Nestle Dreyer's Ice Cream Co. v. National Labor Relations Board

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2222
NESTLE DREYER’S ICE CREAM COMPANY,
Petitioner,
v.
NATIONAL LABOR RELATIONS BOARD,
Respondent,
and
INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL 501, AFL-
CIO,
Intervenor.
-------------
NATIONAL ASSOCIATION OF MANUFACTURERS; RETAIL LITIGATION
CENTER, INC.; THE CHAMBER OF COMMERCE OF THE UNITED STATES
OF AMERICA; COALITION FOR A DEMOCRATIC WORKPLACE;
INTERNATIONAL FOODSERVICE DISTRIBUTORS ASSOCIATION; NATIONAL
ASSOCIATION OF WHOLESALER-DISTRIBUTORS; NATIONAL COUNCIL OF
CHAIN RESTAURANTS; NATIONAL FEDERATION OF INDEPENDENT
BUSINESS; NATIONAL RETAIL FEDERATION; SOCIETY FOR HUMAN
RESOURCE MANAGEMENT,
Amicus Curiae.
No. 14-2339
NATIONAL LABOR RELATIONS BOARD,
Petitioner,
v.
NESTLE DREYER’S ICE CREAM COMPANY,
Respondent.
-------------
NATIONAL ASSOCIATION OF MANUFACTURERS; RETAIL LITIGATION
CENTER, INC.; THE CHAMBER OF COMMERCE OF THE UNITED STATES
OF AMERICA; COALITION FOR A DEMOCRATIC WORKPLACE;
INTERNATIONAL FOODSERVICE DISTRIBUTORS ASSOCIATION; NATIONAL
ASSOCIATION OF WHOLESALER-DISTRIBUTORS; NATIONAL COUNCIL OF
CHAIN RESTAURANTS; NATIONAL FEDERATION OF INDEPENDENT
BUSINESS; NATIONAL RETAIL FEDERATION; SOCIETY FOR HUMAN
RESOURCE MANAGEMENT,
Amicus Curiae.
On Petition for Review of an Order of the National Labor
Relations Board. (31−CA−74297)
Argued: October 28, 2015 Decided: April 26, 2016
Before SHEDD, DIAZ, and HARRIS, Circuit Judges.
Petition for review denied and cross-petition for enforcement
granted by published opinion. Judge Diaz wrote the opinion, in
which Judge Shedd and Judge Harris joined.
ARGUED: Bernard J. Bobber, FOLEY & LARDNER LLP, Milwaukee,
Wisconsin, for Petitioner/Cross-Respondent. Gregory P. Lauro,
NATIONAL LABOR RELATIONS BOARD, Washington, D.C., for
Respondent/Cross-Petitioner. Matthew James Ginsburg, AFL-CIO,
Washington, D.C., for Intervenor. ON BRIEF: Ryan N. Parsons,
FOLEY & LARDNER LLP, Milwaukee, Wisconsin, for Petitioner/Cross-
Respondent. Jennifer Abruzzo, Deputy General Counsel, John H.
Ferguson, Associate General Counsel, Linda Dreeben, Deputy
Associate General Counsel, Jill A. Griffin, Supervisory
Attorney, NATIONAL LABOR RELATIONS BOARD, Washington, D.C., for
Respondent/Cross-Petitioner. Brian A. Powers, James B. Coppess,
Washington, D.C., for Intervenor. Bernard P. Jeweler,
2
Christopher R. Coxson, Harold P. Coxson, OGLETREE, DEAKINS,
NASH, SMOAK & STEWART, P.C., Washington, D.C.; Linda E. Kelly,
Patrick N. Forrest, MANUFACTURERS’ CENTER FOR LEGAL ACTION,
Washington, D.C., for Amicus The National Association of
Manufacturers. Deborah White, RETAIL LITIGATION CENTER, INC.,
Arlington, Virginia; Jason C. Schwartz, Thomas M. Johnson, Jr.,
Alexander K. Cox, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C.,
for Amicus Retail Litigation Center, Inc. Mark Theodore, Los
Angeles, California, Ronald Meisburg, Joshua F. Alloy, PROSKAUER
ROSE, LLP, Washington, D.C.; Kate Comerford Todd, Steven P.
