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Parties Involved:
Arc Bridges, Inc.
Petitioner
National Labor Relations Board
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 6, 2011 Decided December 9, 2011

No. 10-1330

ARC BRIDGES, INC.,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

Consolidated with 10-1360

On Petition for Review and Cross-Application for

Enforcement 

of an Order of the National Labor Relations Board

Raymond C. Haley III argued the cause for petitioner. With

him on the briefs was William C. Vail, Jr. 

Nicole Lancia, Attorney, National Labor Relations Board,

argued the cause for respondent. With her on the brief were

John H. Ferguson, Associate General Counsel, Linda Dreeben,

Deputy Associate General Counsel, and Usha Dheenan,

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Supervisory Attorney. Amy H. Ginn and Jill A. Griffin,

Attorneys, entered appearances.

Before: SENTELLE, Chief Judge, WILLIAMS and RANDOLPH,

Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge

RANDOLPH.

RANDOLPH, Senior Circuit Judge: Arc Bridges, Inc.

petitions for review of a National Labor Relations Board order

finding it in violation of § 8(a)(1) and (3) of the National Labor

Relations Act, 29 U.S.C. § 158(a)(1) & (3). The Board crosspetitions for enforcement. The question presented is whether

Arc Bridges established annual wage increases as a term of

employment and then unlawfully refused to implement a wage

increase after its employees became unionized.

Arc Bridges is a non-profit Indiana corporation, exempt

from federal taxation under § 501(c)(3) of the Internal Revenue

Code. The company runs assisted living programs, employment

counseling, and related support services for individuals with

developmental disabilities. It relies heavily on state and federal

funding. The American Federation of Professionals, a labor

union, conducted an organizing campaign at Arc Bridges in late

2006 and early 2007. The campaign culminated in two

contested representation elections: one for Arc Bridges’ Day

Services employee unit, the other for its Residential and

Supported Living employee unit. A majority in both units voted

in favor of the union.

Bargaining sessions held after the elections yielded little

progress. The union demanded a fifty percent wage increase

over three years, significant increases in benefits, and a variety

of other changes. Management calculated that the wage and

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benefits increases would consume more than a quarter of Arc

Bridges’ operating revenues in the first year, and an even greater

share in later years. In light of those figures and the fact that

Arc Bridges had a sizeable operating loss in the preceding fiscal

year, management informed the union that its proposal was a

financial impossibility. Management also urged the union to

identify “one or two areas” of economic improvements that were

“most important” to its members. The union responded by

calling a strike authorization vote. The parties continued to

meet after the vote, but were unable to come to an agreement.

Kris Prohl, Arc Bridges’ Executive Director, had planned

on granting all Arc Bridges employees a three percent wage

increase in July 2007, just as she had in each of the two

preceding years. But the ongoing labor negotiations caused her

to shelve this plan. Prohl feared that the significant disparity

between the three percent increase and the union’s much larger

demand would provoke a strike. She was also concerned that

implementing the increase would leave Arc Bridges without any

funds to meet the union’s remaining demands. And she believed

that a unilateral wage increase would expose Arc Bridges to a

refusal to bargain charge. See 29 U.S.C. § 158(a)(5); NLRB v.

Katz, 369 U.S. 736, 743-44 (1962).

At the time, Arc Bridges had 260 employees represented by

the union and 121 non-union employees. Turnover among the

non-union employees had recently been unusually high. In an

effort to stem that trend, Prohl decided to grant the non-union

employees the planned three percent wage increase in October

2007, retroactive to July of that year. She explained that the

increase was to be kept confidential, and that union employees

would “have to wait to see what increase, if any [would] be

negotiated by the AFP.” Union officials learned of Prohl’s

decision in March 2008 and immediately asserted that Arc

Bridges “owed” an identical increase to represented employees.

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Management refused, stating that it preferred to address the

issue through Board adjudication.1

The union filed a charge with the Board claiming that Arc

Bridges had violated § 8(a)(1), (3), and (5) of the Act by

granting the wage increase only to non-union employees. The

Regional Director issued a corresponding complaint focusing

exclusively on the theory that Arc Bridges had violated §

8(a)(3), which prohibits employers from “discriminat[ing] in

regard to . . . any term or condition of employment to . . .

discourage membership in any labor organization.” 29 U.S.C.

§ 158(a)(3). 

An Administrative Law Judge dismissed the complaint after

a two-day hearing. The ALJ’s finding regarding Arc Bridges’

wage review process played a critical role in the decision. The

finding read:

[Arc Bridges’] fiscal year extends from July 1 to June

30. For many years it has been the practice of [Arc

Bridges] to review wages in June of each year as a

component of the budget process, and to budget for

wage increases, if financially feasible. Customarily,

such wage increases are granted in July of each year.

Following this pattern, in July of each of the prior 2

years, 2005 and 2006, before the Union became the

employees’ bargaining representative, [Arc Bridges]

granted across-the-board wage increases of 3 percent

to all staff, including managers and supervisors.

1

 Even so, Arc Bridges later offered union employees a

retroactive two percent wage increase. It justified the reduced amount

on the ground that revenues had declined and costs had increased since

October 2007.

