Shares, Inc. v. National Labor Relations Board , 433 F.3d 939 ( 2006 )


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  •                           In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________
    Nos. 05-1289, 05-1557
    SHARES, INC. and WAP, LLC,
    Petitioners,
    Cross-Respondents,
    v.
    NATIONAL LABOR RELATIONS BOARD,
    Respondent,
    Cross-Petitioner,
    and
    INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE &
    AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW,
    Intervenor.
    ____________
    Petition for Review and Cross-Application
    for Enforcement of an Order of the
    National Labor Relations Board.
    No. 25-CA-28771
    ____________
    ARGUED SEPTEMBER 27, 2005—DECIDED JANUARY 9, 2006
    ____________
    Before CUDAHY, POSNER, and EASTERBROOK, Circuit
    Judges.
    2                                         Nos. 05-1289, 05-1557
    CUDAHY, Circuit Judge. Shares, Inc. (Shares) is a non-
    profit corporation that trains and employs disabled individu-
    als who perform primarily industrial tasks for customers.
    Wellman Automotive Parts (Wellman) retained Shares’
    services to package the glow plugs1 that it manufactured for
    diesel engines. When Wellman entered bankruptcy in 2003,
    Shares decided to move to the manufacturing side of the
    glow plug business. Toward that end, Shares formed a new
    company (WAP, LLC), purchased Wellman’s machinery and
    hired many of Wellman’s former employees. These employ-
    ees belonged to the International Union, United Automobile,
    Aerospace & Agricultural Implement Workers of America
    (UAW). When Shares refused to bargain with the UAW, the
    union filed a complaint with the National Labor Relations
    Board (NLRB). The NLRB concluded that Shares is
    Wellman’s successor and is therefore obligated to bargain
    with the UAW under 
    29 U.S.C. § 158
    (a)(5) and (1). Shares
    petitions this Court for review, and the NLRB cross-applies
    for enforcement of its bargaining order against Shares. We
    deny Shares’s petition and grant the NLRB’s cross-applica-
    tion.
    I. Background
    Shares is an Indiana corporation that employs approxi-
    mately 300 individuals in its Industrial Services Group,
    about 250 of whom are disabled. These 300 employees are
    divided into six subsets, each of which specializes in work on
    different products, including die-cast aluminum parts, DNA
    child-identification kits and glow plugs. Disabled employees
    1
    A glow plug is essentially a spark plug that warms the cylinders
    of a diesel engine prior to ignition and initially ignites the fuel.
    Once the engine is running, the mixture of fuel and air ignites
    spontaneously when the piston compresses it.
    Nos. 05-1289, 05-1557                                      3
    (referred to as “consumers”) and nondisabled employees
    (“staff”) work under various conditions and terms of employ-
    ment, especially with respect to compensation. Staff receive
    a standard hourly wage while consumers receive an individ-
    ual hourly wage based on their productivity. In some
    circumstances, consumers perform well enough to be hired
    as staff.
    Wellman bought a manufacturing facility in Shelbyville,
    Indiana, in 1988. The UAW had represented employees at
    that facility since 1972 through a number of changes in
    ownership. Wellman used the facility to manufacture glow
    plugs and contracted the task of packaging the glow plugs
    with Shares. In February 2003, however, Wellman filed for
    bankruptcy. The bankruptcy court appointed Shares to
    oversee the glow plug operation, which it did for about seven
    weeks.
    During those seven weeks, Shares decided to move into
    glow plug manufacturing for profit in order to supplement
    its income and thereby better support its nonprofit activi-
    ties. Accordingly, on April 28, 2003, Shares purchased
    Wellman’s assets that were used to produce glow plugs out
    of bankruptcy. In order to maintain its not-for-profit status,
    Shares created WAP, LLP, a wholly owned for-profit
    subsidiary to own and manage the glow plug operation.
