International Ass'n of Machinists v. National Labor Relations Board , 414 F.2d 1135 ( 1969 )

BURGER, Circuit Judge:

Petitioners seek review of an order of the National Labor Relations Board dismissing a complaint alleging that Thomas Cadillac and Lou Ehlers Cadillac violated Section 8(a) (1) and (5) of the Act, 29 U.S.C. § 158(a) (1) and (5), by failing to recognize and bargain with the petitioning Unions.

Prior to the time Thomas and Ehlers began operations, two factory-dealerships in Los Angeles were owned and operated directly by Cadillac Division of General Motors Corporation. During the period these two factory dealerships were operated by Cadillac Division, the Machinists Union was certified as the bargaining agent for a single unit covering the operations of both outlets along with a third branch which was a used car outlet disposing of cars taken in trade by the two retail branches. The Painters Union was certified later during this period as bargaining agent for a single unit of auto body painters for both Cadillac outlets. The two Unions bargained jointly with General Motors and a single contract was made for both retail outlets. The contract provided the same wages, grievance procedures and other benefits for all employees wherever assigned, and a common seniority list covered both branches. A unique feature of the single contract provided transferability of seniority, vacation and holiday pay at all General Motors plants wherever located. All employees were covered by General Motors’ pension and insurance programs. This contract was in effect when General Motors sold its outlets to the two independent franchise dealers.

While General Motors operated the Cadillac outlets in Los Angeles they were managed and administered as a single unit with a central accounting system, central personnel, credit and purchasing controls. When General Motors decided to terminate direct retail operations in Los Angeles it so advised the two Unions and subsequently reached agreement with them on the rights of the General Motors’ employees.¹ Thereafter, the sale of assets and franchise agreements were separately made with the two new dealers who had no business relationship with each other.

At the time General Motors terminated its operations it employed 117 employees in service departments, 75 at what was to become the Thomas outlet and 42 at the Ehlers outlet. All were union members except three mechanics and one painter. Prior to the actual transfer of assets, the unions requested that the new dealers meet with them to “clarify the rights of the employees.” Ehlers responded that this was premature and Thomas made no reply.

The new Cadillac dealers immediately began operations under separate competing franchise contracts. Thomas hired a total of 63 service employees, 16 of them former General Motors employees who were union members; Thomas also hired a new supervisory staff of 7 persons only 3 of whom had worked for the former General Motors outlets. One assistant sales manager and an accounting supervisor who had worked for unrelated General Motors outlets were also hired.

Ehlers hired 11 service employees and several salesmen who had worked in the predecessor General Motors operation, Ehlers brought in former employees of his own in most supervisory posts. The Board found on undisputed evidence that both dealers hired their new staffs solely on the basis of competence and were not influenced by the union membership of job applicants. The Board also found that neither dealer had any connection with General Motors except by virtue of the franchise as a dealer.

In the face of the refusals by Thomas and Ehlers to negotiate the claims of the Unions, picketing of both dealers was commenced. The Unions made no claim to represent a majority of the employees of Thomas and Ehlers. Nevertheless, the Examiner concluded that Thomas and Ehlers were successor employers and hence required to recognize the Unions and bargain with them. The Board found this determination to be erroneous and held that Thomas and Ehlers did not take over or succeed to the General Motors bargaining unit. In concluding that the new franchise dealers did not take over or succeed to General Motors’ bargaining unit the Board relied on the changes in structure, organization, management, and employees, and the alterations in the relationship of the two retail outlets to each other, to General Motors, and to the public.

The record amply supports the Board’s determination that Thomas and Ehlers selected new employees on the basis of skill, ability and experience “and were in no way influenced by union membership of the job applicant.” Even a cursory comparison of the differences in the enterprises operated by General Motors and those operated by Thomas and Ehlers shows a marked lack of identity. The outlets operated by Thomas and Ehlers were in direct competition for sales and service not only with each other but all other dealers, General Motors and unrelated, whereas under General Motors ownership there was not aggressive advertising and sales promotion vis-a-vis other General Motors dealers. Thomas and Ehlers compete with each other for sales to customers while the General Motors managed enterprise was relatively indifferent in the sense that General Motors did not have the same interest in competing with franchise Cadillac dealers as do Thomas and Ehlers. As noted, management, accounting, and advertising were centrally controlled under the factory management but are totally separate and independent after the new franchise dealers took over.

