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Parties Involved:
Council on Labor Law Equality
Amicus Curiae for Petitioner
McClatchy Newspapers, Inc.
Petitioner
National Labor Relations Board
Respondent
Northern California Newspaper Guild, Local 52
Intervenor

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 16, 1997 Decided December 19, 1997 

No. 96-1399

MCCLATCHY NEWSPAPERS, INC.,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

NORTHERN CALIFORNIA NEWSPAPER GUILD, LOCAL 52,

INTERVENOR

Consolidated with 

No. 97-1111

On Petitions for Review and Cross-Applications

for Enforcement of Orders of the

National Labor Relations Board

Jeremy P. Sherman argued the cause and filed the briefs 

for petitioner.

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David S. Habenstreit, Supervisory Attorney, National Labor Relations Board, argued the cause for respondent, with 

whom Linda R. Sher, Associate General Counsel, and Aileen 

A. Armstrong, Deputy Associate General Counsel, were on 

the brief.

James B. Coppess argued the cause for intervenor Northern California Newspaper Guild, Local 52, with whom Barbara Camens, Marsha S. Berzon, and Laurence S. Gold were 

on the brief.

Gerard C. Smetana was on the brief for amicus curiae

Council on Labor Law Equality.

Before: SILBERMAN, ROGERS, and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge: This dispute encompasses two 

cases, one involving McClatchy's Sacramento newspaper and 

the other its Modesto newspaper. In both cases, the National 

Labor Relations Board found that McClatchy committed an 

unfair labor practice by unilaterally implementing a discretionary merit pay proposal, even though McClatchy had 

bargained to impasse over the proposal with the union. In 

the Modesto case, the Board also found that McClatchy had 

threatened its employees with discharge for engaging in a 

protected activity. McClatchy petitions for review of the 

orders, and the Board cross-petitions for enforcement. We 

enforce the Board's Sacramento order, and partially enforce 

the Board's Modesto order.

I.

At the Sacramento Bee, the Northern California Newspaper Guild, Local 52 represents editorial, advertising, and 

telephone switchboard employees. McClatchy's most recent 

collective bargaining agreement with the union, which expired 

in 1986, set pay through a combination of wage scales and 

discretionary merit raises. The agreement defined 28 job 

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classifications, each setting a minimum salary that automatically increased with each year of experience. Once an employee reached the maximum salary for his or her classification, raises were based solely on merit, as determined by the 

company. McClatchy retained full discretion over the timing 

and amount of these merit raises, and its decisions were 

excluded from the contractual grievance and arbitration procedure. Within 10 days of performing a merit evaluation, 

McClatchy would notify the union of the result, and the union 

then could make nonbinding comments and participate in the 

appeals process at the employee's request.

When the 1986 agreement expired, McClatchy and the 

union each proposed a new wage system. From the outset, 

their proposals were diametrically opposed: McClatchy wanted to move to a system based entirely on its determination of 

merit; the union wanted to eliminate the merit system altogether. McClatchy's final offer proposed to grandfather current employees earning less than their classification's maximum, but this plan only superficially preserved the old wage 

scales. Ninety percent of the employees were already at the 

top salary step in their class, so the offer kept most raises in 

McClatchy's complete discretion. And, since the 1986 scales 

were out of step with the cost of living, salaries for the 

remaining 10% would effectively be determined by the publisher's discretion as well.

The parties bargained in good faith, but ultimately deadlocked over wage terms for the new agreement. Following 

impasse, McClatchy asserted that it was implementing its 

final offer and began granting increases to employees without 

consulting the union. Under the terms of McClatchy's proposalas was true under the 1986 agreementthe union's 

role was restricted to making nonbinding comments and 

participating in the appeal process only if asked by the 

employee. The union filed an unfair labor practice charge 

against McClatchy, alleging that implementing "merit" increases without the union's consent violated McClatchy's duty 

to bargain with the union over wages.

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Before the Board resolved the union's Sacramento complaint, petitioner reached an impasse with the union over a 

similar discretionary pay proposal for its Modesto Bee editorial staff. The only difference in the Modesto proposal was 

that it fixed the timing of merit increases. At the Sacramento Bee, McClatchy could consider employees for increases as 

frequently or infrequently as it wished, but at the Modesto 

Bee, increases were tied to the annual review process. As it 

had in Sacramento, petitioner implemented its final offer 

after impasse and gave raises to some employees. The union 

filed a second unfair labor practice charge against McClatchy, 

and included an allegation that McClatchy had threatened the 

Modesto employees with discharge for engaging in protected 

activity. Petitioner had posted a copy of its final offer, with a 

cover memorandum noting that, in the absence of agreement, 

the final offer set the terms and conditions of employment. 

Because the posted offer included a no-strike/no-picketing 

clause, the union complained that the posting was a veiled 

threat to employees.