Lehotsky, U.S. CHAMBER LITIGATION CENTER, INC., Washington,
D.C., for Amici Coalition for a Democratic Workplace,
International Foodservice Distributors Association, National
Association of Wholesaler-Distributors, National Council of
Chain Restaurants, National Federation of Independent Business,
National Retail Federation, Society for Human Resource
Management, and The Chamber of Commerce of the United States.
3
DIAZ, Circuit Judge:
The National Labor Relations Board certified a collective-
bargaining unit consisting of all maintenance employees at an
ice-cream production facility operated by Nestle-Dreyer’s Grand
Ice Cream, Inc. Dreyer’s contends that (1) the Board applied a
legal standard that violated the National Labor Relations Act
(the “NLRA”) and otherwise represented an abuse of discretion;
and (2) under the proper legal standard as well as the incorrect
legal standard upon which the Board relied, production employees
must be included in the petitioned-for unit. Because the Board
did not violate the NLRA or abuse its discretion in certifying
the maintenance-only unit, we deny Dreyer’s petition for review
and grant the Board’s cross-petition for enforcement of its
order.
I.
A.
At a production facility in Bakersfield, California, 1
Dreyer’s manufactures ice-cream products: cartons, cones, bars,
and other frozen novelties. Known as the Bakersfield Operations
1 We have jurisdiction because Dreyer’s operates a
production facility in Maryland. See 29 U.S.C. § 160(f)
(permitting “[a]ny person aggrieved by a final order of the
Board” to obtain review where the person “resides or transacts
business”).
4
Center (the “BOC”), the facility contains a factory with twenty-
six production lines, a palletizing area and distribution
center, warehouses for dry goods and frozen goods, and a machine
shop for making and repairing parts for the production lines.
It also houses a research and development center.
At the time relevant to this litigation, the BOC employed
about 113 maintenance employees and 578 production employees.
Most production employees work on the production lines,
operating the manufacturing equipment, stacking the product on
pallets, and storing it for distribution. Others work in pre-
manufacturing, where they order materials and mix ingredients
for the lines. Production employees generally work on a
specific production line, and they do not work in the machine
shop or the research and development center.
The majority of maintenance employees work on the
production lines, where they are assigned to multiple production
lines or the adjacent palletizing areas. They perform routine
maintenance and as-needed repairs on the manufacturing
equipment. The rest of the maintenance employees perform a
variety of tasks throughout the BOC. Process technicians, who
work in pre-manufacturing, assist with the computer-controlled
mixing equipment and troubleshoot problems as they arise. The
utilities group maintains the BOC’s refrigeration systems, as
well as its electrical, heating, plumbing, and ventilation
5
systems. Other maintenance employees work as control
technicians, in facilities maintenance, or in the machine shop.
On the production lines and in pre-manufacturing,
maintenance and production employees sometimes work together.
While production workers are trained to solve minor or routine
technical problems—for example, simple packaging jams that can
be fixed by removing the jammed material—their technical
training is limited, and maintenance workers perform most
repairs and routine maintenance. When production employees
encounter technical problems they cannot solve, they call for
the assistance of a maintenance employee. The maintenance
employee diagnoses the problem and performs the repair, relying
on input from the production worker. Every third shift,
production workers disassemble the equipment for cleaning while
maintenance workers stand by to replace broken parts or address
problems that may occur during reassembly and start-up.
Maintenance and production employees have similar working
conditions. They receive the same employment benefits, annual
performance evaluations, and they use the same parking lots,
time clocks, break rooms, and lockers. They must also follow
the same workplace policies, including wearing similar uniforms.
But the two groups are distinguished in several significant
respects. Maintenance workers are generally better paid,
receiving $20–$30 an hour, compared with $15–$22 for production
6
workers. This reflects the fact that maintenance employees have
significantly more training, particularly in mechanics and
electronics. Maintenance employees rarely do the work of
production employees, and they work on a different schedule.
Whereas maintenance employees work four ten-hour shifts each
week, production employees work five eight-hour shifts, which
results in different overtime, holiday, and sick pay.