Once Thomas and Ehlers took over, no common seniority was feasible and no transfers from one establishment to the other — or to an unrelated General Motors operation — were available. Thomas and Ehlers each established a new management and supervisory hierarchy. Each was free to fix wages and working conditions subject only to the normal competition for skilled service personnel in the local labor market. From a management point of view, given the fiercely competitive nature of retail auto sales, each enterprise was now “on its own”; attitudes on sales and performance which might have been tolerable to General Motors would not be acceptable to independent dealers.

A comparison of these factual aspects indicates at once that this record is clearly distinguishable from successorship cases cited by the petitioners. See, e. g., K. B. & J. Young’s Super Markets, Inc. v. NLRB, 377 F.2d 463, 466 (9th Cir. 1967). These comprehensive changes, and others we deem it unnecessary to detail, furnish support for the Board’s determination that no successorship existed. To have concluded otherwise would have deprived the new employees of Thomas and Ehlers — a majority of whom had no prior affiliation with Petitioners — of rights guaranteed them by Section 7 of the Act to be represented by an agent of their own choice.

It should be noted that the Board’s finding of nonsuccessorship did not turn on the fact that a majority of the new employees were not members of the old bargaining unit; if the composition of the unit was the controlling factor in determining successorship, a purchaser might well seek to avoid application of the successorship principle by refusing to hire the seller’s employees.² Of course, if the purchaser deliberately sets out to destroy a union when he takes over a going business other consequences of a violation of the Act might well arise. As previously noted, however, there is undisputed evidence on the record that Thomas and Ehler’s selection of new employees to staff the significantly altered operations was based only on skill and ability, and that union affiliation played no part.

Our review satisfies us that the record contains substantial evidence which supports the Board’s finding that Thomas and Ehlers were not successors of the General Motors’ dealerships, thereby neutralizing the contention that the prior existence of a valid certification created a presumption of continued majority status which obligated Thomas and Ehlers to bargain with the Unions. The substantial nondiscriminatory change in personnel found by the Board, along with the changes in operational structure, negated any such presumption. See NLRB v. John Stepp’s Friendly Ford, Inc., 338 F.2d 833 (9th Cir. 1964); cf. International Union, United A., A. Agr. Implement Wkrs. v. NLRB, 129 U.S.App.D.C. 282, 394 F.2d 757, cert. denied, 393 U.S. 831, 89 S.Ct. 100, 21 L.Ed.2d 102 (1968).

On substantial supporting evidence the Board found that the changes in operational format and nondiscriminatory personnel turnover negated a finding of successorship. Those findings effectively overcome the presumption of continuing majority status thereby placing on the Union the burden of making this showing. Petitioners have not claimed, nor are they able to demonstrate, this circumstance.

The petition for review is Denied.

1 . In his concurring opinion, Member Jenkins stated:

Meetings [between General Motors and] the Union resulted in a Supplement Agreement, dated April 28, 1965, which provided that, in anticipation of General Motors’ closing Bixel and Wil-shire, employees who left to take another job could voluntarily be laid off out of line of seniority. In addition, General Motors agreed to give employees vacation and absence pay prorated to

the date of termination, lump sum payment of amounts accumulated under the General Motors Income Security Plan, retirement benefits for employees having reached the permissible retirement age of 60 and having the minimum 10 years of service, and pensions to those between the ages of 55-60 who otherwise qualified for retirement. A sizable [sic] number of employees took advantage of these provisions. (Joint Appendix 60-61).

2 . See Note, Obligations of Successor Employers: Recent variations on the John Wiley Theme, 2 Ga.L.Rev. 574, 582-586 (1968).