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Parties Involved:
Daily News of Los Angeles
Petitioner
Los Angeles Newspaper Guild, Local 69, AFL-CIO
Intervenor
National Labor Relations Board
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 6, 1995 Decided January 19, 1996

No. 95-1047

DAILY NEWS OF LOS ANGELES,

A DIVISION OF COOKE MEDIA GROUP, INC.,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

LOS ANGELES NEWSPAPER GUILD, LOCAL 69, AFL-CIO,

INTERVENOR

On Petition for Review and Cross-Application for

Enforcement of an Order

of the National Labor Relations Board

Thomas P. Burke argued the cause for petitioner, with whom Jamie L. Johnson was on the briefs.

David A. Fleischer, Senior Attorney, 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. Paul J. Spielberg and Ellen Greenstone entered appearances.

Before: EDWARDS, Chief Judge, HENDERSON and ROGERS, Circuit Judges.

Opinion for the Court filed by Chief Judge EDWARDS.

Dissenting opinion filed by Circuit Judge HENDERSON.

EDWARDS, Chief Judge: Between 1986, when the Daily News ("Company") purchased its

daily newspaper operation, and 1989, when the National Labor Relations Board ("NLRB" or

"Board") certified the Los Angeles Newspaper Guild, Local 69, AFL-CIO ("Guild" or "Union"), as

the collective bargaining representative of the Company's editorial employees in Washington, D.C.

and eight locationsinCalifornia, theCompanyfollowed its predecessor's policyof giving annualmerit

increasesto employeesin the editorial department. However, following the Union's certification, the

Company unilaterally decided to terminate its practice of granting merit increases. In response, the

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1

29 U.S.C. § 158(a)(5) (1988) states: "It shall be an unfair labor practice for an employer ... to

refuse to bargain collectively with the representatives of his employees...." 

Guild filed a complaint with the NLRB.

The Board determined that the Daily News had unlawfully refused to bargain, in violation of

section 8(a)(5) of the National Labor Relations Act ("NLRA" or "Act"),1by discontinuing the

merit-increase policy without first negotiating to impasse with the Guild. The Board rejected the

Company's argument that the wage increases were totally discretionary, and, therefore, could be

terminated at any time. Instead, the Board ruled that the program of granting annual, merit-based

wage increases based on performance evaluations had become a fixed term or condition of

employment that could not be discontinued except pursuant to negotiations with the Union. On the

basis ofthisfinding of an unfair labor practice, theBoard ordered the DailyNewsto award employees

back pay representing the difference between their current salaries and the approximate amount of

their salaries absent the unlawful termination of the merit-increase policy.

On appeal, the Company contends that the Board's decision should be reversed because a

discretionary program can never become a fixed term or condition of employment. However, the

Company's argument is misguided in suggesting that a term or condition of employment can never

be a mandatory subject of bargaining so long asit carriesthe appellation "discretionary." Indeed, the

proper analysis in a case such as this one does not begin with the label assigned to a particular

employee benefit, but, rather, with the character of the program at issue. Here, the Board found that

the Company had an established practice of annually evaluating the merit of each employee based

upon standard performance evaluations, and then determining an appropriate increase based only on

the merit criterion. The program was in no sense whimsical, for each employee was assured an

annual evaluation and a merit increase if his or her evaluation warranted it. The only discretion

retained by the Company was with respect to the amount of the increases to be given to employees

who earned good evaluations. Thus, the Board properly determined that the Company could not

discontinue the entire program based on non-merit considerations, at least not without first

negotiating with the Guild. Because there is substantial evidence in the record as a whole to support

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2The Company argues that these percentages are misleading, because some employees (such as

those who had not yet worked a full year or who worked part-time) received neither performance

evaluations nor increases. This contention, while true, is irrelevant to the Board's findings. The

percentages indicate that a very large majority of employees who were eligible to receive

increases under the program did, in fact, receive some kind of raise. 

the Board's findings, and because we find no infirmity in the legal analysis underlying the Board's

judgment, the Company's petition for review is denied, and the Board's cross-application for

enforcement is granted.