Furthermore, the two groups are organized into separate
departments with different immediate supervisors. Maintenance
employees are part of the Technical Operations Team; production
employees are on either the Manufacturing Team or the Pre-
Manufacturing Team. Finally, the BOC shuts down annually for
two to four weeks for a complete rebuild of the production
lines. All maintenance employees are required to work during
this period, whereas only a few production employees work if
they volunteer or are selected to participate.
Near the end of 2009, Dreyer’s put in place a pilot
program, limited to one production line, intended to partially
integrate the roles of production and maintenance employees.
The purpose of the program was to increase production employees’
ability to perform routine maintenance (cleaning, inspecting,
lubricating), thereby allowing maintenance employees to focus
less on breakdowns and more on preventive maintenance. The
7
program was put on hold sometime in 2011 and was restarted in
early 2012.
B.
Late in 2011, the International Union of Operating
Engineers Local 501, AFL–CIO filed a petition with the Board,
seeking to represent the BOC’s maintenance employees. Dreyer’s
objected to the proposed unit, arguing that it should also
include production employees. The Board’s Regional Director
(the “RD”) approved the maintenance-only unit over Dreyer’s
objections, and the Board denied Dreyer’s request for review.
After maintenance employees voted 56–53 in favor of joining the
Union, Dreyer’s refused to bargain and the Union filed an
unfair-labor-practice charge with the Board. 2
The Board granted summary judgment to the Union, and
Dreyer’s sought review in this court. We placed the case in
abeyance pending the Supreme Court’s decision in NLRB v. Noel
Canning, 134 S. Ct. 2550 (2014), which ultimately held that the
appointments of some members of the Board were unconstitutional.
On the Board’s motion, we vacated its order and remanded.
On remand, the Board again found that Dreyer’s had
committed an unfair labor practice, and Dreyer’s again
2
To challenge the Board’s unit determination, “the employer
must refuse to bargain, triggering unfair labor practice
proceedings under Section 8(a)(5).” Wellman Indus., Inc. v.
NLRB, 490 F.2d 427, 430 (4th Cir. 1974).
8
petitioned this court for review. The Board cross-petitioned
for enforcement.
II.
A.
The NLRA requires the Board to determine “the unit
appropriate for the purposes of collective bargaining.” 29
U.S.C. § 159(b). In making this determination, the Board
exercises “the widest possible discretion.” Sandvik Rock Tools,
Inc. v. NLRB, 194 F.3d 531, 534 (4th Cir. 1999). The Board may
approve any appropriate unit; it need not identify and select
“the single most appropriate unit.” NLRB v. Enter. Leasing Co.
Se., 722 F.3d 609, 625 (4th Cir. 2013) (quoting Am. Hosp. Ass’n
v. NLRB, 499 U.S. 606, 610 (1991)). Therefore, to resist the
Board’s determination that a petitioned-for unit is appropriate,
an employer cannot merely demonstrate that a different unit is
also appropriate, or even more appropriate. Sandvik, 194 F.3d
at 537. Rather, “[a]n employer challenging the Board’s unit
determination . . . has the burden to prove that the bargaining
unit selected is ‘utterly inappropriate.’” Enter. Leasing, 722
F.3d at 626-27 (quoting Sandvik, 194 F.3d at 534); see also
Arcadian Shores, Inc. v. NLRB, 580 F.2d 118, 120 (4th Cir.
1978).
9
But despite granting broad discretion, the NLRA prohibits
the Board from blindly deferring to a union’s proposed unit.
NLRB v. Lundy Packing Co., 68 F.3d 1577, 1580 (4th Cir. 1995).
Rather, the NLRA states that “[i]n determining whether a unit is
appropriate . . . the extent to which the employees have
organized shall not be controlling.” 29 U.S.C. § 159(c)(5).
This means that the happenstance of a union’s organizing efforts
may not be the dominant factor in the Board’s decision to
approve the unit. See Lundy, 68 F.3d at 1580. Because a union
will ordinarily propose a unit controlled by organized
employees, the Board violates the statute if it presumes the
appropriateness of a proposed unit. See id. at 1581.
Nevertheless, the Board may consider the extent of organization
as one relevant factor, which may even be the “determinative”
factor in a “close case.” Overnite Transp. Co. v. NLRB, 294
F.3d 615, 620 (4th Cir. 2002).