The Board considered the Sacramento case first. The 

General Counsel argued that because McClatchy had a statutory obligation to bargain over "wages, hours, and terms of 

employment," granting individual raises without consulting 

the union violated the National Labor Relations Act. 

McClatchy maintained that it had satisfied that duty by 

bargaining to impasse over the discretionary pay proposal. 

Once it had exhausted the bargaining process by reaching 

impasse, McClatchy asserted, it was privileged to implement 

its "last, best, and final offer" over the union's objection. 

Relying on its decision in Colorado-Ute Electric Association,

295 N.L.R.B. No. 67 (1989), enf. denied, 939 F.2d 1392 (10th 

Cir. 1991), the Board rejected McClatchy's defense. In the 

Board's view, this case was less about impasse than statutory 

waiver: an employer who proposes unlimited management 

discretion over wages is really proposing that the union waive 

its statutory right to be consulted about wage changes. That 

is fine, the Board reasonedif the union agrees. But impasse, by definition a lack of agreement, could not substitute 

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for consent. Without a waiver, nothing relieved McClatchy of 

its obligation to bargain with the union before changing any 

employee's pay; unilaterally granting merit increases, therefore, was an unfair labor practice. McClatchy Newspapers, 

Inc., Publisher of The Sacramento Bee, 299 N.L.R.B. No. 156 

(1990).

The Board petitioned for enforcement of its order. The 

majority of the court, in a per curiam opinion, held that the 

Board's decision did not constitute reasoned decisionmaking. 

NLRB v. McClatchy Newspapers, Inc., 964 F.2d 1153 (D.C. 

Cir. 1992). The three judges wrote separate opinions, however, each expressing a somewhat different view of the Board's 

approach. Judge Henderson essentially agreed with the 

Tenth Circuit's view, expressed in Colorado-Ute, that the 

Board simply could not square its approach with governing 

precedent under the NLRA. Judge Silberman thought that 

the issue the Board faced was novel and that the Board's 

waiver theory might well be a legitimate interpretation of the 

Act if adequately explained. Chief Judge Edwards believed 

that the Board's waiver theory would not work, but that it 

might be possible to articulate a limited exception to the 

impasse doctrine that would cover this situation. He pointed 

out that the employer's bypassing the union in setting wage 

rates could be seen as a kind of de-collectivization of bargaining. Id. at 1173. Chief Judge Edwards and Judge Silberman 

agreed to remand to the Board for further consideration; 

Judge Henderson would have simply denied enforcement.

On remand, although it still used some language redolent of 

its original waiver theory,1the Board essentially adopted 

Chief Judge Edwards' suggestion and fashioned an exception 

to the implementation after impasse doctrine. The Board 

explained that although the doctrine "is designed, in part, to 

__________

1

"In sum, it is not the Respondent's bargaining proposal that 

we view as inimical to the policies of the Act, but its exclusion of the 

Guild at the point of its implementation of the merit pay plan from 

any meaningful bargaining as to the procedures and criteria governing the merit pay plan, when the Guild has not agreed to relinquish 

its statutory role." McClatchy Newspapers, Publisher of The Sacramento Bee, 321 N.L.R.B. No. 174 at 6 (1996) (emphasis added).

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allow an employer to exert unilateral economic force .... [it 

is legitimate] only as a method for breaking the impasse." 

McClatchy Newspapers, Publisher of The Sacramento Bee,

321 N.L.R.B. No. 174 at 4 (1996) (McClatchy II). In other 

words, the Board grounded its new "narrow exception" on the 

impact that implementation would have on the collective 

bargaining process:

Were we to allow the Respondent here to implement its 

merit wage increase proposal and thereafter expect the 

parties to resume negotiations for a new collectivebargaining agreement, it is apparent that during the 

subsequent negotiations the Guild would be unable to 

bargain knowledgeably and thus have any impact on the 

present determination of unit employee wage rates. The 

Guild also would be unable to explain to its represented 

employees how any intervening changes in wages were 

formulated, given the Respondent's retention of discretion over all aspects of these increases. Further, the 

Respondent's implementation of this proposal would not 

create any fixed, objective status quo as to the level of 

wage rates, because the Respondent's proposal for a 

standardless practice of granting raises would allow recurring, unpredictable alterations of wages [sic] rates 

and would allow the Respondent to initially set and 

repeatedly change the standards, criteria, and timing of 

these increases. The frequency, extent, and basis for 

these wage changes would be governed only by the 

Respondent's exercise of its discretion.