I. BACKGROUND

A. The Dispute

On January 1, 1986, the Daily News took over the operation of a daily newspaper it had

purchased from another company, the Valley News. At that time, the Company adopted its

predecessor's policy of annually evaluating the performance of each editorial department employee

on or about the anniversary of the employee's date of hire or last promotion, and using the

performance review as the basis for increasing salaries. These merit increases could range from no

increase to a substantial raise, depending upon the employee's evaluation.

Although the amount of the increase was discretionary, the timing of the reviews was fixed,

and the sole criterion for determining the amount of the increase was merit (except for those

employees who had already reached the top pay for their job classification). Moreover, a vast

majorityof all eligible employeesreceived some kind ofraise each year. For example, in 1986, 81.5%

of the employees who received performance evaluations received merit raises; in 1987, 82.7%

received merit raises; and in 1988 and the first five months of 1989, 89% received merit raises.2

Petitioner/Cross- Respondent's Appendix ("P.A.") 430-31.

On May 8, 1989, the Board certified the Guild as the collective bargaining representative for

all of the Company's full-time and regular part-time editorial department employees in Washington,

D.C. and at eight locations in California. Bargaining negotiations between the Guild and the

Company commenced on June 14, 1989. The parties agreed to defer bargaining on economic issues

until all non-economic issues had been negotiated. Company negotiator Tom Burke also stated that,

pending negotiations, the Company did not intend to continue with the merit program. P.A. 427.

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The Guild's Administrative Officer, James Smith, stated that he considered the salary increases to be

an existing condition of employment that the Company could not unilaterally discontinue, and that,

during the course of bargaining, the Daily News should continue to grant the increases to all

employees on their anniversary dates. Burke replied that the Company would continue to consider

whether it would discontinue the increases during the course of bargaining. Id. at 427-28.

Sometime after the June 14 bargaining session, the Daily News decided that it would not give

any raises to employees who were part of the collective bargaining unit ("unit employees"). The

Company concedes that this decision was not based on any merit determinations regarding the

individual employees. Indeed, at least two unit employees were informed at their annual performance

appraisal that, based on their performance, theywould have received increases, but that theCompany

would not give raises because of the Union negotiations. Tr. of Hearing (Dec. 12, 1989) 27, 33-34,

reprinted in P.A. 148, 154-55.

At the second bargaining session, held on July 5, 1989, Burke announced that the Company

had decided to discontinue granting merit raises to unit employees. The Company did, however,

continue to issue annual performance appraisals to all employees, and also continued to grant merit

increases to those employees outside of the collective bargaining unit.

B. The Board's Initial Conclusions

The Guild filed a complaint with the NLRB, which issued a Decision and Order on August

27, 1991. Daily News of Los Angeles, 304 N.L.R.B. 511 (1991) ("DNLA I"). The Board found that

the merit-increase program, although discretionary as to the precise amount of each individual

increase, had nevertheless become a fixed term or condition of employment that, pursuant to NLRB

v. Katz, 369 U.S. 736 (1962), could not be changed without bargaining. While acknowledging the

Company's discretion in setting the amount of any raises, the Board nevertheless determined that the

Company was not free to discontinue the policy, and so was required to continue its prior practice

of giving unit employees increases based on individualized merit assessments. Id. at 511.

Further, the Board rejected the Company's argument that the Guild had waived any possible

objections to changes in the increase program by agreeing to the employer's exercise of discretion in

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granting the increases. The Board ruled that the Guild had only agreed to the exercise of discretion

concerning the amount ofthe raises, but did not waive an objection to the discontinuance ofthe entire

program. Id.