To guide its discretion, and to avoid giving controlling
weight to the extent of organization, the Board has
traditionally asked whether “employees in the requested unit
shar[e] a sufficient community of interest to be included in the
same unit.” Overnite Transp. Co., 322 N.L.R.B. 723, 725 (1996).
The community-of-interest test incorporates several factors:
(1) similarity in the scale and manner of determining
the earnings; (2) similarity in employment benefits,
hours of work, and other terms and conditions of
10
employment; (3) similarity in the kind of work
performed; (4) similarity in the qualifications,
skills and training of the employees; (5) frequency of
contact or interchange among the employees;
(6) geographic proximity; (7) continuity or
integration of production processes; (8) common
supervision and determination of labor-relations
policy; (9) relationship to the administrative
organization of the employer; (10) history of
collective bargaining; (11) desires of the affected
employees; [and] (12) extent of union organization.
Enter. Leasing, 722 F.3d at 626 n.8 (quoting Lundy, 68 F.3d at
1580). The test ensures not only that the employees in the unit
share common interests, but also that these interests are
distinct from those of excluded employees. See Newton-Wellesley
Hosp., 250 N.L.R.B. 409, 411 (1980).
In Specialty Healthcare & Rehabilitation Center of Mobile,
357 N.L.R.B. No. 83 (2011), the Board set out to clarify this
longstanding unit-determination analysis. The Board explained
that the analysis proceeds in two steps. In step one, “the
Board examines the petitioned-for unit . . . . If that unit is
an appropriate unit, the Board proceeds no further.” Id. at
*12. In essence, this is the traditional community-of-interest
test outlined above. See id. at *14 (examining the community-
of-interest factors to determine that the included employees
“share a community of interest” and “are unlike all the other
employees the Employer would include in the unit”). Once the
Board determines in step one that the members of the proposed
unit share a community of interest—and the unit is thus
11
appropriate—the burden then shifts to the employer to show that
the approved unit is inappropriate. Id. at *15.
In step two, the employer “is required to demonstrate that
a proposed unit consisting of employees readily identifiable as
a group who share a community of interest is nevertheless not an
appropriate unit because the smallest appropriate unit contains
additional employees.” Id. The employer’s required showing is
necessarily “heightened”: because the Board need not select the
most appropriate unit, the employer must do more than show that
its preferred unit is also appropriate. Id. at *16.
The Board acknowledged in Specialty Healthcare that it and
the courts of appeals had over time used “different words . . .
to describe this heightened showing,” and it concluded that the
use of “slightly varying verbal formulations . . . [did] not
serve the statutory purpose” of the NLRA. Id. at *16-17.
Accordingly, to describe the employer’s required showing when
asking the Board to include additional employees in the unit,
the Board settled on a phrase accepted by the D.C. Circuit: “an
overwhelming community of interest.” Id. at *16 (quoting Blue
Man Vegas, LLC v. NLRB, 529 F.3d 417, 421 (D.C. Cir. 2008)).
To summarize the Specialty Healthcare framework: in step
one, the Board performs a community-of-interest analysis to
determine whether the proposed unit is appropriate; if the unit
is found appropriate, in step two the employer must demonstrate
12
that the excluded employees it wishes to include share an
“overwhelming community of interest” with the included
employees. Id. (emphasis added).
B.
We hold that the Board acted within its broad discretion in
certifying the Union’s petitioned-for unit. After a thorough
analysis of the facts, the RD applied the traditional community-
of-interest factors to determine not only that the maintenance
employees share a community of interest amongst themselves, but
also that maintenance employees form a group distinct from
production employees. By doing so, the RD did not allow the
extent of organization to control his decision.
In applying the Specialty Healthcare framework, the RD
began by determining that the maintenance employees are “readily
identifiable as a separate group” from production employees.
J.A. 416. Maintenance employees “are in their own department,
and are in different job classifications, have different skills,
and perform different functions from production employees.” Id.The RD focused in particular on the “very different skills” of
the two employee groups and on the fact that maintenance
employees have “much more technical knowledge” than production
employees. Id. Specifically, maintenance employees “are
required to have one year[’s] experience in computerized
maintenance management, two years[’] experience in
13
troubleshooting pneumatics, hydraulics, and electrical and
manufacturing, and five to seven years[’] experience in
industrial high speed maintenance.” Id. None of these
requirements apply to production employees. Id. And whereas
“[m]aintenance mechanics spend about 90% of their time
performing skilled maintenance work,” “production employees lack
the appropriate skill” for such work and make only “minor
adjustment[s] or repair[s].” J.A. 416-17.
