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Parties Involved:
National Labor Relations Board
Respondent
Service Employees' International Union
Intervenor
The Finley Hospital
Petitioner

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 15-2285

___________________________

The Finley Hospital

lllllllllllllllllllllPetitioner

v.

National Labor Relations Board

lllllllllllllllllllllRespondent

Service Employees' International Union, Local 199

lllllllllllllllllllllIntervenor

___________________________

No. 15-2592

___________________________

The Finley Hospital

lllllllllllllllllllllRespondent

v.

National Labor Relations Board

lllllllllllllllllllllPetitioner

Service Employees' International Union, Local 199

lllllllllllllllllllllIntervenor

Appellate Case: 15-2285 Page: 1 Date Filed: 06/27/2016 Entry ID: 4417678 
____________

National Labor Relations Board

____________

 Submitted: March 15, 2016

 Filed: June 27, 2016 

____________

Before MURPHY, BEAM, and GRUENDER, Circuit Judges.

____________

BEAM, Circuit Judge.

The FinleyHospital (the Hospital) appeals the NationalLabor Relation Board's

(the Board's) decision affirming an administrative law judge's (ALJ's) finding that the

Hospital violated §§ 8(a)(5) and (1) of the National Labor Relations Act (NLRA) by

(1) unilaterally discontinuing annual pay raises negotiated in a one-year collective

bargaining agreement (CBA) without bargaining with the Service Employees'

International Union, Local 199 (the Union) on behalf of the nurses, and (2) by

informing the Union it was discontinuing the pay raises. For the reasons discussed

below, we reverse.

I. BACKGROUND

The Hospital is an acute-care hospital with three facilities in Iowa. The Board

certified the Union asthe exclusive bargaining representative of full-time and regular

part-time nurses. On June 20, 2005, the Hospital entered into a one-year CBA with

the Union. Article 20.3 of the CBA states the Hospital's policy regarding pay raises:

"BaseRate Increases During Termof Agreement. For the duration ofthis Agreement,

the Hospital will adjust the pay of Nurses on his/her anniversary date. Such pay

increases for Nurses not on probation, during the term of this Agreement will be three

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(3) percent." The CBA expired by its own terms one year after the initial effective

date. Pursuant to the agreement, the Hospital gave a single raise to each of its nurses

on his or her anniversary date during the one-year term. 

Negotiations for a new agreement began on March 28, 2006, but a new

agreement had not been reached when the CBA expired on June 20, 2006. The

Hospital sent a letter to all Union employees stating that it would not provide raises

to nurses whose anniversary date fell after the date of contract expiration until the

parties reached a new agreement. On June 29, 2006, the Hospital submitted a

proposal that would provide a 3% increase in wages. The Union voted to strike on

July 6, 7, and 8. The Hospital then told the Union it would not make wage increases

in the new CBA retroactive to June 21, 2006. The Union filed a complaint arguing

that the Hospital'srefusal to give automatic 3% raises after the expiration of the CBA

amounted to a refusal to bargain in violation of 29 U.S.C. § 158(a)(5) and (1). 

1

On June 3, 2015, the Board found, in agreement with the ALJ, that the Hospital

violated 29 U.S.C. § 158(a)(5) and (1) by declining to give its nurses additional raises

after the CBA expired. TheBoard conceded that the Hospital's contractual obligation

The complaint further alleged that the Hospital violated the NLRA by failing 1

to provide the Union with information regarding Unit Operations Councils and

nurses' absences due to work-related illnesses, which the Union requested on April

26, 2006. The complaint also noted the Hospital'sfailure to reasonably accommodate

the Union's request for the names and contact information of complainants against

Nurse Gina Gross, who was terminated by the Hospital in June 2005. The Board

affirmed the ALJ's finding that the Hospital violated §§ 8(a)(5) and (1) of the NLRA

by failing to provide the requested information or make a timely accommodation. 

The Hospital does not appeal these findings, and it failed to discuss these issues in

its brief. Thus, "[t]he Board is entitled to summary enforcement of [these]

uncontested portions of [the] order." NLRB v. Bolivar-Tees, Inc., 551 F.3d 722, 727

(8th Cir. 2008) (quoting Flying Food Group, Inc. v. NLRB, 471 F.3d 178, 181 (D.C.

Cir. 2006)).