Accordingly, the Board determined that the Company had violated section 8(a)(5) of the

NLRA by unilaterally withholding the annual merit increases from employees. The Board ordered

theCompanyto cease and desist fromthis unfair labor practice and to make the unit employees whole

for any monetary losses sustained because of the Company's unlawful conduct. Id. at 516.

C. Previous Proceedings Before This Court

On appeal, this court questioned whether the Board's core holding might be inconsistent with

prior Board precedent. The court noted that, in other cases where there has been "an established

pattern of increases that [was] fixed as to timing but discretionary as to amount," the Board has

appeared to treat such programs as lacking the character of an established practice. Daily News of

Los Angeles v. NLRB, 979 F.2d 1571, 1575 (D.C. Cir. 1992). Of particular concern to the court was

theBoard's decision in Anaconda Ericcson Inc., 261 N.L.R.B. 831 (1982). The court also noted that

the Supreme Court's decision in Katz, on which the Board had relied, did not necessarily dictate the

result reached by the Board because Katz only addressed the case of an employer who unilaterally

decides to give a discretionary merit wage increase, whereas, in this case, the Daily News was

attempting to discontinue its policy. See 979 F.2d at 1573. Accordingly, the court remanded the

case so that the Board could reconsider and more fully explain its apparent failure to follow

Anaconda Ericcson and its application of Katz in a situation involving the discontinuance of merit

increases. 979 F.2d at 1576.

The court, sua sponte, also invited the Board to address two additional issues on remand.

First, the court asked how the Board could justify a back pay remedy for failure to grant discretionary

wage increases when the amount of the increase each employee would have received was "by

hypothesis ... unascertainable." Id. at 1577. Second, the court questioned whether the prohibition

on wage and benefit decreases during negotiations was consistent with the SupremeCourt's decisions

in NLRB v. Insurance Agents' International Union, 361 U.S. 477 (1960), and American Ship

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Building Co. v. NLRB, 380 U.S. 300 (1965), which impose limits on the Board's authority to find

unlawful either party's choice of economic weapons in aid of its bargaining position. 979 F.2d at

1577-78.

D. The Board's Decision on Remand

The Board held on remand that, under Katz, any unilateral change covering a mandatory

subject of bargaining is unlawful regardless of the nature of the change or the particular term or

condition affected. Daily News of Los Angeles, 315 N.L.R.B. 1236, 1237-38 (1994) ("DNLA II").

The Board further noted that it had consistently applied Katz to find the unilateral discontinuance of

merit raises to be unlawful whenever such raises had become established terms or conditions of

employment. Id. at 1239-40. Agreeing that Anaconda Ericcson could not be reconciled with other

Board decisions, however, the Board overruled it. Id. at 1241.

The Board also pointed out that a back pay award need only be based on an approximation

of the amount lost, not an exact determination. The Board concluded that, in this case, an

approximation could be reached, using such information as the past annual reviews of the unit

employees, the merit increases given to unrepresented employees with similar reviews, and the

amounts of the increases for unit employees in previous years. Thus, the Board concluded, its

remedial order would make possible the calculation of a proper back pay award for each affected

employee. Id.

Finally, the Board rejected the Company's argument that discontinuing the merit-increase

program was a legitimate economic weapon protected under Insurance Agents' and American Ship.

According to the Board, those cases only apply to parties that are engaged in lawful, good-faith

bargaining. Therefore, because a unilateral change in a term or condition of employment is itself a

violation of the duty to bargain, the Board reasoned that the Company's change could not be a lawful

economic weapon. Accordingly, the Board reaffirmed its finding of a violation and its prior remedial

Order. Id. at 1242-43.

II. ANALYSIS

Sections 8(a)(5) and 8(d) of the NLRA require parties in a collective bargaining relationship

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to negotiate in good faith over "wages, hours, and other terms and conditions of employment." 29

U.S.C. § 158(d) (1988). However, this duty applies only to those areas that are considered to be

mandatory subjects of bargaining. See NLRB v. Borg-Warner Corp., 356 U.S. 342, 349-50 (1958).