Having distinguished maintenance and production employees,
the RD next determined that “[t]he maintenance employees share a
sufficient community of interest amongst themselves for purposes
of collective bargaining.” J.A. 417. Applying the traditional
community-of-interest factors, he determined that the
maintenance employees share similar wages, similar hours, common
supervision, and common functions. J.A. 418-19.
Throughout this analysis, the RD continued to note how
maintenance employees are distinct from production employees.
He found that “[t]he greater skill of the maintenance employees
is . . . reflected by the fact that the maintenance employees
are significantly higher paid than the production employees” and
that “there is virtually no temporary interchange between
maintenance and production employees.” J.A. 419–20. Moreover,
any overlap in wages of the two groups is limited to one of five
classes of maintenance employees and is ultimately
14
“insignificant.” J.A. 418. The two groups work different
shifts, the RD found, and as a result, “[o]vertime is calculated
differently for maintenance employees than production
employees,” “maintenance employees tend to work more overtime
than production [employees],” and maintenance employees receive
more hours of sick pay than production employees. Id. The two
groups’ essential functions also differ: “The maintenance
employees are primarily in charge of maintaining the Employer’s
machinery, and the production employees are primarily in charge
of producing the ice cream.” J.A. 419. And while many
maintenance employees “come into contact with production
employees on the production lines,” some maintenance employees
who do not work on the lines have “more limited” or “very little
contact” with production employees. J.A. 420.
Moving on to step two of the Specialty Healthcare analysis,
the RD found that Dreyer’s could not meet its burden to show
that the production and maintenance employees share an
overwhelming community of interest. J.A. 420–21. He rejected
several of Dreyer’s arguments. First, he found distinguishable
prior Board cases approving joint units of production and
maintenance employees. J.A. 421 (citing Buckhorn, Inc., 343
N.L.R.B. 201 (2004); TDK Ferrites Corp., 342 N.L.R.B. 1006(2004)). Second, he found that the petitioned-for unit is not
arbitrary or fractured because the Union sought “to represent
15
all classifications of the Employer’s maintenance employees.”
Id. Third, he found the bargaining history at the facility
inconclusive. Id. And finally, the RD gave “little weight” to
Dreyer’s argument that its pilot program for increasing the
integration of the production and maintenance employees’ work
renders the unit inappropriate. J.A. 422. The success of the
program remained speculative, he found, and even assuming its
success, the program would not close the significant gap in
skill between the two groups. Id.By properly applying the community-of-interest factors
before shifting the burden to Dreyer’s, the RD appropriately
exercised his discretion and did not permit the extent of
organization to control. Cf. FedEx Freight, Inc. v. NLRB, No.
15-1848, 2016 WL 859971, at *7 (8th Cir. Mar. 7, 2016)
(published) (holding that “the use of an overwhelming community
of interest test at the second step of the Board’s analysis does
not violate section 9(c)(5)”); Kindred Nursing Ctrs. E., LLC v.
NLRB, 727 F.3d 552, 565 (6th Cir. 2013) (enforcing the Board’s
order in Specialty Healthcare); Blue Man, 529 F.3d at 423 (“As
long as the Board applies the overwhelming community-of-interest
standard only after the proposed unit has been shown to be prima
facie appropriate, the Board does not run afoul of the statutory
injunction that the extent of the union’s organization not be
given controlling weight.”).
16
This conclusion is supported by the fact that the approved
unit tracks Dreyer’s own departmental lines and is consistent
with prior Board unit determinations. See, e.g., Ore-Ida Foods,
Inc., 313 N.L.R.B. 1016, 1020 (1994) (finding that maintenance
employees shared a community of interest distinct from
production workers because of differences in skill and
compensation, despite “extensive contact with, and, at times the
assistance of, the production employees”). And it is of no
consequence that a unit including production employees may also
be appropriate. See J.A. 421 (RD noting that “factors
[Dreyer’s] points to might show that a combined unit is an
appropriate unit”). Dreyer’s burden is to show that the
approved unit is “utterly inappropriate.” Enter. Leasing, 722
F.3d at 626-27. That it cannot do, as we explain in the next
section.