Id. at 6. Echoing Chief Judge Edwards' de-collectivization 

remark, the decision noted that petitioner's "ongoing ability 

to exercise its economic force in setting wage increases 

[without the Guild's participation] ... would simultaneously 

disparage the Guild by showing ... its incapacity to act as 

the employees' representative in setting terms and conditions 

of employment." Id. The Board took pains to emphasize 

that its holding was limited to a case where an employer 

refused to state any "definable objective procedures and 

criteria" for determining merit. Id. It decided the Modesto 

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case by the same reasoning and also found that petitioner had 

threatened the Modesto employees by posting its final offer, 

which had included the no-strike clause. McClatchy Newspapers, Publisher of The Modesto Bee, 322 N.L.R.B. No. 135 

(1996).

Petitioner criticizes the Board for not adhering to portions 

of the three separate opinions of the judges on the prior 

panel, or in not answering all of the questions posed by those 

judges, but it should be understood that only the per curiam

opinion is the court's holding. The Board's analysis does rely 

on observations made in the judges' opinions, and the Board 

adopted Chief Judge Edwards' suggestion. Its decision, however, must be judged on its own bottomnot on whether it 

conforms in whole or in part to the views of individual judges.

II.

Although the parties agree the case is one in which petitioner unilaterally implemented the terms of its final offers, it 

does seem somewhat anomalous to refer to the institution of 

the new wage regime as an "implementation of terms." 

Essentially, these wage proposalsparticularly the one for 

the Sacramento Beehave no terms. Indeed, the Board's 

opinion expresses the tentative view that under NLRB v. 

Katz, 369 U.S. 736 (1962), "a wholly discretionary merit wage 

policy (i.e., without identifiable procedures and criteria) does 

not itself 'establish' terms and conditions of employment at 

any point prior to the actual exercise of this discretion in 

setting discrete wage rates for unit employees." McClatchy 

II at 6 n.24 (emphasis added). In other words, the Board 

questioned whether the impasse doctrine should even apply to 

the employer's action. We think there is something to this 

query, but since it is not the Board's holding, we obviously 

cannot rely on it in reviewing the Board's decision.

Although petitioner's argument is somewhat diffuse, we 

detect three lines of attack against the Board's order. The 

first is that the NLRAor at least its "settled doctrine"

contemplates that an employer will be able to implement its 

last offer to the union after impasse; thus, the argument 

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goes, the Board either lacked authority to craft the "narrow 

exception" applied in this case or was arbitrary and capricious 

in doing so. Second, petitioner claims that the Board implicitly treats its merit pay proposal as a permissive bargaining 

subject, despite the Supreme Court's recognition that comparable management discretion clauses are mandatory subjects 

of bargaining. Finally, the Board is accused of inadequately 

setting forth the boundaries of the exception it has crafted 

and insufficiently reconciling its own precedent.

* * * *

The NLRA is wholly silent on the question whether an 

employer may implement its final offer after impasse. To be 

sure, the general language of the Act, including § 8(a)(5) and 

§ 8(d), have been authoritatively interpreted by the Supreme 

Court, and the Board is not free under Chevron to alter any 

of the those interpretations even if they otherwise would be 

permissible readings of the Act. See Lechmere, Inc. v. 

NLRB, 502 U.S. 527, 536-37 (1992); Maislin Indus. v. Primary Steel, Inc., 497 U.S. 116, 131 (1990). But the Supreme 

Court, while it has recognized the Board's doctrine, has never 

held that an employer has the right under the statute to 

implement its final offer, let alone considered whether the 

Board is entitled to craft exceptions to this supposed right.2

Indeed, not even the Board has ever held that the NLRA 

requires this rule.

The Board argues, moreover, that its decision does not 

create the only exception to the rule. It contends, and 

petitioner does not dispute, that other clausesdues checkoff, union security, no-strike, and arbitration clausescould 

not be implemented unilaterally post-impasse. Insofar as 

dues check-off and union security clauses are exceptions to 

the post-impasse rule, however, it is not because the Board 

__________

2

See Brown v. Pro Football, Inc., 116 S. Ct. 2116 (1996); 

Laborers Health & Welfare Trust Fund for N. Cal. v. Advanced 

Lightweight Concrete Co., 484 U.S. 539, 544 n.5 (1988); Charles D. 

Bonanno Linen Serv. v. NLRB, 454 U.S. 404 (1982); NLRB v. 

Katz, 369 U.S. 736, 745 n.12 (1962); NLRB v. Crompton-Highland 

Mills, Inc., 337 U.S. 217, 224 (1949).

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has authority to treat them as such; rather, the NLRA 

requires that these clauses be exceptions, because they are 

legal only if authorized by a collective bargaining agreement. 

See 29 U.S.C. § 158(a)(3) (1994). As for arbitration clauses, it 

would seem that just as a union cannot force an employer to 

arbitrate after an agreement has expired, an employer cannot 

force a union to arbitrate when no agreement has been 

reached. See generally Litton Fin. Printing Div. v. NLRB,

501 U.S. 190 (1991). But that proposition, if true, appears to 

rest not so much on a Board-crafted exception to the postimpasse rule, but rather on general principles of contract 

interpretation under § 301 of the Labor Management Relations Act. See Litton, 501 U.S. at 203-04; see also 29 U.S.C. 