Therefore, as an initial matter, we must determine whether the merit-increase programat issue in this

case is, in fact, a mandatory bargaining subject. Because the program involved employee wages, we

have no difficulty concluding that it was. See, e.g., NLRB v. McClatchy Newspapers, Inc., 964 F.2d

1153, 1161 (D.C. Cir. 1992) (per curiam) ("[M]erit pay is a mandatory subject of bargaining....")

(Edwards, J., concurring). Indeed, the Daily News does not dispute this point.

Given that the merit-increase program was a mandatory subject of bargaining, we next turn

to the question of whether the program was impermissibly changed. The Supreme Court, in Katz,

held that an employer violatesthe duty to bargain by unilaterally changing a termof employment with

respect to a mandatory subject of bargaining during the course (or in the absence) of negotiations.

369 U.S. at 743. Such a change constitutes "a refusal to negotiate about the affected conditions of

employment under negotiation, and must of necessity obstruct bargaining, contrary to the

congressional policy." Id. at 747; see also NLRB v. Cauthorne, 691 F.2d 1023, 1025 (D.C. Cir.

1982) (The court noted that an employer's implementation of a pre-impasse unilateral change in

established wages or working conditions, over which bargaining isrequired, will generally constitute

a violation of section 8(a)(5).).

As the Board correctly explained in its supplemental decision, it makes absolutely no

difference under Katz whether the change at issue adds to or subtracts from employees' wages, or

whether it institutes a new employment policy or withdraws one that already exists. Thus, "in some

circumstances it will be an unfair labor practice to grant unilaterally a wage increase, and ... in other

circumstances it will be an unfair labor practice to deny unilaterally a wage increase. The Act is

violated by a unilateral change in the existing wage structure whether that change be an increase or

the denial of a scheduled increase." NLRB v. Allied Prods. Corp., 548 F.2d 644, 652-53 (6th Cir.

1977) (citations omitted); see also NLRB v. Dothan Eagle, Inc., 434 F.2d 93, 98 (5th Cir. 1970)

("The cases make it crystal clear that the vice involved in both the unlawful increase situation and the

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unlawful refusal to increase situation is that the employer has changed the existing conditions of

employment. It is this change which is prohibited and which forms the basis of the unfair labor

practice charge."). The dissent misreads this clear and well-established rule from Katz, and therefore

misses the mark. It cannot be doubted that, under the prevailing case law from the Supreme Court,

the circuit courts, and the Board, the relevant inquiry here is whether any established employment

term on a mandatory subject of bargaining has been unilaterally changed.

In conducting this inquiry, we must sustain the factual findings of the Board so long as

substantial evidence exists in the record to support them. Universal Camera Corp. v. NLRB, 340

U.S. 474, 488 (1951). Moreover, as the Supreme Court has made clear, "because the classification

of bargaining subjects as terms or conditions of employment is a matter concerning which the Board

has special expertise, its judgment as to what is a mandatory bargaining subject is entitled to

considerable deference." Ford Motor Co. v. NLRB, 441 U.S. 488, 495 (1979) (citation and internal

quotations omitted).

A. The Company Changed a Fixed Term or Condition of Employment

The Daily News argues that the merit-increase program was fully discretionary, leaving the

Company free to discontinue the program at will without violating Katz. The Board's findings do not

support the Company's contentions.

The decisionoftheAdministrativeLaw Judge ("ALJ"), incorporated bytheBoard,statesthat,

under the merit-pay program, the "salary increase, if any, is based on merit, and may range from no

increase to a substantial increase depending on the perceived efforts and ability of the employee, and

his or her value to the newspaper. The amount of the increase, if any, is totally discretionary."