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to provide annual raises expired at the end of the one-year term. However, because

it found that the one-year CBA created a status quo of annual pay raises, it held that

the Hospital had a statutory obligation under the NLRA to continue annual pay raises

until a new CBA was reached or the parties bargained to an impasse. The Board also

found nothing in Article 20.3 of the CBA or in the CBA in general that clearly and

unmistakably waived the employer's statutory duty to continue granting annual raises

after the expiration of the CBA. Member Harry Johnson dissented. 

 

The Hospital now appeals the Board's decision, arguing that the one-year-long

CBA did not establish a status quo of annual, compounded raises after the agreement

expired. Alternatively, the Hospital argues that the Union waived its statutory right

to post-expiration raises. 

II. DISCUSSION

A. Standard of Review

We review factual findings for substantial evidence. NLRB v. Am. Firestop

Solutions, Inc., 673 F.3d 766, 767 (8th Cir. 2012). "'Substantial evidence' is evidence

that 'a reasonable mind might accept as adequate to support' a finding." Id. at 768

(quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951)). We review

legal questions to ensure the Board "correctly applied the law." Id. Under this

standard, "the NLRB must be sustained if: (1) itstarted with the currently controlling

law; (2) it correctly applied this law; and (3) substantial evidence supports its

finding." Cedar Valley Corp. v. NLRB, 977 F.2d 1211, 1215 (8th Cir. 1992). For

contractual questions not based on policy under the NLRA, we review the Board's

decision de novo. Am. Firestop Solutions, 673 F.3d at 768. Although the Board has

authority to interpret CBAs in regards to unfair labor practices, "courts are still the

principal sources of contract interpretation." Litton Fin. Printing Div. v. NLRB, 501

U.S. 190, 202 (1991) [hereinafter Litton Fin.] (quoting NLRB v. Strong, 393 U.S.

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357, 360-61 (1969)). If the Board were given authority to interpret contracts, "[w]e

would risk the development of conflicting principles." Id. at 203. 

B. Status Quo

The Hospital argues that the Board erred in holding that the one-year-long

CBA with the Union established a status quo of annual, compounded raises that,

under the NLRA, must be continued after the agreement's expiration. We agree. It

is an unfair labor practice under the NLRA for an employer "to refuse to bargain

collectively with the representatives of his employees." 29 U.S.C. § 158(a)(5). The

obligation to bargain collectively means that the employer must "meet at reasonable

times and confer in good faith with respect to wages, hours, and other terms and

conditions of employment." Id. § 158(d). 

The unilateral change doctrine states that "an employer's unilateral change in

conditions of employment under negotiation is . . . a violation of § 8(a)(5), for it is a

circumvention of the duty to negotiate which frustrates the objectives of § 8(a)(5)

much as does a flat refusal." NLRB v. Katz, 369 U.S. 736, 743 (1962). Even an

increase in wages without negotiation constitutes an unfair labor practice. Id. at 746. 

The only exception is if the pay raises are "in line with the company's long-standing

practice of granting" raises, which would then make the practice "a mere continuation

of the status quo." Id. Wage increases that fit within this exception are generally

"automatic increases to which the employer has already committed himself." Id. 

The terms and conditions that continue as part of the status quo under the

unilateral change doctrine "are no longer agreed-upon terms; they are terms imposed

by law." Litton Fin., 501 U.S. at 206. This is so because "an expired contract has by

its own terms released all its parties from their respective contractual obligations." 

Id. The "rights and duties under the expired agreement[, however,] 'retain legal

significance because they define the status quo' for purposes of the prohibition on

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unilateral changes." Id. (quoting Derrico v. Sheehan Emergency Hosp. 844 F.2d 22,

25-27 (2d Cir. 1988)). 

All parties agree that because the CBA had expired, the Hospital no longer had

any contractual obligations. As such, "[t]he critical inquiry is whether there existed

an established practice or status quo" that created a statutory obligation of

compounded, annual raises. NLRB v. Talsol Corp., 155 F.3d 785, 794 (6th Cir.

1998). The Board relied solely on its interpretation of Article 20.3 of the CBA to

conclude that continuing 3% pay increases were part of the status quo. However,

rather than discussing exactly how the language of Article 20.3 established a status

quo of annual pay raises, the Board simply assumed that because the CBA authorized

a one-time 3% pay raise, annual 3% raises automatically became part of the status quo

that must be maintained during negotiations. As Member Johnson pointed out in his

dissent, "[b]y effectively deleting the time constraint that was an inherent part of the

wage increase obligation, the majoritymakes a time-bound obligation into a perpetual

one." The Board's decision allows "any incrementalist or decrementalist term [to]

control over the actual language used in the contract." The purpose of the NLRA

was surely not to make all wage terms in every employment agreement last beyond

the tenure of the bargained-for agreement. 