C.
Dreyer’s offers several objections, focusing its attack on
Specialty Healthcare rather than on the Board’s decision in this
case. 3 We consider each objection in turn.
3Dreyer’s focus on Specialty Healthcare rather than on the
RD’s analysis in this case is telling. Indeed, the dissenting
member of the Specialty Healthcare panel also participated in
this case, and, while he refused to rely on Specialty
Healthcare, he nevertheless found here “that, under the
traditional community-of-interest test, the interests of the
petitioned-for unit are sufficiently distinct from the
(Continued)
17
First, Dreyer’s contends that the overwhelming-community-
of-interest test in Specialty Healthcare violates the NLRA by
giving controlling weight to the extent of union organization.
For this contention, Dreyer’s relies primarily on our decision
in Lundy Packing. In Lundy, the Board approved a unit of
production and maintenance employees at a pork-products plant,
rejecting the employer’s argument that industrial engineers and
some quality-control employees should also be included. 68 F.3d
at 1579. While the Board conceded that the larger unit might
also be an appropriate unit, it determined that the excluded
employees did not share an “overwhelming community of interest”
with those in the proposed unit. Id. at 1581. The Board
therefore denied the employer’s request to include additional
employees. Id. at 1579.
We denied enforcement of the Board’s order, finding several
problems with the decision. First, the Board permitted the
exclusion of some employees on the basis of “meager
differences,” which was “problematic under the ‘community of
interest’ standard.” Id. at 1581. Second, the Board “adopted a
production employees.” J.A. 426. And at oral argument, counsel
for Dreyer’s conceded that the RD’s community-of-interest
analysis “looks a lot like the . . . historical analysis that
used to be done.” Oral Argument at 14:15, Nestle Dreyer’s Ice
Cream Co. v. NLRB, 14-2222 (Oct. 28, 2015),
http://coop.ca4.uscourts.gov/OAarchive/mp3/14-2222-20151028.mp3.
18
novel legal standard which effectively accomplished the
exclusion. Under this new standard, any union-proposed unit is
presumed appropriate unless an ‘overwhelming community of
interest’ exists between the excluded employees and the union-
proposed unit.” Id. We held that this use of the overwhelming-
community-of-interest standard, which presumed the
appropriateness of a proposed bargaining unit, “effectively
accorded controlling weight to the extent of union organization”
in violation of the NLRA. Id.According to Dreyer’s, Lundy held that the overwhelming-
community-of-interest test necessarily violates the NLRA when
used in the context of unit determinations: “Instead of using a
range of factors to determine whether a proposed unit is
appropriate, as the Board did with its traditional [community-
of-interest] test, the overwhelming test skews the analysis
‘overwhelmingly’ in favor of the union-proposed unit.” Pet’r’s
Br. at 41.
Dreyer’s reads Lundy too broadly. Lundy does not establish
that the overwhelming-community-of-interest test as later
applied in Specialty Healthcare fails to comport with the NLRA.
Instead, Lundy prohibits the overwhelming-community-of-interest
test where the Board first conducts a deficient community-of-
interest analysis—that is, where the first step of the Specialty
Healthcare test fails to guard against arbitrary exclusions.
19
The “meager differences” we identified in Lundy between the
excluded quality-control employees and the included production
and maintenance employees were the following: “(1) the method
for calculating their earnings; (2) supervision; and (3) a lack
of interchangeability with other [production and maintenance]
positions.” Id. at 1580. And even these distinctions were
questionable: at least one included employee’s pay was
calculated in the same manner as the excluded employees, and
many of the included employees had different supervisors from
one another. Id. at 1580–81. In other words, the petitioned-
for unit was an apparent union gerrymander. By rubber-stamping
it and then applying the overwhelming-community-of-interest
test, “the Board effectively accorded controlling weight to the
extent of union organization.” Id. at 1581.
But in Lundy we had no occasion to determine whether the
overwhelming-community-of-interest test would offend the NLRA in
a case where the Board properly conducts Specialty Healthcare’s
step-one analysis by determining that the members of the
petitioned-for unit share a distinct community of interest.
With such a case now before us, we find Lundy distinguishable.
