Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-14-01021/USCOURTS-caDC-14-01021-0/pdf.json

Parties Involved:
Mike-sell's Potato Chip Company
Petitioner
National Labor Relations Board
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 7, 2015 Decided December 11, 2015

No. 14-1021

MIKE-SELL'S POTATO CHIP COMPANY,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

Consolidated with 14-1031

On Petition for Review and Cross-Application

 for Enforcement of an Order of 

the National Labor Relations Board

Jennifer R. Asbrock argued the cause for petitioner. With

her on the briefs was Eric S. Clark.

Micah P.S. Jost, Attorney, National Labor Relations Board,

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

Richard F. Griffin, Jr., General Counsel, John H. Ferguson,

Associate General Counsel, Linda Dreeben, Deputy Associate

General Counsel, and Elizabeth A. Heaney, Supervisory

Attorney.

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 1 of 13
2

Before: MILLETT, Circuit Judge, and SILBERMAN and

WILLIAMS, Senior Circuit Judges.

Opinion for the Court filed by Senior Circuit Judge

SILBERMAN.

SILBERMAN, Senior Circuit Judge: Mike-sell’s, a snack

food manufacturer and distributor, challenges an NLRB

determination that petitioner violated the NLRA (8(a)(5)) when

it unilaterally instituted terms and conditions of employment for

its employees represented by the Teamsters. Mike-sell’s claims

that it was entitled, under our precedent, to do so because

negotiations with the Union had reached an impasse. The

Board, however, adopted the ALJ’s determination that no

impasse existed. Although this is a close case – the Petitioner’s

predicament is unfortunate – we are obliged to affirm the Board

and deny the petition.

I.

Petitioner had fallen on economic hard times, losing almost

$5.5 million over four years, before the events in this case. Its

main competitor, Frito-Lay, was underselling the Company and

taking increasing market share. Frito-Lay, a much larger

company, had apparently lower operating costs in part because

it produced its own inputs. Petitioner, on the other hand, was

obliged to purchase commodities on the open market.

The Company employs three groups of unionized

employees. Its warehouse workers package the Company’s

manufactured products for distribution. Its over-the-road drivers

deliver product from the warehouse to regional distribution

centers and warehouses. And last, its route sales drivers deliver

the product to local retailers, collect payments, and, importantly,

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 2 of 13
3

work to increase sales at the retail locations on their routes. 

While technically the Union is broken into two bargaining units

– one for warehouse workers and one for drivers – negotiations

have proceeded in the past, and continued as such in this case,

separately for each of the three groups. Yet negotiations were

coordinated. Although a separate collective bargaining

agreement, running from October 26, 2008, to October 26,

2012, covered only the warehouse workers, an agreement

covering both groups of drivers was almost co-extensive,

running from November 17, 2008 to the same day in 2012.

Negotiations for new agreements started in the late summer

of 2012. The Company, which showed the Union its books,

sought from the beginning to lower costs by reducing its

obligations in wages, pension and health care. The Union

wished to maintain existing pensions and health benefits and

restore wage cuts it had given up in prior negotiations. By the

middle of November, the parties had reached agreement for the

warehouse workers and over-the-road drivers on nearly all

matters, including wages but not pensions and health benefits. 

It was agreed that those subjects would be resolved in the crucial

route sales drivers negotiation.

Those negotiations were more complicated because, on top

of the pension and health dispute, the parties also focused on

direct compensation, the mix between commissions and fixed

amounts. The Company proposed a change to the commission

structure. The existing commissions were based on “gross

sales,” which does not reflect the amount Mike-sell’s actually

receives. The Company wished to substitute “net sales,” which

more accurately represents the Company’s actual revenue. The

Company also sought a reduction in commission rates. The

Union wanted, by contrast, to preserve the existing commission

structure and increase the rates.

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 3 of 13
4

The Company, seeking to avoid locking in its health care

obligation, proposed that it be entitled to review it after only a

year. It explained that the new Affordable Care Act could have

unforeseen consequences. To further reduce its health costs, it

proposed to cut off health care for retirees. As to pensions, the

Company sought a reduction in its contribution, with employees

picking up part of the costs. It later proposed that, at a

minimum, its contribution rate be frozen.

Illustrating its financial squeeze, on October 10 the

Company notified the Union it was selling routes and

distribution centers in Ohio to independent operators (who

would continue to service Mike-sell’s). That caused the layoff

of some thirty employees. Severance packages for the laid-off

employees were agreed to two weeks later, as well as some other

minor matters, but the Union rejected the Company’s suggestion

of a federal mediator to deal with the core issues of pensions,

health benefits and commissions. Instead, the Union suggested

the Company switch its health care provider to Central States.