"We interpret collective-bargaining agreements . . . according to ordinary

principles of contract law, at least when those principles are not inconsistent with

federal labor policy." M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926, 933

(2015). The Restatement (Second) of Contracts § 202(1) states, "Words and other

conduct are interpreted in the light of all the circumstances, and if the principal

purpose of the parties is ascertainable it is given great weight." "Unless a different

intention is manifested, where language has a generally prevailing meaning, it is

interpreted in accordance with that meaning." Id. § 202(3)(a). Article 20.3 of the

CBA, the raise-providing provision, statesthat it applies only "for the duration of this

Agreement." That phrase, or a slight variation of that phrase, is used three times in

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Article 20.3, and the parties knew that the CBA expired in one year. The generally

prevailing meaning of that phrase, in light of all the circumstances, is that each nurse

gets one 3% raise on one date during the year that the CBA is in effect. Thus, the

plain language of the CBA does not, as the Board states, provide for periodic wage

increases or annual raises; rather, the language sets forth a straight forward, singular

pay increase on a particular day during the one-year contract. 

"Since the status quo is quite obviously defined by reference to the substantive

terms of the expired contract, it follows that . . . those pertinent contractual terms

'survive' the expiration date." Hinson v. NLRB, 428 F.2d 133, 139 (8th Cir. 1970). 

The "substantive terms of the expired contract" in question here, as discussed above,

explicitly state that each employee will receive a one-time 3% raise on his or her

anniversary date. One cannot separate the one-year term limit from the pay raise

obligation. As such, the language of the CBA did not provide for compounded,

annual raises. Member Johnson correctly notes in his dissent that the nurses' pay

"moved from one fixed point to another and [thus should] stay[] there upon contract

expiration." Therefore, the new salary at the time the CBA expired, not the alleged

practice of 3% annual pay raises, isthe status quo that must be maintained throughout

negotiations.

Further, there is minimal, if any, legal precedent supporting the notion that a

one-time act by an employer creates a new status quo. In fact, the Fourth Circuit has

said the opposite, stating, "[W]e refuse to give any credence to the proposition that

a one-time gift . . . , standing alone, could in any way establish a policy or practice of

yearly bonuses." S. Md. Hosp. Ctr. v. NLRB, 801 F.2d 666, 669 (4th Cir. 1986). 

However, "[a]n employer with a past history of a merit increase program neither may

discontinue that program . . . nor . . . continue to unilaterally exercise his discretion

with respect to such increases." Litton Microwave Cooking Prods. v. NLRB, 949

F.2d 249, 252 (8th Cir. 1991) [hereinafter Litton Microwave] (alterationsin original)

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(quoting Oneita Knitting Mills, 205 N.L.R.B. 500, 501 n.1 (1973)). "Instead, the

employer must maintain the general outline of the program . . . ." Id. at 253.

In Litton Microwave the employer had granted raises every January or

February since the opening of the plant in 1977. 949 F.2d at 251, 253. In 1981, the

employer decided not to give merit raises. Id. at 252. This court found that under the

unilateral change doctrine the employer was required to continue giving raises while

negotiating the contract because of the longstanding practice of giving such raises. 

Id. at 253. "[T]he February merit increases were a part of wages because they had

become a practice of the company . . . ." Id. at 252. Thus, failure to bargain over

discontinuation of the raises constituted an unfair labor practice in violation of the

NLRA. Id. at 253. Conversely, in Phelps Dodge Mining Co. v. NLRB, 22 F.3d 1493

(10th Cir. 1994), the court held that eight bonuses paid to various employees between

1985 and 1989 did not establish a status quo of bonuses. Id. at 1497. Bonuses or pay

raises "are considered 'wages' or 'other terms and conditions of employment' 'if they

are of such a fixed nature and have been paid over a sufficient length of time to have

become a reasonable expectation of the employees and, therefore, part of their

anticipated remuneration.'" Id. at 1496 (quoting NLRB v. Nello Pistoresi & Son, Inc.,

500 F.2d 399, 400 (9th Cir. 1974)). The Board examined the "regularity of the

practice and the way in which the employer . . . treated it." Id. (quoting Guy Gannett

Publ'g Co., 295 N.L.R.B. 376, 378 (1989)). Even with multiple bonuses paid on a

semi-consistent basis over several years, it was not enough to establish a new status

quo, and thus, failure to negotiate discontinuation of the bonuses was not an unfair

labor practice. Id. at 1498. 