Here, in addition to the differences cited in Lundy, the RD
identified several community-of-interest factors that
distinguished maintenance employees from production employees:
higher wages, greater training and education requirements,
20
higher skill levels, and different hours. In Lundy, the Board
effectively assumed the proposed-unit employees shared a
community of interest; here, in contrast, the Board rigorously
weighed the traditional community-of-interest factors to ensure
that the proposed unit was proper under the NLRA.
We need not and do not hold that an application of the
Specialty Healthcare standard will never run afoul of Lundy.
Our assessment of a prior Board policy regarding unit
determinations remains applicable here:
The Board’s announced standard may lead to some
decisions where the extent of organization will be the
dominant factor in unit selection (such as in cases
where the community of interest considerations in
support of the union’s proposed unit are weak), but
not all cases will be like that. And that did not
happen here, where the Board supported its decision to
exclude the [production employees] from the . . . unit
with numerous community of interest factors.
Overnite Transp., 294 F.3d at 621 (addressing the Board’s policy
of considering “only whether the unit requested [by the union]
is an appropriate one, even though it may not be the most
optimum or most appropriate unit”). At least on the facts
before us, the imposition of the overwhelming-community-of-
interest test did not give controlling weight to the extent of
union organization, unlike in Lundy.
Next, Dreyer’s contends that the Board in Specialty
Healthcare failed to provide a reasoned explanation for its
adoption of the overwhelming-community-of-interest test, which
21
resulted in a “repudiation of more than forty years of
precedent.” Pet’r’s Br. at 44. Dreyer’s overstates the changes
the Board made in Specialty Healthcare. Indeed, we agree with
our sister circuits that the Board clarified—rather than
overhauled—its unit-determination analysis. See FedEx, 2016 WL
859971, at *7 (“We conclude that the overwhelming community of
interest standard articulated in Specialty Healthcare is not a
material departure from past precedent . . . .”); Kindred, 727
F.3d at 561 (“The Board has used the overwhelming-community-of-
interest standard before, so its adoption in Specialty
Healthcare . . . is not new.”); Blue Man, 529 F.3d at 421
(describing the Board’s “consistent analytic framework” as
including the question whether “the excluded employees share an
overwhelming community of interest with the included
employees”).
We acknowledge that some statements in Specialty Healthcare
may be read to indicate significant changes in Board policy.
For example, some passages suggest that whether employees are
appropriately excluded from the petitioned-for unit is addressed
only in step two, the overwhelming-community-of-interest
analysis, not in step one, the traditional community-of-interest
analysis. Specialty Healthcare, 357 N.L.R.B. No. 83, at *26
(Hayes, dissenting); see also id. at *17 (majority opinion).
This would indeed constitute a significant change, as it would
22
mean that the Board no longer determines for itself whether
employees are arbitrarily excluded from the petitioned-for unit.
Applying Specialty Healthcare in such a manner might well
conflict with Lundy, which requires that before the
overwhelming-community-of-interest test is applied, the Board at
the very least must ensure that employees are not excluded on
the basis of “meager differences.” Lundy, 68 F.3d at 1581.
The RD’s application of Specialty Healthcare here, however,
is entirely consistent with our precedent. The analysis of the
proposed unit did not “address[], solely and in isolation, the
question whether the employees in the unit sought have interests
in common with one another.” Newton-Wellesley Hosp., 250
N.L.R.B. at 411. Instead, the analysis “proceed[ed] to a
further determination whether the interests of the group sought
[were] sufficiently distinct from those of other employees to
warrant the establishment of a separate unit.” Id. This was a
proper application of the well-worn community-of-interest test,
and it represented a finding that the petitioned-for unit was
appropriate. At that point, a challenge to the unit faced a
high burden. In our words, the unit had to be proven “utterly
inappropriate”; in the Board’s newly chosen words, the excluded
employees had to share an overwhelming community of interest
with those in the unit. These standards are entirely
consistent.