DNLA I, 304 N.L.R.B. at 514 (emphasis added). Thus, while acknowledging that the employer

exercised discretion in deciding the amount of each increase, the ALJ made clear that employees

routinely received annualreviewsfor the purpose ofmerit-based pay increases, and that an individual

assessment of merit was the sole basis for determining the amount of an employee's increase.

Similarly, in its supplemental opinion, the Board explicitly noted that "the element of discretion

retained by the [Company]" was "in setting the amount of merit raises." DNLA II, 315 N.L.R.B. at

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3The NLRB's supplemental decision (and the prior decision of this court) focused solely on the

fact that the merit-increase program was fixed as to timing. While we find that the regularized,

annual nature of the evaluations at issue is relevant to whether employees had come to view the

merit increases as fixed terms or conditions of employment, see, e.g., Guy Gannett Publishing

Co., 295 N.L.R.B. 376, 378 (1989) (Because an annual wage-increase policy had been granted

for many years, "the work force surely was entitled to regard it as a permanent element in their

wage structure program."), we do not believe that fixed timing alone would be sufficient to bring

the program under Katz. In this case, had the Board found that the Company retained total

discretion to grant the increases based on any factors it chose, we doubt that discontinuing the

policy would have resulted in a violation of section 8(a)(5) even though the raises had been

awarded annually. 

4Supervising editor Robert Burdick stated in testimony before the ALJ that "it is our absolute

policy to grant an increase when the supervisor feels that someone's work merits. And when

someone's work doesn't, then that person simply does not get an increase." Tr. of Hearing (Dec.

13, 1989) at 129, reprinted in P.A. 251. Thus, unequivocal evidence in the record indicates that,

prior to the Company's discontinuance of the merit-increase policy, a positive performance

evaluation invariably corresponded to some form of wage increase. 

1236. Nowhere does the record indicate that the Company was free, under the policy, to ignore its

merit-based criterion in making wage-increase judgments. Indeed, the ALJ found that the Company

"had instituted a pattern and practice of evaluating the unit employees at the time of each employee's

anniversary date, and that as a result of such evaluation the [Company] would grant a discretionary

merit salary increase to the employee in an amount commensurate with the employee's evaluation."

DNLA I, 304 N.L.R.B. at 515 (emphasis added). The Board therefore found that the Company's

merit-increase policy was not completely discretionary. Rather, the employer was constrained both

by the established procedures for evaluating employees and by the fixed criteria for making each

individual merit decision.

The crucial question, therefore, is what Katz requires of an employer if an established

merit-increase program is fixed asto timing and criteria, but discretionary as to amount.3 Given that

Katz proscribes unilateral changes to mandatory subjects of bargaining, the answer to this question

is relatively simple. In this case, employees knew that they would receive annual merit increases

based on an evaluation oftheir work: increases were denied only when an employee's evaluation was

unsatisfactory (or when an employee was already at the top of the salary scale).4 Because the

disputed program was a mandatory subject of bargaining, the employer could not terminate the pay

plan without first bargaining to impasse with the Union. In other words, when the criteria for

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5The Company points to the Second Circuit's decision in J.J. Newberry Co. v. NLRB, 442 F.2d

897 (2d Cir. 1971), where the court ruled in favor of an employer that unilaterally discontinued a

practice of periodic merit increases based on performance reviews. In that case, however, no

collective bargaining representative had yet been certified, and so there was no one to consult in

order to avoid acting unilaterally. Indeed, the Second Circuit subsequently distinguished

Newberry on precisely this ground. See NLRB v. United Aircraft Corp., 490 F.2d 1105, 1111 &

n.6 (2d Cir. 1973). 

determining discretionary wage increases are fixed (even if the amount of each individual increase is

discretionary), then Katz demands that the Company continue to apply the same criteria and use the

same formula for awarding increases during the bargaining period as it had previously.