§ 171(b) (1994) (the United States encourages voluntary arbitration).

The Board's treatment of no-strike conditions, on the other 

hand, is somewhat more analogous. The Board has held that 

because the right to strike is "fundamental," it cannot be 

relinquished by employees except by consentwhich implies 

a specific contractual waiver. Gary-Hobart Water Corp., 210 

N.L.R.B. No. 87 at 744 (1974). It follows, thereforealthough the Board has never expressly so heldthat an 

employer could not impose no-strike conditions post-impasse 

even if embodied in its final contract proposal. It will be 

recalled that the Board's McClatchy II decision still has 

fragments of its original waiver theory, and the Board's 

description of wages as of "paramount" concern is certainly 

akin to its description of the right to strike as "fundamental." 

And, if the Board's conclusory waiver rationale as applied to 

no-strike conditions were ever challenged, it would surely say, 

as it has in these cases, that a unilateral imposition of a nostrike condition would also impair the process of collective 

bargainingwithout the right to strike, the union's future 

bargaining position would be devastated.

Even if the Board has never before determined that an 

exception to its doctrine was warranted, however, it is not 

clear that the statute prevents it from doing so in this case. 

Petitioner argues that this exception is inconsistent with 

NLRB v. Insurance Agents' International Union, AFL-CIO,

361 U.S. 477 (1960), which forbids the Board to act "as an 

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arbiter of the sort of economic weapons the parties can use in 

seeking to gain acceptance of their bargaining demands." Id.

at 497. But the Supreme Court, in Charles D. Bonanno 

Linen Service v. NLRB, 454 U.S. 404 (1982), has also emphasized that the Board has wide latitude to monitor the bargaining process. There, bargaining between the union and a 

multi-employer bargaining unit had reached impasse. The 

union selectively struck Bonanno Linen and attempted to 

reach secret interim agreements with some of the other 

employers. This "whipsaw" technique was designed to force 

a presumably stronger employer like Bonanno Linen to yield 

to the union's demands, carrying the rest of the unit with it 

and ending the impasse. In response, however, Bonanno 

Linen replaced striking workers and notified both the union 

and the other employers that it was withdrawing from the 

bargaining unit. The Board held that a bargaining impasse, 

even when combined with a selective strike and the specter of 

interim agreements, was not an "unusual circumstance" justifying an employer's unilateral withdrawal from the unit. An 

employer can only withdraw if it is subject to extreme financial pressures or if the bargaining unit has become substantially fragmented. Id. at 411. In the Board's view, giving an 

individual employer the ability to withdraw at impasse would 

threaten the stability of multi-employer bargaining units, 

because dissatisfied employers could walk away instead of 

working out differences. Id. at 412 n. 8.

The Supreme Court deferred to the Board's "rule," notwithstanding strong dissents arguing that the Board had 

unfairly tied the hands of employers. As one pair of dissenters protested, "With one or more competitors fully back in 

business, the ability of the remaining employers to resist the 

union demands becomes greatlyand unfairlydiminished." 

Id. at 422 (Burger, C.J., dissenting). The majority did not 

dispute that the Board's decision reduced the struck employer's bargaining powerbut the majority, as opposed to the 

dissenters, did not think this necessarily beyond the Board's 

reach. In Insurance Agents', the Board had held that the 

union's use of slow-downs, sit-ins, leafleting, and picketing 

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was a per se violation of its obligation to bargain in good faith 

under § 8(b)(3), the union counterpart to § 8(a)(5).3In reversing, the Court emphasized that the Board had taken an 

erroneous view of collective bargaining, a system in which 

good-faith bargaining and economic weapons must coexist. 

Id. at 489. But the Court also noted that while economic 

pressure is not itself inconsistent with § 8(b)(3), the "unique 

character" of particular tactics might be inconsistent with 

collective bargaining. Id. at 488. In keeping with this point, 

the Court in Bonanno Linen concluded that the Board could 

"deny an employer a particular economic weapon ... in the 

interest of the proper and pre-eminent goal, maintaining the 

stability of the muliemployer bargaining unit." Bonanno 

Linen, 454 U.S. at 419.

Thus it is true, as petitioner stresses, that Insurance 

Agents' prohibited the Board from "act[ing] at large in equalizing disparities of bargaining power between employer and 

union." Insurance Agents', 361 U.S. at 428. But it is also 

true, as Bonanno Linen makes apparent, that regulating the 

process of collective bargaining may involve the Board in 

making determinations that necessarily implicateif they do 

not rest directly onthe Board's appraisal of conditions that 

will affect the parties' bargaining power. Although the line 

between economic neutrality and authority over process is 

exceedingly difficult to draw, we think that this case is 

marginally closer to Bonanno Linen than to Insurance 

Agents'. Here, as in Bonanno Linen, the Board has denied 

the employer a particular economic tactic for the sake of 

preserving the stability of the collective bargaining process.