23
Nor is it unreasonable, as Dreyer’s urges, for the Board to
use the same overwhelming-community-of-interest test in this
context that it has historically used in the context of
accretions. In an accretion, new employees become part of an
existing bargaining unit without taking part in a representative
election. Lundy, 68 F.3d at 1581. Because these employees lack
the opportunity to vote, the Board will not permit their
addition to a unit unless they share an overwhelming community
of interest with the unit. Id. As we explained in Lundy, the
Board may not import this test to determine whether a
petitioned-for unit is appropriate. Id. at 1582. The proper
analysis for that determination is the community-of-interest
test. But in determining whether the Board’s approved unit is
“utterly inappropriate,” the overwhelming-community-of-interest
test is reasonable. As in the accretion context, the question
is whether some employees share more than a community of
interest with the members of the unit.
Moreover, to the extent the Board in Specialty Healthcare
departed from its prior precedent, it provided enough
explanation so that a reviewing court could understand what
changes the Board intended to make and why. See J.P. Stevens &
Co. v. NLRB, 623 F.2d 322, 329 (4th Cir. 1980) (determining that
the Board had not sufficiently explained itself where it was
“difficult to ascertain . . . why the Board apparently departed
24
from its precedents”). Specifically, the Board explained that
the overwhelming-community-of-interest test, though somewhat new
in name, was consistent with the Board’s prior precedent and
with the precedent of the courts of appeals, and that using
varying terminology did not serve the purposes of the NLRA.
Specialty Healthcare, 357 N.L.R.B. No. 83, at *16-17. This was
a sufficient explanation for our review. Because the Board did
not significantly alter its prior rulings in Specialty
Healthcare, and because it reasonably explained the changes it
was making, the Board did not abuse its discretion.
Finally, Dreyer’s argues that in Specialty Healthcare, “the
Board exceeded the reasonable boundaries of the adjudicative
process and abused its discretion,” in violation of the
Administrative Procedure Act. Pet’r’s Br. at 59. This appears
to encompass two sub-arguments: first, Specialty Healthcare
changed the law so significantly that rulemaking rather than
adjudication was required; second, whether to adopt the
overwhelming-community-of-interest test was not before the Board
in Specialty Healthcare, so the Board was announcing a rule
without either proper adjudication or rulemaking. Both
arguments lack merit.
Ordinarily, the Board may adopt new regulatory principles
through adjudication rather than rulemaking. NLRB v. Bell
Aerospace Co. Div. of Textron, 416 U.S. 267, 294 (1974).
25
However, courts have sometimes found the choice of adjudication
inappropriate where an agency purports to establish a new rule
of widespread application. See Ford Motor Co. v. FTC, 673 F.2d
1008, 1009 (9th Cir. 1981). In Ford, for example, the FTC was
required to proceed by rulemaking rather than adjudication when
it created a rule that “would require a secured creditor to
credit the debtor with the ‘best possible’ value of [a]
repossessed vehicle, and forbid the creditor from charging the
debtor with overhead and lost profits.” Id.In Specialty Healthcare, by contrast, the Board did not
create a new obligation for employers in operating their
businesses. Rather, the Board merely clarified the employer’s
evidentiary burden when it challenges a union’s proposed
bargaining unit in the course of an adjudication. Such a
clarification of agency law through adjudication is hardly the
kind of abuse of discretion the Ninth Circuit identified in
Ford. See FedEx, 2016 WL 859971, at *8 (holding that “the
Board’s decision to proceed by adjudication was not an abuse of
discretion”); cf. Bell Aerospace, 416 U.S. at 295 (finding that
rulemaking was not required for the Board to change course from
prior decisions, when industry reliance on past decisions would
not result in “substantial” adverse consequences).
We also reject Dreyer’s contention that the issue of
whether to adopt the overwhelming-community-of-interest test was
26
not before the Board in Specialty Healthcare. Although the
parties did not raise the question of what standard should
apply, the employer was asking the Board to include additional
employees in a proposed bargaining unit. Specialty Healthcare,
357 N.L.R.B. No. 83, at *2. The Board was free to clarify the
applicable standard. See Bell Aerospace, 416 U.S. at 294(“[T]he Board is not precluded from announcing new principles in
an adjudicative proceeding . . . .”).
We therefore conclude that the Board did not violate the
Administrative Procedure Act.
III.
For the reasons stated, we deny Dreyer’s petition for
review and grant the Board’s cross-petition for enforcement.
PETITION FOR REVIEW DENIED AND CROSS-PETITION FOR
ENFORCEMENT GRANTED
27