    Pursuant to the purchase agreement, Wellman discharged
    its glow plug employees on Friday, April 25, 2003. Shares
    resumed glow plug production the following Monday and
    hired eleven employees to work on the glow plug production
    line. Seven of those employees were Wellman employees
    discharged on April 25. Three others were Wellman employ-
    ees who had been laid off but who held recall rights under
    the expiring collective bargaining agreement. The ten former
    Wellman employees continued working on the same orders
    they had been working on the previous workday.
    On May 9, 2003, a representative of the UAW sent a letter
    to Shares’s general manager asserting that Shares was a
    4                                     Nos. 05-1289, 05-1557
    successor to Wellman and demanding that Shares recognize
    and bargain with the union. Shares disputed these claims
    and refused to bargain. The UAW then filed a complaint
    with the NLRB. An administrative law judge recommended
    that Shares recognize and bargain with the UAW. A panel
    of the NLRB agreed and entered such an order. Specifically,
    the NLRB found that Shares violated 
    29 U.S.C. § 158
    (a)(5)
    and (1) by refusing to recognize and bargain with the UAW
    as the exclusive representative of the glow plug manufactur-
    ing employees. Shares petitions this Court for review, and
    the NLRB cross-applies to enforce its order.
    II. Discussion
    We review a disposition of the NLRB with substantial
    deference. Under this standard of review, we ask only
    whether the record contains substantial evidence to support
    the NLRB’s factual findings and whether its application of
    the law to the facts is reasonable. E.g., L.S.F. Transp., Inc.
    v. NLRB, 
    282 F.3d 972
    , 980 (7th Cir. 2002); Canteen Corp.
    v. NLRB, 
    103 F.3d 1355
    , 1360-61 (7th Cir. 1997). The
    question before the NLRB and before us on review is
    whether Shares is a successor employer to Wellman and
    therefore obligated to bargain with the UAW.
    Under the National Labor Relations Act, a new employer,
    succeeding to the business of another, is obligated to bargain
    with the union representing the predecessor’s employees.
    Fall River Dyeing & Finishing Corp. v. NLRB, 
    482 U.S. 27
    ,
    41 (1987); NLRB v. Joe B. Foods, Inc., 
    953 F.2d 287
    , 292
    (7th Cir. 1992). The obligation to bargain is triggered when:
    (1) there is “substantial continuity” between the enterprises
    of the predecessor and the new employer; (2) the unit of
    employees comprising the new operation remains the
    appropriate unit for collective bargaining; and (3) the new
    employer’s workforce contains a majority of the predecessor’s
    former employees at a time when the new workforce has
    Nos. 05-1289, 05-1557                                       5
    reached a “substantial and representative complement.” Fall
    River Dyeing & Finishing Corp., 
    482 U.S. at 43, 46-47
    ; Joe
    B. Foods, Inc., 
    953 F.2d at 292-93
    . It is well established that
    a new employer has a duty to bargain when it makes a
    conscious decision to maintain generally the same business
    and to hire a majority of its employees from its predecessor.
    It is equally well established that in conducting the succes-
    sorship analysis, it is appropriate to “keep[ ] in mind the
    question whether ‘those employees who have been retained
    will understandably view their job situations as unaltered.’”
    Fall River Dyeing & Finishing Corp., 
    482 U.S. at
    43 (citing
    Golden State Bottling Co., Inc. v. NLRB, 
    414 U.S. 168
    , 184
    (1973)).
    A. Substantial Continuity
    The first element of the successorship analysis—whether
    the two enterprises share a “substantial continuity”—focuses
    on factors including whether the business of both enter-
    prises is essentially the same; whether the employees of the
    new company are doing the same job under the same
    working conditions with the same supervisors; and whether
    the new entity has the same production process, produces
    the same products and basically has the same body of
    customers as the former company. Id. at 43; Bloedorn v.