The post-impasse rule itself regulates process through power. The Board has told us that its rationale for permitting an 

employer to unilaterally implement its final offer after im-

__________

3

Insurance Agents', 361 U.S. at 482. Of course, a union's 

tactics, no matter how troubling or even independently unlawful, 

are always designed to reach a collective bargaining agreement. 

An employer, on the other hand, may well wish to break the union. 

Neither the Board nor the Supreme Court has mentioned this 

asymmetrical factor, but it may have affected decisions.

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passe is that such an action breaks the impasse and therefore 

encourages future collective bargaining.4 The theory might 

well be thought somewhat strained, for it does not explain 

why the Board decided to handle impasse with this rule 

instead of another. The Board could have adopted, for 

example, a rule requiring the status quo to remain in effect 

until either the union or the employer was willing to resume 

negotiations. Stagnancy might pressure both the employer 

and the union to bend. But the rule it did chooseallowing 

the employer to implement its final offermoves the process 

forward by giving one party, the employer, economic leverage. And in this case, where the employer has advanced no 

substantive criteria for its merit pay proposal, the Board has 

decided that the economic power it has granted would go too 

far. Rather than merely pressuring the union, implementation might well irreparably undermine its ability to bargain. 

Since the union could not know what criteria, if any, petitioner was using to award individual salary increases, it could not 

bargain against those standards; instead, it faced a discretionary cloud. As the Board put it, "the present case represents a blueprint for how an employer might effectively 

undermine the bargaining process while at the same time 

claiming that it was not acting to circumvent its statutory 

bargaining obligation." McClatchy II at 6. We think that it 

is within the Board's authority to prevent this development:

[T]he Board, employing its expertise in the light of 

experience, has sought to balance the 'conflicting legiti-

__________

4 We can find, however, no "seminal case" setting forth the 

Board's rationale underlying the impasse rule. Cf. Ellen J. Dannin, 

Collective Bargaining Impasse and Implementation of Final Offers: Have We Created a Right Unaccompanied by Fulfillment?

19 U. TOL. L. REV. 41, 44 n.7 (1987). Taft Broadcasting Co., 163 

N.L.R.B. No. 55 (1967), enf. sub nom. AFTRA v. NLRB, 395 F.2d 

622 (D.C. Cir. 1968), is usually cited as the prime case, but Taft

assumes the existence of the rule and goes on to list criteria for 

determining whether impasse has been reached in good-faith. The 

cases that best describe the Board's rationale are Hiway Billboards, Inc., 206 N.L.R.B. No. 1 (1973) and Bi-Rite Foods, Inc., 147 

N.L.R.B. No. 11 (1964).

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mate interests' in pursuit of the 'national policy of promoting labor peace through strengthened collective 

bargaining.' The Board might have struck a different 

balance from the one it has, and it may be that some 

or all of us would prefer that it had done so. But assessing the significance of impasse and the dynamics 

of collective bargaining is precisely the kind of judgment that Buffalo Linen ruled should be left to the 

Board.

Bonanno Linen, 454 U.S. at 413 (emphasis added) (citations 

omitted). Of course, if relative bargaining strength were not 

a matter that the Board could consider in determining whether petitioner's action furthered the collective bargaining process, the Board's reasoning would be vulnerable. But that is 

not how we read Bonanno Linen.

Not only does an employer's implementation of a proposal 

such as petitioner's deprive the union of "purchase" in pursuing future negotiations, the Board also concluded that by 

excluding the union from the process by which individual 

rates of pay are set petitioner "simultaneously disparag[ed] 

the Guild by showing ... its incapacity to act as the employees' representative in setting terms and conditions of employment." McClatchy II at 6. It knew no specifics about the 

merit raises, therefore it had no information to relay. In that 

regard, the Board echoed concerns expressed in Chief Judge 

Edwards' prior concurring opinion that petitioner's implementation of its proposal could be seen as seeking decollectivization of bargaining.5 The Board concluded that 

__________

5 De-collectivization concerns are related to concerns about 

direct dealing, although direct dealing is not itself at issue in this 

case. In Toledo Typographical Union No. 63 v. NLRB, 907 F.2d 

1220 (D.C. Cir. 1990), the court, reversing the Board, held that a 

proposal for direct employer-employee negotiations over retirement 

buyouts was a permissive subject upon which an employer could not 

insist to impasse. The Board has not, however, applied Toledo 

Blade to proposals that preserve some role for the union as 

bargaining agent. In Cincinnati Newspaper Guild, Local 9 v. 