The critical bargaining session took place November 14,

three days before the expiration of the agreement. On that

occasion, fatefully, for the first time, the Union was represented

by counsel but the Company was not. The Union started out by

seeking an extension of the contract. The Company responded

it could not afford the contract terms, but did suggest a one-year

extension if there was a modification of the commission

structure in return for a slightly higher commission rate and a

freeze of its pension contributions. The Union rejected that

proposal and the parties continued to negotiate. Later in the day,

the Union, for the first time, indicated a willingness to accept the

Company’s preferred commission structure (“net sales”), but it

sought an increase in commission rates. The Company

countered with a proposal that moved slightly towards the

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 4 of 13
5

Union’s position. The Union then agreed to an increase in

employee contributions to the health plan, but its position still

included a shift to the Central States health plan.

At 8:00 pm, without agreement on the major issues,1 the

Company suggested a further meeting two days later on

November 16 – a day before the expiration of the agreement. 

The Company stated that it did not intend to extend the

agreement. The Union indicated its representatives were not

available on the 16th, but it would be in touch to propose further

days. (The parties did meet on the 15th to discuss the warehouse

workers’ contract.) 

On November 16, the Company delivered the following

letter to the Union (dated the day before):

This letter will confirm our conversation of yesterday

in which the Company asked to meet with your Union

and your Union Committee with regard to our Labor

Agreement for the Sales/Over-the-Road group, which

is due to expire on November 17, 2012. Since you

indicated that you would not be available to meet either

today or tomorrow, I wish to inform you that our last

proposal to you, which was made on Wednesday,

November 14, 2012...is the Company’s full and final

offer. We have also attached a full and Final Offer for

1

Petitioner claims it asked the Union to submit its position to the

membership for a vote – which the Union declined. But the Union

representative did not recall such a conversation and the ALJ did not

make a finding on the issue. Of course, a company is not entitled to

insist on such a vote. See NLRB v. Wooster Div. of Borg-Warner

Corp., 356 U.S. 342 (1958).

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 5 of 13
6

the Warehouse group. We would request that you take

these Final Offers to a vote of the Union membership

before the Labor Agreement expires.

The Company and Union representatives spoke briefly as

the letter was delivered. The Union representative said it was

only scheduling conflicts preventing a meeting prior to the

expiration of the contract on November 17. On the 18th, the

Company sent the Union another letter, declaring an impasse

and stating it would unilaterally implement its last offer, which

it did the next day. The Union, for its part, insisted that the

parties were not at impasse. The Company and Union continued

to negotiate in the months following the unilateral

implementation, but never reached agreement.

 * * *

The ALJ’s opinion, largely adopted by the Board,

concluded that no impasse existed prior to Petitioner’s unilateral

imposition of its terms. He emphasized that the parties reached

some agreements and that they went back and forth on pensions,

health benefits, and route sales drivers’ commissions – most

notably on November 14. The Petitioner, according to the ALJ, 

did not indicate at that time that it had made a final offer, still

less that an impasse had been reached and both parties were

open to scheduling further negotiating sessions. Therefore, the

declaration of impasse expressed on November 18 (following

the “final” offer on the 16th) came abruptly, seemingly

inconsistent with the tenor of the negotiations on the 14th.

The ALJ cited previous Board decisions holding that “an

employer’s declaration of impasse is not valid when it is

motivated by an employer’s determination to implement cuts

immediately upon the expiration of the contract,” Newcor Bay

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 6 of 13
7

City Division of Newcor, Inc., 345 N.L.R.B 1229, 1240 (2005). 

The Board indicated that it did not rely on that conclusion.2

 Nor

did the Board base its approval of the ALJ’s decision on his

discussion of negotiations that took place after the alleged

impasse. 

The ALJ further emphasized that the Union had made

concessions and that “where a party has already made

significant concessions indicating a willingness to compromise

further,” previous cases hold it would be “both erroneous as a

matter of law and unwise as a matter of policy for the Board to

find impasse merely because the party [that made concessions]

is unwilling to capitulate immediately and settle on the other

party’s unchanged terms.” Grinnell Fire Protection Systems Co.,

328 N.L.R.B. 585, 586 (1999). 

II.

Petitioner asserts that the Board’s finding that no impasse

existed at the time it instituted its “final offer” lacked substantial

evidence. It is argued that the ALJ focused on progress on

peripheral matters and ignored the parties’ positions on the key

issues of pension, health benefits and commissions (for route

sales drivers). The ALJ also, according to Petitioner, improperly

considered post-impasse bargaining as a factor in determining

that no impasse existed. Petitioner reiterates the defense made

before the ALJ (and Board) that the Union had engaged in

dilatory bargaining tactics in an effort to avoid an impasse. 

2

If an employer unilaterally imposed terms after a contract

expired “irrespective of the state of negotiations,” that would be an

obvious violation of 8(a)(5). See CBC Industries, Inc., 311 N.L.R.B.

123, 127 (1993). 

