th Cir. 1988), employers may make business
decisions based on general "economic reasons," which "are not
reasons distinct and apart from a desire to decrease labor
costs," but that does not mean that labor costs are somehow
implicated by every employer's decision intended to improve the
business's bottom line. Id. at 228.
Similarly, that an employer's decision is based on
factors "involv[ing] employee conduct" does not necessarily imply
that labor costs or other concerns amenable to resolution through
collective bargaining are central to the decision. The factors
that principally motivated FRA Vice-President Senker to contract
out delivery services were, as found by the ALJ and as supported
by the record, FRA's continuing problems with delivery workers'
carelessness, misconduct, untrustworthiness and thievery. The
Board suggests that "education," or the implementation of "an
effective anti-theft program" would serve the same purpose as the
wage and benefit concessions discussed in Fibreboard and First
National. We do not read Fibreboard and First National as
requiring employers to automatically bargain with employee
representatives over the inviolability of their own property,
without regard to the benefit likely to be obtained from that
process. Nor are we able to perceive any likelihood of benefit
to be derived from subjecting the problem of employee thievery to
collective bargaining.
Our purpose in making these observations is not to
substitute our judgment for that of the Board's on the possible
benefits to be derived from collective bargaining in a situation
like the one in this case. We intend only to convey our concern
that the Board has not exercised the judgment that Fibreboard and
First National require of it. We believe the Board needs to
acknowledge that FRA's decision to subcontract its delivery work
was primarily based on factors arguably not as amenable to
collective bargaining as direct labor costs. The Board then
needs to make a judgment about the likelihood and degree of
benefit, if any, to be derived from collective bargaining in a
situation of this kind and to weigh that benefit against the
employer's considerable interest in taking prompt action.
III. Conclusion
We will grant the Board's petition to enforce with
respect to those provisions of its order designed to remedy the
unfair labor practices related to FRA's withdrawal of
recognition. We will deny its petition in all other respects.
We will grant FRA's petition for review and remand for further
proceedings on the charge that FRA violated sections 8(a)(1) and
(5) of the Act by failing to provide notice and bargain with the
Union concerning its decisions to subcontract its delivery work
and lay off employees.