    Francisco Foods, Inc., 
    276 F.3d 270
    , 288 (7th Cir. 2001). On
    this basis, the NLRB reasonably concluded that the glow
    plug employees would view their jobs as unaltered. Their
    last day of unemployment with Wellman was Friday, April
    25, 2003, when they made glow plugs using machinery at a
    facility in Indiana. The following Monday, when Shares
    employed them, those same employees returned to the same
    facility and continued to manufacture glow plugs for the
    same customers, using the same machinery they had
    employed the previous workday. From the employees’
    perspective, then, it seemed that little had changed but the
    signatory of their paychecks.
    6                                     Nos. 05-1289, 05-1557
    Shares, however, contends that because it (unlike
    Wellman) is a nonprofit corporation, the companies cannot
    be substantially the same. Shares also contends that the
    glow plug employees perform different jobs at Shares than
    they did at Wellman, since they are now cross-trained to
    perform a variety of tasks and some have even moved to
    different divisions. Shares finally contends that it cannot be
    Wellman’s successor since its pay structure differs from
    Wellman’s and since it did not simply inherit Wellman’s old
    customers but actively reacquired them.
    These arguments all fail in that they rely on an interpre-
    tation of successorship law that downplays the importance
    of the employee-perspective model. While it is true that
    Shares’s overarching purpose is to assist the disabled, its
    glow plug operation is conducted explicitly for profit. Its
    motivations for entering this activity may have been
    different from the motivations of other for-profit enterprises,
    but that consideration is not particularly relevant to
    successorship analysis. Again, we must compare the two jobs
    from the employees’ perspective. Their employer’s business
    principles might affect their view of their work, but they do
    not determine its basic nature; whether the enterprise is
    manufacturing glow plugs to help the disabled or to help the
    company’s bottom line (or, in this case, both), the nature of
    the manufacturing position is fundamentally to manufacture
    glow plugs to be sold at a profit.
    Likewise, the fact that these positions are not purely
    identical and that Shares did not simply absorb Wellman’s
    customers does not disallow its position as Wellman’s
    successor. We have previously rejected the notion that jobs
    must be identical; where employees “perform[ ] largely the
    same tasks, under comparable conditions, and under a
    number of the same supervisors,” the continuity is sufficient
    to satisfy this inquiry. Bloedorn, 
    276 F.3d at 289
    . A seamless
    transition might provide an even clearer case for successor-
    ship, but it is certainly not a necessary precondition. See,
    Nos. 05-1289, 05-1557                                           7
    e.g., Pa. Transformer Tech., Inc. v. NLRB, 
    254 F.3d 217
    , 224
    (D.C. Cir. 2001) (finding successorship despite a two-year
    production hiatus and a number of other factors not present
    here).
    B. Appropriate Bargaining Unit
    The second element of the successorship test focuses on
    what constitutes the appropriate unit for collective bargain-
    ing. “[T]he selection of an appropriate bargaining unit lies
    largely within the discretion of the [NLRB], whose decision
    ‘if not final, is rarely to be disturbed.’ ” S. Prairie Constr. Co.
    v. Operating Eng’rs Local No. 627, 
    425 U.S. 800
    , 805 (1976)
    (quoting Packard Motor Co. v. NLRB, 
    330 U.S. 485
    , 491
    (1947)); see also 
    29 U.S.C. § 159
    (b). We will uphold the
    NLRB’s determination unless Shares is able to show that
    the bargaining unit is clearly inappropriate. Dunbar
    Armored, Inc. v. NLRB, 
    186 F.3d 844
    , 847 (7th Cir. 1999).
    Here, the NLRB concluded that Shares’s glow plug
    employees constitute the appropriate bargaining unit
    because they are the only employees who work in a for-profit
    division of Shares. These employees share a community of
    interests different from the interests of other employees who
    work in divisions having a combination of consumers and
    staff. That Shares created a separate entity to allow the
    glow plug production employees to work for profit under-
    scores their differences from the rest of the organization,
    and it is logical to conclude that the for-profit employees
    might hold interests differing from the nonprofit employees.