Here, the Board's finding of a status quo of annual raises was based on a

singular pay raise delineated in a CBA that contained an explicit termlimit. Although

courts have struggled with deciding exactly how long is long enough to establish a

new status quo, a one-time pay increase is clearly insufficient. The one-year-long

CBA did not establish "a past history" of annual 3% raises. Litton Microwave, 949

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F.2d at 252. Thus, the Hospital "maintain[ed] the general outline of the program" by

preserving employees' salaries through negotiation as they were at the expiration of

the CBA. Id. at 253. 

III. CONCLUSION

Because we hold that the CBA did not establish a status quo of, and thus a

statutory right to, annual 3% raises, we need not address whether the Union waived

its alleged statutory right to post-expiration raises. And, because the Hospital did not

violate 29 U.S.C. § 158(a)(5) by discontinuing annual pay raises, the Hospital also

did not violate 29 U.S.C. § 158(a)(1) by informing employees that it would no longer

give annual pay raises after the expiration of the CBA. We grant the Hospital's 2

petition for review and set aside the portion of the Board's order regarding the

Hospital's discontinuance of annual pay raises. The uncontested portions of the

Board's order are affirmed. 

MURPHY, Circuit Judge, dissenting.

Because the majority has not applied the governing law to this case, I dissent. 

Under the NLRA employers are prohibited from refusing "to bargain collectively

The dissent misconstrues the court's analysis, suggesting that we "confuse[] 2

the union's prima facie case with the Hospital's affirmative defense of waiver." As

the dissent correctly states, we should have, and we did, first "determine[] the

sufficiency of the union's prima facie case," holding that the one-year-long CBA

failed to establish a status quo of annual 3% raises. Since, as noted in Hinson, 428

F.2d at 139, the Union's applicable status quo is measured by "the terms of the

expired contract," the plain language of the CBA established a new "status quo"

salary, not a status quo of annual 3% raises. Thus, given the holding that the Union

had no right, contractual orstatutory, to annual 3% raises, it was not necessary for the

court to reach the Hospital's defense that the Union waived any right emerging from

the CBA. 

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with" the employees' representatives, 29 U.S.C. § 158(a)(5), and must maintain the

"status quo" after a CBA expires until either a new agreement or an impasse is

reached. NLRB v. Katz, 369 U.S. 736, 746–47 (1962). In order to show that an

employer has violated the NLRA by a unilateral change in the status quo, a union

must prove that the employer changed a term or condition of employment that is a

mandatory subject of bargaining under the CBA. See Am. Oil Co. v. NLRB, 602

F.2d 184, 188 (8th Cir. 1979); Hinson v. NLRB, 428 F.2d 133, 139 (8th Cir. 1970).

An employer may nevertheless unilaterally change such a term if a union has waived

its statutory right to bargain about that provision. Id. at 133. Waiver is an affirmative

defense an employer must prove by "clear and unmistakable" evidence. Porta-King

Bldg. Sys., Div. of Jay Henges Enters., Inc. v. NLRB, 14 F.3d 1258, 1262–63 (8th

Cir. 1994). 

 

The majority's analysis confusesthe union's prima facie case with the hospital's

affirmative defense of waiver. In its opinion the majority concludes that the union

failed to prove that the hospital unilaterally changed the status quo since the nurse

pay raise provision was limited to the "duration of" the CBA. A union's prima facie

case is however to be analyzed separately from an employer's waiver defense. See

Porta-King, 14 F.3d at 1262–63; see also Local Joint Exec. Bd. of Las Vegas v.

NLRB, 540 F.3d 1072, 1078–80 (9th Cir. 2008); Honeywell Int'l, Inc. v. NLRB, 253

F.3d 125, 128–34 (D.C. Cir. 2001); NLRB v. Gen. Tire & Rubber Co., 795 F.2d 585,

588 (6th Cir. 1986). 