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Recognizing that employers may withhold wage increases from

unionized employees as a bargaining tactic, provided that the

decision is not a product of anti-union animus, see Shell Oil Co.,

77 N.L.R.B. 1306, 1310 (1948), the ALJ proceeded to evaluate

Prohl’s wage decision under the Wright Line standard, seeNLRB

v. Transp. Mgmt. Corp., 462 U.S. 393, 399-404 (1983)

(approving the burden-shifting test adopted in Wright Line, 251

N.L.R.B. 1083 (1980)). On this analysis, the ALJ found that

there were two plausible explanations for the decision: Prohl

may have withheld the increase to punish the employees for

joining the union, or she may have done so to conserve limited

resources and maximize Arc Bridges’ leverage in the

negotiations. Because the evidence did not clearly rule out the

latter theory, the ALJ concluded that Arc Bridges had carried its

burden of establishing that it would have taken the same action

even in the absence of any discriminatory motive. See Wright

Line, 251 N.L.R.B. at 1089. 

The Board sustained the ALJ’s factual findings, but

disagreed with his conclusion. Arc Bridges, Inc., 355 N.L.R.B.

No. 199, 2010 NLRB LEXIS 379, at *2-3 (Sept. 29, 2010). The

Board began by purporting to summarize the finding quoted

above: “For 8 consecutive years, [Arc Bridges] annually

reviewed its finances in June and, if sufficient funds existed,

implemented an across-the-board wage increase in July.” 2010

NLRB LEXIS 379, at *2. According to the Board, Arc Bridges’

budget review process dictated that increases were “feasible” in

1999, 2000, 2001, 2005, and 2006, but not in 2002, 2003, and

2004. Id. at *4. 

From this the Board concluded that Arc Bridges’ budget

review each June and across-the-board wage increase each July

– “if sufficient funds existed” – amounted to “an established

condition of employment.” Id. at *10 (citing Eastern Me. Med.

Ctr., 253 N.L.R.B. 224, 242 (1980), enforced 658 F.2d 1 (1st

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Cir. 1981)). Arc Bridges’ refusal to maintain that condition in

2007 was, the Board held, “inherently destructive” of the

employees’ rights, id. at *12-16 (quoting NLRB v. Great Dane

Trailers, Inc., 388 U.S. 26, 34 (1967)), and thus a violation of §

8(a)(1) and (3) of the Act, id. at *17.2 To remedy this violation,

the Board ordered Arc Bridges to reimburse, with interest, each

of the union employees “for the increases they would have

received on October 12, 2007, retroactive to July 2007” – an

amount equal to “the difference between their actual wages and

the wages they would have received had the increases been

granted to them” in the same manner as the non-union

employees. Id. at *17. 

 

In reviewing the decision, we assume the Board did not

mean that Arc Bridges’ preparation of a budget each June had

itself become a term or condition of employment. Union or no

union, prudent companies plan for the future and prepare

budgets based on forecasts of revenues and expenditures. In

doing so they are performing an internal management function

beyond the Board’s competence. See First Nat’l Maint. Corp.

v. NLRB, 452 U.S. 666, 676-77 (1981); contrast 29 U.S.C. §

158(d) (listing “wages” and “hours” as examples of “terms and

conditions of employment”). The Board did not say otherwise.

It said instead that a condition of employment resulted from the

annual budget review plus the custom of Arc Bridges giving an

across-the-board wage increase “if feasible” or “if sufficient

funds existed.” 2010 NLRB LEXIS 379, at *4, 10. This

decision, we believe, is arbitrary and unsupported by substantial

evidence. 29 U.S.C. § 160(e); see also Jackson Hosp. Corp. v.

NLRB, 647 F.3d 1137, 1138 (D.C. Cir. 2011); E.I. du Pont de

2

 Although the Board hinted that Arc Bridges would also be

liable under the Wright Line test, it declined to reach the issue. 2010

NLRB LEXIS 379, at *3, 16 & n.9. 

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Nemours & Co. v. NLRB, 489 F.3d 1310, 1314 (D.C. Cir. 2007);

BB&L, Inc. v. NLRB, 52 F.3d 366, 372 (D.C. Cir. 1995).

Arc Bridges points out an obvious problem with the Board’s

formulation. So far as we can tell, Arc Bridges did not use any

particular criteria to determine when to give an increase, or the

amount of the increase when it did give one. Even under the

Board’s formulation, there were no objective criteria for

determining whether there would be any wage increase at all.

The Board wrote that Arc Bridges gave wage increases when

“sufficient” funds were available or when it was “feasible” to do

so. 2010 NLRB LEXIS 379, at *10-11. But this seems highly

discretionary, depending on management’s budget forecasting,

its assessment of the economic climate, its plans for the

upcoming fiscal year, and so forth. The situation is thus unlike

Daily News of Los Angeles v. NLRB, 73 F.3d 406, 411-13 (D.C.

Cir. 1996), in which the amount of an annual raise was

discretionary but the merit-based criteria for determining if there

would be any raise were fixed. The only common theme linking

Arc Bridges’ wage increases is timing – a characteristic found

insufficient to create a term or condition of employment in Daily

News. See id. at 412 n.3. 