NLRB, 938 F.2d 284 (D.C. Cir. 1991), the court upheld the Board's 

determination that an employer committed no unfair labor practice 

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petitioner's action was "so inherently destructive of the fundamental principles of collective bargaining that it could not 

be sanctioned as part of a doctrine created to break impasse 

and restore active collective bargaining." McClatchy II at 6 

(citations omitted). Petitioner particularly objects to this 

passage, arguing that the phrase "inherently destructive"

which, as the Board acknowledges, comes from NLRB v. 

Great Dane Trailers, 388 U.S. 26 (1967)applies only to 

employer behavior that is claimed to violate § 8(a)(3), the 

anti-discrimination provision of the Act. But the Board explained that it was using the term only to show that, as in 

Great Dane, the employer's action will have "foreseeable 

consequences" notwithstanding its motive. We do not see 

why that observation is independently objectionable.

* * * *

Nevertheless, petitioner contends that the Board's logic is 

inconsistent with NLRB v. American National Insurance,

343 U.S. 395 (1952), which held that a clause giving an 

employer discretion over "management functions" such as 

promotions, discipline and work scheduling is a mandatory 

subject of bargainingi.e., one on which an employer is 

entitled to insist to the point of impasse. The Court there 

said that the Board is not entitled to "sit in judgment upon 

the substantive terms of collective bargaining agreements," 

id. at 404, and petitioner asserts that the Board is doing just 

that in this case. The Board, petitioner argues, has really 

based its entire reasoning on its judgment about the substance of petitioner's pay proposal.

It seems to us that petitioner may well overread American 

National Insurance. The Court there dealt with a management functions clause that was traditional in the insurance 

industry. Can one imagine employee's payin any indus-

__________

by insisting to impasse on a unilateral merit pay plan because the 

plan allowed the union to participate in the grievance procedure. 

The Board seems to have followed Cincinnati Newspaper Guild in 

this case, and it has not been suggested that McClatchy's merit pay 

plan was a permissive subject.

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trybeing described as a subject of a management functions

clause? And the Court held only that "[a]ny fears the Board 

may entertain that use of management functions clauses will 

lead to evasion of an employer's duty to bargain collectively 

as to 'rates of pay, wages, hours, and conditions of employment' do not justify condemning all bargaining for management functions clauses concerning any 'condition of employment'...." Id. at 409 (emphasis added). We rather doubt 

that American National Insurance means that no employer 

proposal could be condemned as a per se indication of bad 

faith bargaining. Suppose, for instance, an employer proposed that all working conditions, including wages and hours, 

were to be determined in accordance with the employer's 

total discretion. The offered agreement would have just 

three clauses: (1) union recognition, (2) the employer's discretion over all terms, and (3) a no-strike clause. That would 

seem to be the paradigm management functions clause "evading" the employer's collective bargaining duty.

In any event, the Board did not hold, as it did in American 

National Insurance, that petitioner's insistence on its pay 

proposal was a permissive subject of bargaining; petitioner 

was therefore entitled to insist on it to impasse. Petitioner 

claims, however, that by declaring its "implementation" after 

impasse illegal the Board has done indirectly what it could 

not do directly. If an employer cannot implement its proposal then the union has a permanent "veto," see Colorado-Ute 

Elec. Ass'n v. NLRB, 939 F.2d 1392, 1404 (10th Cir. 1991), 

which, it is argued, is simply another way for the Board to 

treat an employer's insistence on the proposal as illegal. 

Petitioner's argument has a good deal of force, but it does not 

quite carry the day. As the Board's counsel pointed out, the 

two steps of bargaining to impasse and implementing after 

impasse are not practically equivalent and therefore can be 

judged according to different standards. If a party can force 

an impasse over a subject, its authority to do so gives it 

significant leverage over all other matters. That ability is not 

lostat least not totallyby the Board's holding that the 

same proposal may not be unilaterally implemented after 

impasse.

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Admittedly, an employer in this situation is somewhat 

"stuck" on its wage proposal. Normal labor market pressures presumably will require it to increase salaries. (But as 

we noted earlier, the stalemate could pressure the union as 

well. See infra p. 12.) It can, of course, bargain ad hoc with 

the union as to each increase, but transaction costs might (or 

might not) make that infeasible. We cannot visualize exactly 

how various scenarios would play outand it is not our job to 

do so; it is the Board's authority over the "dynamics of 

collective bargaining" to which we must defer. It is important to recognize, however, that the Board's decision does not 

prevent an employer from implementing a merit pay proposal 

post-impasseso long as the proposal defines "merit" with 

objective criteria.