Here, the union proved its prima facie case since the nurse pay raise provision

was a mandatory subject of bargaining, 29 U.S.C. § 158(d), and an express term of

the CBA, see Hinson, 428 F.2d at 139. The pay raise provision defined the status quo

despite the clauses limiting it to the "duration of" the CBA because the agreement's

expiration was extended by law until the parties reached an impasse or a new

agreement. See Local Joint Exec. Bd., 540 F.3d at 1078–80; Honeywell Int'l, 253

F.3d at 128–34; Gen. Tire & Rubber Co., 795 F.2d at 588. Since the hospital failed

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to pay nurse raises after the expiration of the CBA, but before an impasse or a new

agreement, the union proved its prima facie case. The duration clauses in the pay

raise provision are only relevant to the hospital's affirmative defense of waiver.

A union relinquishes its right to bargain for a term of employment if it has

agreed to "waive its statutory protection against unilateral changes in mandatory

subjects of bargaining." Honeywell Int'l, Inc., 253 F.3d at 133; see also Am. Oil Co.,

602 F.2d at 188. In order for a party to waive its statutory right to bargain over a

CBA provision, the CBA must explicitly state that the provision terminates at the

expiration of the CBA. See, e.g., LocalJoint Exec. Bd., 540 F.3d at 1080; Honeywell

Int'l, 253 F.3d at 133–34. It is not enough for the provision to state that it lasts for the

duration of the agreement. See, e.g., Local Joint Exec. Bd., 540 F.3d at 1080;

Honeywell Int'l, 253 F.3d at 133–34. That is because the unilateral change doctrine

"presupposes the end of a collective bargaining agreement and guarantees the

continuation of existing benefits as a matter of law." Honeywell Int'l, 253 F.3d at

128. Thus, if a CBA provision contains a duration clause that merely defines when

the union's "contractual right[s]" end but "is silent on [when] the Union's statutory

rights" end, it "in no way evinces a clear and unmistakable waiver." Id. at 134. 

Here, the union did not waive its statutory right to pay increases after the

expiration of the CBA. The nurse raise provision at issue states:

20.3 Base Rate Increases During Term of Agreement. For the duration

of this Agreement, the Hospital will adjust the pay of Nurses on his/her

anniversary date. Such pay increases for Nurses not on probation, during

the term of this Agreement will be three (3) percent. . . . 

(emphasis added). Although the provision states that the pay increases will last for

the duration of the contract, it does not provide that the increases will "terminate"

when the agreement expires. Because the duration clauses are "silent on the Union's

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statutory rights under Katz and Litton," they "in no way evince[] a clear and

unmistakable waiver by the union." See Honeywell Int'l, Inc., 253 F.3d at 430. 

The duration clauses at issue in this case are similar to the one in Local Joint

Executive Board of Las Vegas, where a dues checkoff provision in the CBA stated

that it "shall be continued in effect for the term of [the] Agreement." 540 F.3d at

1075. The Ninth Circuit explained that this duration clause did not waive the union's

statutory right to bargain over the provision because:

The Board's precedent has plainly and consistently distinguished

between language that states a particular provision applies "during" the

contract term, and language that states the relevant benefit will

"terminate" at the end of the contract term. Only where the provision

states that the benefit will "terminate" has the Board found a clear and

unmistakable waiver.

Id. at 1080. 

The decision in Local Joint Executive Board of Las Vegas is supported by

several other circuit court and Board decisions. See, e.g., Honeywell Int'l, Inc., 253

F.3d at 130, 133–34 (concluding that the following duration clause did not waive the

union's rights: "The Effects Bargaining Agreement shall be effective as of May 30,

1994, and shall remain in effect until midnight on June 6, 1997, but not thereafter

unless renewed or extended in writing by the parties"); Gen. Tire & Rubber Co., 795

F.2d at 587–88 (concluding that the following duration clause did not waive the

union's rights: "the benefits described herein shall be provided for ninety (90) days

following termination"); Schmidt-Tiago Const. Co., 286 N.L.R.B. 342, 343 n.7

(1987) (concluding that the CBA's requirement that employer contributions to the

employees' pension could only be made "in accordance with a Pension Agreement"

did not waive the union's rights); KBMS, Inc., 278 N.L.R.B. 826, 849 (1986)

(concluding that the CBA requirement that employer contributionsto employee trust

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funds "shall continue to be paid as long as [the company] is so obligated pursuant to

said collective bargaining agreements" did not waive the union's rights). 

Since the hospital violated the NLRA by not paying nurse raises while CBA

negotiations were ongoing and the union did not waive its right to bargain over this

provision, the hospital's petition for review should be denied.

______________________________

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