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 7 of 13
8

Finally, Petitioner offers a fallback position; even if no impasse

existed prior to its institution of its last offer, an impasse was

created the next February. 

We can easily dispose of the last three contentions. 

Although it is clear that the Union wished to avoid an impasse,

we don’t think the ALJ’s determination that the Union did not

improperly delay bargaining sessions can be effectively

challenged. There were 12 total negotiation meetings and the

Union’s inability to meet on November 16 (the day before the

contract expired), by itself, can not be regarded as evidence of

a delaying tactic. After all, the Union indicated it would get

back to the Company with proposed dates. The Union does not

have to be available on two days’ notice, and as discussed

below, the expiration of the agreement does not have bargaining

significance.

Petitioner’s criticism of the ALJ’s reliance on bargaining

that took place after the Company put into effect its offer

puzzles us. The Board explicitly cordoned off the ALJ’s

discussion of that matter by deciding it did not rely on it when

adopting the ALJ’s recommended decision. Petitioner’s

criticism, therefore, is irrelevant. We have also considered the

Company’s fallback argument regarding an alleged impasse in

February, but we think it is insubstantial and therefore does not

merit discussion.

That leaves Petitioner’s main argument and that, we think,

is quite troubling – particularly in light of our precedent. See

TruServ Corp. v. NLRB, 254 F.3d 1105 (D.C. Cir. 2001); Laurel

Bay Health & Rehabilitation Center v. NLRB, 666 F.3d 1365

(D.C. Cir. 2012). On the other hand, the government’s response 

– that the Board’s finding of no impasse is entitled to deference

because it relies on the Board’s expertise in evaluating the

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 8 of 13
9

parties’ bargaining tactics and intentions – is also a powerful

one.

To take a step back, the doctrine that an employer is entitled

to institute its last offer after impasse is an ancient one in labor

law. Its stated purpose is to accelerate negotiations. See

McClatchy Newspapers, Inc v. NLRB, 131 F.3d 1026, 1032

(D.C. Cir. 1997). But it should be obvious that it presents an

employer – at least one negotiating in good faith – with a

powerful weapon. Therefore, typically a Union will seek to

frustrate its use by attempting to avoid an impasse. See, e.g.,

Laurel Bay, 666 F.3d at 1375.3

 This is analogous to another area

of labor law in which an employer is not obliged to bargain at all

– decisions concerning whether to discontinue a portion of its

business. See generally First National Maintenance Corp. v.

NLRB, 452 U.S. 666 (1981). There too, the Supreme Court

recognized that a union has every incentive to delay and impede

any accommodation. Id. at 683-84; see also Hawaii Meat

Company v. NLRB, 321 F.2d 397, 400 (9th Cir. 1963)

(recognizing a union incentive to delay bargaining over a

subcontract to replace strikers makes a bargaining requirement

inappropriate). Thus although it is often said by both the Board

and courts that an impasse exists when both parties believe

bargaining has reached a dead end, as we recently recognized in

TruServ, “[a] contemporaneous understanding as to impasse

does not...require the parties to reach mutual agreement as to the

state of negotiations.” TruServ, 254 F.3d at 1117 (quotations

3

One exception to that incentive may be where a union has signed

a “most favored nation” clause in other contracts which limits its

freedom of action in bargaining.

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 9 of 13
10

omitted).4

 If the law were otherwise, an employer would

virtually never be entitled to implement a final offer. It would,

in effect, require the union’s consent.

Therefore, we recently held in TruServ and Laurel Bay that

if an employer maintains a firm position, and has made clear that

acceptance of its position on particular issues is essential to

agreement, a union’s last minute movement, short of agreement,

will not avoid an impasse. For that reason, we reject the ALJ’s

statement that the Union does not have to “capitulate” to the

Company’s position to rebut an impasse. That sounds like a

substantive evaluation of the parties’ positions which – it is

black letter law – the Board may not do. See NLRB v. American

National Insurance Co., 343 U.S. 395, 404 (1952). 

Of course, an employer must have bargained in good faith

to be permitted to unilaterally institute its last offer after an

alleged impasse. But good faith bargaining simply means a

desire to reach an agreement. See United Steelworkers of

America, Local Union 14534 v. NLRB, 983 F.2d 240, 245 (D.C.

Cir. 1993). It does not mean that an employer is not entitled to

insist on certain terms. See Atrium of Princeton, LLC v. NLRB,

684 F.3d 1310, 1317 (D.C. Cir. 2012). Indeed, if an employer

is not firm – at least eventually – on certain terms, it would be

difficult to establish that an impasse exists.