The Board's conclusion that petitioner may not unilaterally 

implement its proposal certainly draws from the substance of 

that proposal. But that is not unprecedented. To some 

degree, the Board often considers substance when regulating 

process. The Board must look to the content of a proposal to 

decide whether a subject is mandatory or permissive under 

§ 8(d). See NLRB v. Wooster Div. of Borg-Warner Corp.,

356 U.S. 342 (1958).6 As petitioner itself concedes, the Board 

may consider the content of a proposal when making a 

determination whether the employer is engaged in "surface 

bargaining." See, e.g., NLRB v. Pacific Grinding Wheel Co.,

572 F.2d 1343, 1348 (9th Cir. 1978). Here, as in those 

instances, the Board's reliance on substance is not the same 

as "compelling McClatchy to agree to a proposal." See 29 

U.S.C. § 158(d).

The Tenth Circuit, in Colorado-Ute, strongly suggests a 

contrary view. Relying on American National Insurance, it 

said that the employer had a "right" to use the "economic 

weapon of implementing at impasse" and that "this right 

exists irrespective of the parties' bargaining positions." 

Colorado-Ute, 939 F.2d at 1404. But the case before the 

__________

6

Indeed, Justice Harlan dissented in Borg-Warner primarily 

because he thought that categorizing bargaining subjects involved 

the Board too much in the substance of the proposal. The majority 

of the Court, however, did not think this inconsistent with either 

American National Insurance or the Act itself.

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Tenth Circuit rested on the Board's initial waiver theory that 

we too rejected. The Board did not rely in Colorado-Ute on 

its authority under Bonanno Linen to "assess[ ] the significance of impasse and the dynamics of collective bargaining." 

See Bonanno Linen, 454 U.S. at 413. The Tenth Circuit thus 

did not actually decide the precise issue before us; its opinion does not even mention Bonanno Linen. Moreover, 

Colorado-Ute may be distinguishable even under the Board's 

new rationale. The Tenth Circuit was under the impression 

that the merit increases limited the employer's discretion to 

the extent that they were linked to the identifiable criteria of 

"job performance" and "contribution on the job." 7

* * * *

Finally, petitioner argues that the Board has not explained 

adequately why it is making an exception for a proposal that 

affords an employer complete discretion over the grounds for 

and timing of wage increases. Petitioner asks, why are 

wages to be thought different than hours or other working 

conditions the statute also treats as mandatory subjects of 

bargaining? The Board explained that wages are "a key 

term and condition of employment and a primary basis of 

negotiations," McClatchy II at 6. That proposition, drawn 

perforce from the Board's expertise, seems hard to challenge 

in a reviewing court. The Board also thought its conclusion 

that wages were of "paramount importance" was supported 

by the wording of § 8(d), which lists wages first before hours 

and working conditions as subjects for collective bargaining. 

It does seem that the orderparticularly when one considers 

that wages are, after all, a working condition and are nonetheless separately mentionedis a legitimate point, if only a 

make-weight.

__________

7 Our reading of the Board's decision in Colorado-Ute, however, suggests that "merit" pay was as substantively standardless 

there as here. Colorado-Ute Elec. Ass'n, 295 N.L.R.B. No. 67 

(1989). Colorado-Ute's proposal did limit the employer's discretion 

as to amount, because increases were granted within a fixed range 

of progression steps. Id.

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Admittedly, the Board's explanation as to why wages would 

be treated differently than, let us say, the decisions covered 

by the management functions clause in American National 

Insurance, is hardly a full one; it is surely not as extensive as 

the judges on the prior panel had wished. Nevertheless, we 

recognize the issue is analytically difficult and appreciate the 

Board's desire to proceed cautiously. Perhaps any hard and 

fast boundary drawing will force the Board prematurely to 

decide legal policy issues; agencies are entitled, just as 

courts, to proceed case by case. Stereo Broadcasters, Inc. v. 

FCC, 652 F.2d 1026, 1031 (D.C. Cir. 1981). We think the 

Board is free to draw on its expertise to determine that 

wages are typically of paramount importance in collective 

bargaining and to suggest that wages, unlike scheduling or a 

host of other decisions generally thought closely tied to 

management operations, are expected to be set bilaterally in 

a collective bargaining relationship.8

Petitioner also claims that the Board inadequately explained its deviation from its reasoning in prior cases. But 

the Board simply overruled portions of those decisions inconsistent with its reasoning in this case. Agencies are entitled 

to do just that.

III.

Section 8(a)(1) of the Act makes it an unfair labor practice 

for an employer to "interfere with, restrain or coerce" employees in the exercise of the rights guaranteed by § 7 of the 

Act. 29 U.S.C. § 158(a)(1) (1994). The Board found that 

McClatchy threatened its Modesto Bee employees with discharge in violation of § 8(a)(1) by posting its final offer, which 

included a no-strike/no-picketing clause. Petitioner claims, 

however, that both the Amended Complaint and the hearing 

__________

8 We think the Board also has the authority to decide that 

having fixed standards as well as fixed timing for considering raises 

is necessary if an employer wishes to implement its proposal. Thus 

we find no fault with the Board's decision to treat the Modesto and 

Sacramento proposals identically, even though Modesto had fixed 

timing.

