Shares, Inc. v. National Labor Relations Board

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