4

In addition to the “contemporaneous understanding of the parties

as to the state of negotiations,” the Board considers factors such as

“the bargaining history, the good faith of the parties in negotiations,

the length of the negotiations, [and] the importance of the issue or

issues as to which there is disagreement” in evaluating whether an

impasse exists. TruServ, 254 F.3d at 1114 (quoting Taft Board Co.,

163 N.L.R.B. 475, 478 (1967)). 

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 10 of 13
11

In the early days of collective bargaining, the typical case

of an employer’s claimed post-impasse institution of an

employer’s last offer involved an employer putting into effect an

increase in compensation, although not as much as would meet

the union’s demand. See, e.g., NLRB v. Katz, 369 U.S. 736

(1962). If an employer made a mistake – there was no actual

impasse – the Board’s remedy did not impose an economic

penalty, just an order to restore the status quo. In other words,

the downside risk of guessing wrong was not substantial. But

if an employer, such as Petitioner, facing financial difficulty

wishes relief from existing collective bargaining costs and

therefore puts into place significantly diminished compensation,

its risk is considerable because the Board, if it finds a violation

of 8(a)(5) (no impasse existed), will order extensive back

compensation, as it did in this case.

In that respect, an employer, facing a deadlock and planning

a post-impasse institution of its last offer, is entitled to an

understanding of clear legal principles that will govern its

behavior. The situation is analogous to an employer

contemplating discontinuing a portion of its business; in First

National Maintenance Corp., the Supreme Court emphasized

that employers deserve a degree of certainty in that situation. 

See generally First National Maintenance, 452 U.S. at 675. 

Such is the case here as well. 

Our precedent closely read, although it recognizes the

Board’s expertise, does set forth certain principles that govern

at least our review of such cases. If an employer remains firm

in collective bargaining as to one or more essential issues and

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 11 of 13
12

credibly5

 declares a last offer in the negotiations, a last offer that

is consistent with and follows logically from its negotiating

position, a union’s failure to agree creates an impasse. A union

official’s denial that an impasse exists, combined with a new

negotiating proposal that does not meet the employer’s position,

does not rebut an impasse. See TruServ, 254 F.3d at 1117;

Laurel Bay, 666 F.3d at 1375.

* * *

At the close of the bargaining on November 14, it would not

have been apparent to a neutral observer that the parties had run

into a brick wall. The Union, as we mentioned, armed with

counsel, seemed to acquiesce in the Company’s framework for

route sales drivers’ pay, which prompted the parties to go back

and forth on percentages for commissions. Turning to health

benefits, the Union suggested the possibility of a shift to Central

States, proposing that a representative come and present its

conditions. The Company negotiators (without counsel6

) did not

reject that notion, and they never put forth a last offer nor

declared the parties were at impasse. Instead, two days later,

apparently prompted by the termination of the collective

5 See Serramonte Oldsmobile, Inc. v. NLRB, 86 F.3d 227, 233

(D.C. Cir. 1996); Chicago Typographical Union No. 16 v. Chicago

Sun-Times, Inc., 935 F.2d 1501, 1508 (7th Cir. 1991). Of course, if an

employer repeatedly claimed different positions as a “last offer,” it

would not be credible. See Teamsters Local Union No. 175 v. NLRB,

788 F.2d 27, 31 (D.C. Cir. 1986). And as we noted in TruServ, at

1115-16, an employer benefits if it carefully explains how to identify

its last offer. 

6

Cf. Laurel Bay, 666 F.3d at 1368 (noting that the company was

represented by counsel throughout negotiations).

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 12 of 13
13

bargaining agreement, the Company, in writing, presented a

“last offer” and later abruptly declared an impasse.

Under those circumstances, we think the Board’s

determination that an impasse had not been reached is a

legitimate finding (a mixed question of fact and law). Petitioner

had not displayed the requisite firmness on the key issues in

negotiations, it had not made a last offer – a necessary if not a

sufficient condition – nor declared an impasse in the crucial

bargaining session. 

Although the Board disavowed the ALJ’s reliance on

Petitioner’s supposed intent to institute “cuts” following

termination of the contract, without regard to the status of

collective bargaining, the timing of the Company’s abrupt

declaration of an impasse and institution of the last offer does

seem to be connected to the termination of the agreement. We

have the impression that the Company was under the mistaken

understanding that it was free to change the terms of

employment conditions once the contract expired. But the law

is clear that the terms and conditions of a collective bargaining

agreement continue (with exceptions not here relevant) until

either of the parties agrees to change the terms or an impasse is

reached. See Laborers Health & Welfare Trust Fund v.

Advanced Lightweight Concrete Co., Inc., 484 U.S. 539, 544 n.6

(1988). In any event, Petitioner did not carefully “touch the

bases” that we have held obliges the Board to recognize the

existence of an impasse thereby authorizing the institution of a

last offer. 

* * *

For the above reasons, we deny the petition and grant the

Board’s cross-petition for enforcement.

USCA Case #14-1021 Document #1588048 Filed: 12/11/2015 Page 13 of 13