In any event, the Board’s decision contains a rather large

evidentiary hole. Arc Bridges granted no wage increases in July

2002, July 2003, or July 2004 – three of the five years

immediately preceding the 2007 wage decision at issue here.

How then could the Board derive any established pattern or

practice of the company granting annual wage increases? The

Board tried to fill the gap with this explanation: “Presumably,

[Arc Bridges’] annual review indicated that no across-the-board

increase was warranted in those years.” 2010 NLRB LEXIS

379, at *11. By not “warranted” the Board must have meant, as

it said earlier in its opinion, not “financially feasible” or that

“sufficient funds” did not (or would not) exist. Id. at *10-11.

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The trouble is that there is no substantial evidence – indeed,

there is no evidence at all – to support the Board’s

“presumably.” It comes out of thin air. 

Counsel for the Board admitted as much at oral argument.

See Oral Arg. at 19:41-20:25; 21:55-23:04, 23:45-57. The

Board’s brief was not as forthcoming. It cites Prohl’s statement

that another, credentials-based type of increase was given

between 2002 and 2004 “regardless of any other increases.” 

This supposedly served as evidence that Arc Bridges granted

across-the-board increases in July when it had available funds,

and did not when money was short. The testimony established

no such thing. To the contrary, it indicated that Arc Bridges did

have funds available to award increases in 2002, 2003, and

2004, but chose to use the funds for other purposes. The brief’s

other citations to the record are of no help to the Board.3

Nor is it true that Arc Bridges consistently granted acrossthe-board pay increases, as opposed to other types of

adjustments. The Board focused solely on July wage decisions

made between 1999 and 2006. In July of each of those years,

Arc Bridges gave either an across-the-board increase or no

increase at all. But the company’s history of granting July wage

increases dates back further, to 1992. Between 1992 and 1998,

Arc Bridges provided an across-the-board wage increase only

once, in July 1997. It granted individual, merit-based increases

or an increase to specific groups of employees (sometimes in

3

 See, e.g., J.A. 119 (undated document indicating that Arc

Bridges’ predecessor entity based salary decisions on a variety of

factors, including the “[c]ost of living,” “appropriate[ness],” “annual

resources available to the corporation,” the “performance of the

corporation as a whole,” and “market studies”); id. at 249-50 (Prohl’s

testimony that she chose not to grant increases in 2002, 2003 and 2004

“for whatever reason”).

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addition to other increases) in each of the remaining six years.

The upshot of this additional data is that Arc Bridges granted an

across-the-board increase in six of fifteen years – less than half

the time. 

The Act requires the Board to base its factual findings “on

the record considered as a whole.” 29 U.S.C. § 160(e). Had the

Board done so here, it could not possibly have concluded that

annual across-the-board wage increases were an established

condition of employment. Citing Kurdziel Iron of Wauseon,

Inc., 327 N.L.R.B. 155, 155 & n.3 (1998), enforced 208 F.3d

214 (6th Cir. 2000) (per curiam), counsel for the Board claims

that the company’s granting of across-the-board increases in

2005 and 2006 was itself enough to establish a term or condition

of employment. We think not. 

In Kurdziel, the employer operated two facilities, Britt and

Wauseon, and granted an identical wage increase to employees

at each in 1994 and 1995. 327 N.L.R.B. at 155. The employer

discontinued this practice in 1996, when employees at the

Wauseon facility voted to unionize. Id. Instead, it granted an

increase only to employees at the Britt facility, which remained

non-union. Id. The Board held that the two-year history of

matching wage increases established a term of employment, and

that the employer’s failure to honor that term at the Wauseon

plant violated § 8(a)(1) and (5) of the Act. Id. Here, of course,

there is no evidence that Arc Bridges followed anything like the

dual-facility approach at issue in Kurdziel. More importantly,

the evidence of past wage increases in Kurdziel was limited to

the preceding two years, in part because the Britt facility began

operation in “1991 or 1992” and the Wauseon facility opened in

1993. See id. at 155 & n.3 (highlighting “the absence of

evidence” from years “prior to 1994”). Thus, while two

consecutive years of wage increases might be enough to

establish a term of employment when that span constitutes 100

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percent of the record evidence, it will not suffice when the

employer’s history dates back further. As statisticians know, a

sample must be representative for inferences drawn from it to be

valid. And we know that one way to reduce errors is to increase

the size of the sample. In determining whether an established

practice existed at Arc Bridges, the Board was not free to

discount evidence contradicting the practice. See 29 U.S.C. §

160(e); Universal Camera Corp. v. NLRB, 340 U.S. 474, 488

(1951) (“The substantiality of evidence must take into account

whatever in the record fairly detracts from its weight.”). To do

so in the face of a record such as this one was nothing short of

arbitrary.

We therefore grant the petition for review, deny the crosspetition for enforcement, and set aside the Board’s order. We

also remand the case for further proceedings, in light of the

Board’s decision to reserve judgment on the Wright Line theory.

See Micro Pac. Dev., Inc. v. NLRB, 178 F.3d 1325, 1336 (D.C.

Cir. 1999).

So ordered.

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