Both this court and the NLRB have long applied this analytical framework to determine

whether employers violate Katz when they unilaterally discontinue merit pay plans. As far back as

1971, this court held that an employer who had granted discretionary increases based on annualmerit

reviews was required to continue evaluating employees according to the plan. UAW v. NLRB

(Udylite Corp.), 455 F.2d 1357, 1365 (D.C. Cir. 1971). Likewise, in NLRB v. Blevins Popcorn Co.,

659 F.2d 1173 (D.C. Cir. 1981), the court ruled that, even though the wage increases in question

"contained both automatic and discretionary elements," the employer was obligated to bargain with

the union before it could "discontinue entirely the practice of granting annual wage increases." Id.

at 1189 (emphasis added).5

While the Board's precedent in this area has not always been a model of clarity, its decisions

similarly indicate that, when an employer has established a regular wage-increase program with fixed

criteria, even though discretionary in amount, that program cannot be discontinued unilaterally. See,

e.g., RochesterInst. of Technology, 264 N.L.R.B. 1020, 1020 (1982) (The Board adopted the ALJ's

findings that the company's merit-increase policy had become a condition of employment similar to

an actually promised increase.), enforcement denied on other grounds, 724 F.2d 9 (2d Cir. 1983);

Allied Prods. Corp., 218 N.L.R.B. 1246, 1252 (1975) (Because the company had an established

policy of evaluating the performance ofits office clerical employees and rewarding such performance

with wage increases, the employer could notsuspend the entire program.), enforced as modified, 548

F.2d 644 (6th Cir. 1977); General Motors Acceptance Corp., 196 N.L.R.B. 137, 137 (1972) ("[A]n

element of discretion ... was retained by the [Company] with respect to particular employees, but

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6Even Anaconda Ericcson, which the Board overruled, does not appear to run contrary to this

general proposition. In that case, the Board ruled in favor of an employer who refused to grant a

discretionary general wage increase during collective bargaining negotiations despite the fact that

such an increase had been given in each of the prior five years. However, there was no evidence

that the general wage increases were determined through the application of any fixed criteria. 

Therefore, it is unclear whether any term or condition of employment had been established. See

id. at 834-35. 

7The Company's reliance on Winn-Dixie Raleigh, Inc., 267 N.L.R.B. 231 (1983), is also

misplaced because there was no finding in that case that the employer had established fixed

criteria for determining the amount of its yearly, across-the-board wage increase. See id. at 235. 

certainly not to the entire [wage-increase] program."), enforced 476 F.2d 850 (1st Cir. 1973).6

The Company points to two recent cases that found an employer's denial of wage increases

to be lawful. However, in both instances, the employer did not suspend the program, but rather

applied its usual evaluation criteria before deciding that no increases were justified. Thus, in

American Packaging Corp., 311 N.L.R.B. 482 (1993), the employer "followed procedures used in

the past and legitimately determined" the amount of an annual across-the-board bonus. Id. at 483.

The Board ruled that the mere fact that use of the formula resulted in no bonus in that particular year

did not make its use a change in existing practice. Id. Similarly, in Stone Container Corp., 313

N.L.R.B. 336 (1993), the employer's decision not to grant a wage increase was based on the results

of its regular annual survey. There was no evidence that the employer used anything other than its

usual criteria for determining the amount of the increase. See also Brannan Sand &Gravel Co., 314

N.L.R.B. 282 (1994) (The Board permitted an employer to make a unilateral change in its health care

plan because the change was made in accordance with its regular review of the costs and benefits of

the plan.).7

The Daily News was, therefore, required to continue its prior practice of making

individualized determinations based on merit. Although the Company remained free to evaluate the

merit of each employee and to deny increases if no one was deserving, it could not make an

across-the-board policy determination based on non-merit criteria. It is undisputed, however, that

the Company did not, in fact, base its decision to deny increases on particularized merit

considerations. Rather, the Company made a broad policy determination that, regardless of merit,

no unit employees should receive increases. By ignoring the established criteria for making its

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8The Daily News asserts that its decision to stop granting the wage increases was not a

permanent policy change because it informed Union representatives that future merit increases

would be subject to negotiations with the Guild regarding the economic package as a whole. 