    See, e.g., Davis Mem’l Goodwill Indus., Inc. v. NLRB, 
    108 F.3d 406
    , 410 (D.C. Cir. 1997) (stating that employees who
    work for a primarily rehabilitative division are likely to have
    interests that are very different from or even antagonistic
    toward for-profit employees).
    Shares points to a number of factors suggesting that its
    glow plug operation is an integrated segment of the com-
    8                                     Nos. 05-1289, 05-1557
    pany. In some circumstances, these factors might suggest
    that the entire operation is a single unit appropriate for
    collective bargaining. In the present situation, however,
    Shares has failed to establish that the for-profit and non-
    profit employees are similarly situated. Given this critical
    fact, nothing suggests that the NLRB abused its discretion
    in selecting the glow plug employees as the appropriate
    bargaining unit. Shares thus meets the second element of
    the successorship test.
    C. Substantial and Representative Complement
    The third and final issue for us to consider is whether the
    NLRB erred by concluding that Shares reached a substan-
    tial and representative complement of its employees on April
    28, 2003—the Monday after Wellman ceased operations in
    bankruptcy. This consideration is one of timing; it estab-
    lishes the moment when the determination of the composi-
    tion of the successor’s workforce is to be made, and it
    identifies the date when a successor’s obligation to bargain
    arises. “If, at this particular moment, a majority of the
    successor’s employees had been employed by its predecessor,
    then the successor has an obligation to bargain with the
    union that represented these employees.” Fall River Dyeing
    & Finishing Corp., 
    482 U.S. at 47
    .
    In order to determine when a substantial and representa-
    tive complement arises, the NLRB considers whether the job
    classifications designated for the operation were filled or
    substantially filled and whether the operation was in normal
    or substantially normal production. The NLRB also consid-
    ers the size of the complement on that date and the time
    expected to elapse before a substantially larger complement
    would be employed, as well as the relative certainty of the
    employer’s expected expansion. 
    Id. at 48-49
    . In general, if a
    new employer continues operations uninterrupted, the
    proper substantial and representative complement determi-
    Nos. 05-1289, 05-1557                                     9
    nation should take place at the time of transfer of control.
    
    Id. at 47
    ; see also 3750 Orange Place Ltd. P’ship v. NLRB,
    
    333 F.3d 646
    , 663 (6th Cir. 2003); Prime Serv., Inc. v. NLRB,
    
    266 F.3d 1233
    , 1239-40 (D.C. Cir. 2001).
    Although Shares contends that it initially did a minimum
    amount of work merely necessary to avoid defaulting on
    Wellman’s outstanding orders with later increased produc-
    tion as Shares ramped up its glow plug operation, it is
    undisputed that manufacturing operations never ceased.
    The April 28 labor complement contained sixty-one percent
    of Shares’s ultimate workforce and was a group large enough
    to deal with Wellman’s outstanding orders. This complement
    was far from skeletal. Longstanding precedent requires only
    that the complement be representative, not full. Fall River
    Dyeing & Finishing Corp., 
    482 U.S. at 50-51
    ; 3750 Orange
    Place Ltd. P’ship, 
    333 F.3d at 664
     (finding that the NLRB
    reasonably chose to measure the company’s substantial and
    representative complement at a time when sixty-three
    percent of the eventual full workforce was employed). Shares
    is unable to point to any fact to suggest that the NLRB
    abused its broad discretion in fixing the substantial and
    representative complement date at April 28, particularly in
    light of the uninterrupted nature of the work. Thus, the
    NLRB’s determination on this point was reasonable.
    III. Conclusion
    In sum, we DENY Shares’s petition and GRANT the NLRB’s
    cross-application to enforce its order requiring Shares to
    bargain.
    10                              Nos. 05-1289, 05-1557
    A true Copy:
    Teste:
    ________________________________
    Clerk of the United States Court of
    Appeals for the Seventh Circuit
    USCA-02-C-0072—1-9-06