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before the ALJ focused only on whether McClatchy had an 

"affirmative duty to explain" the nonbinding nature of the nostrike clause rather than on whether the posting "threatened" 

the employees. Therefore, petitioner argues, the charge 

violates its due process rights because "[t]he Board may not 

make findings or order remedies on violations not charged in 

the General Counsel's complaint or litigated in the subsequent hearing." NLRB v. Blake Constr. Co., 663 F.2d 272, 

279 (D.C. Cir. 1981). We think that McClatchy is splitting 

hairs. The Amended Complaint described the posting of the 

no-strike provision and alleged that McClatchy failed "[to 

give] notice to employees that a no-strike proposal as described therein is not enforceable in the absence of a binding 

contract between the parties, and that, without such a binding 

contract, employees were free to strike." It is hard to say 

that petitioner was not on notice that the General Counsel 

thought the posting misled the employees into thinking that 

McClatchy would fire them for striking. Why would there be 

a question of McClatchy's clarifying the notice if it caused no 

confusion? Even assuming that this pleading is not specific 

enough, however, due process is satisfied if the issue is "fairly 

tried by the parties." Petitioner relies on Blake Construction, but there, although the General Counsel never alleged 

that the Company's treatment of non-union employees 

amounted to a violation of § 8(a)(1) or (5), the Board found an 

unfair labor practice on that ground. Here, the General 

Counsel alleged from the beginning that the posting violated 

§ 8(a)(1); both the "affirmative duty to inform" and the 

"threatening" theories focused on same portion of the statute 

and the same set of facts. Granted, the General Counsel 

slightly shifted his legal theory after the hearing, but 

McClatchy has not argued that it would have litigated the 

issue differently at the hearing had it faced the "threatening" 

theory. To the contrary, petitioner has used the same arguments to counter both theories: that the union notified the 

employees of their rights and that McClatchy took no retaliatory action when employees picketed. The issue was thus 

"fairly tried."

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We nevertheless agree with petitioner that the § 8(a)(1) 

violation is not supported by substantial evidence. In evaluating an employer's conduct under § 8(a)(1), the Board must 

consider "whether the conduct in question had a reasonable 

tendency in the totality of the circumstances to intimidate." 

NLRB v. Nueva Eng'g, Inc., 761 F.2d 961, 965 (4th Cir. 1985) 

(quoting Corrie Corp. v. NLRB, 375 F.2d 149,153 (4th Cir. 

1967)). In this case, the circumstances raise such a weak 

inference of intimidation that it is an intolerable stretch to say 

that substantial evidence supports it. The no-strike clause, 

which was buried in the document as "subsection 23.1," 

stated:

During the term of this Agreement the Guild and its agents 

will not cause, permit, condone, encourage, or sanction and 

no employee or employees of the Publisher will participate 

or engage in any strike.... Any employee or employees 

covered by this Agreement engaging in any such activity 

shall be subject to immediate discharge as said misconduct 

shall constitute just cause for discharge under this Contract.

(emphasis added). In characterizing the posting as a threat, 

the ALJ relied on what he described as the "negative pregnant" of the offer's cover page, which noted that "the Publisher reserves the right not to apply any provision of these 

terms and conditions that depends upon the existence of a 

binding contract between the parties for enforceability." 

This wording, the ALJ thought, implied that McClatchy had 

the authority to enforce the no-strike clause if it so wished. 

Other language in the posting, however, cuts against this 

strained inference. The no-strike clause itself began by 

saying it was enforceable "[d]uring the term of this Agreement," and the memorandum accompanying the posted offer 

emphasized several times that the Company and the union 

had "been unable to reach agreement" and that there was "no 

contract." The union represents educated employees who 

work in the editorial department. No evidence in the record 

suggests that these employees did not understand that the 

no-strike clause only applied during an agreement. Indeed, 

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the employees picketed, suggesting that they felt no threat. 

We decline to enforce this portion of the Board's order.

* * * *

This case presents a difficult question because of the 

tension between the Supreme Court decisions bearing on the 

Board's limited exception to the post-impasse rule. We certainly understand how Board members can come to different 

conclusionswitness member Cohen's dissent. McClatchy II

at 7. The question is even more difficult for us as a reviewing 

court, and we are obliged to admit that we are unsure 

ourselves as to the right answer. Under those circumstances, 

we think the appropriate course, keeping in mind the Board's 

"primary responsibility for developing and applying national 

labor policy," Chamber of Commerce v. Reich, 74 F.3d 1322, 

1334 (D.C. Cir. 1996) (quoting NLRB v. Curtin-Matheson 

Scientific, Inc., 494 U.S. 775, 786 (1990)), is to defer to the 

Board's interpretation of the Act.

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