Thus, according to the Company, this case is similar to Stone Container and American

Packaging, where the NLRB found no violation when an employer simply decided not to award a

discretionary merit increase in a given year. However, as discussed supra, in those cases, the

employers applied their existing formulae for granting wage increases, and then decided that no

one was eligible. In contrast, the Daily News suspended the entire policy despite the existence of

deserving employees. Such an action constitutes a change in a term or condition of employment

regardless of how long the suspension lasts. See, e.g., Udylite Corp., 455 F.2d at 1365 (The

court found a violation even though the unilateral suspension of a merit review plan lasted less

wage-increase decisions, the Company changed a fixed aspect of the policy.

The Board's finding that an individualized merit evaluation wasthe only established criterion

for determining the amount of each increase hassufficient support in the record to require affirmance

under Universal Camera. Indeed, the Company's editor, Robert Burdick, testified that, in general,

no factors other than performance were considered by the Company in assessing raises. Tr. of

Hearing (Dec. 13, 1989) 175, reprinted in P.A. 297. The employer has also made no assertion that

the general economic status of the Company was part of the criteria that had previously been

considered in determining the amount ofthe increases. More importantly, the record reflects that the

Company was not economically unable to give the increases, and indeed, non-unit employees

continued to receive raises as before.

The Board was also justified in finding that the employer did not use individual merit

assessmentsin reaching its decision to deny increasesto all unit employees. Editor Burdick admitted

that at least some of the employees who were evaluated after July 1989 deserved increases based on

the performance evaluations, but did not receive them. Id. at 176,reprinted in P.A. 298. In addition,

two editorial employees testified that they were told by management that they would have received

increases but for the ongoing Union negotiations. Tr. of Hearing (Dec. 12, 1989) 27, 33-34,

reprinted in P.A. 148, 154-55. Thus, the record indicates that, under the Company's usual criteria,

employees would have received raises, but that the Daily News opted to discontinue the entire

program. Because the Daily News made an across-the-board decision not to grant any increases,

rather than a decision based on the established criteria that each employee did not deserve one, the

Company's action constituted an impermissible change in a mandatory subject of bargaining.8

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than five months.). 

B. The Company's Action Was Not a Legitimate Economic Bargaining Weapon

The Supreme Court has placed limits on the Board's power to "sit in judgment upon every

economic weapon the parties to a labor contract negotiation employ." Insurance Agents', 361 U.S.

at 497-98. In Insurance Agents' the Court ruled that participants in collective bargaining may,

without violating their duty to bargain, use tactics designed to exert economic pressure. Similarly,

in American Ship, 380 U.S. at 318, the Court held that a lockout in support of an employer's

legitimate bargaining position does not violate employees' bargaining rights.

The Daily News rightly points out that these cases strip the Board of the power to interfere

with the Company'slegitimate economic weaponsin the guise of enforcing a duty to bargain in good

faith. However, the Board is only forbidden to pass judgment on a particular economic weapon if

that weapon is "used in support of genuine negotiations." Katz, 369 U.S. at 747 (emphasis added).

Katz made clear that the Board retained the power "to order the cessation of behavior which is in

effect a refusal to negotiate." Id.; see also American Ship, 380 U.S. at 308 (The Court specifically

excluded from its discussion those cases where the employer used an economic weapon "as a means

... to evade his duty to bargain collectively.").

In this case, as in Katz itself, the unilateral action of the employer constitutes a refusal to

negotiate to impasse over a mandatory subject of bargaining, which is a violation of section 8(a)(5)

precisely because such an action impermissibly interferes with the collective bargaining process. It

is clear beyond a doubt that the Company's action cannot fall within Insurance Agents' or American

Ship because, in refusing to negotiate over a mandatory subject, the employer is evading the duty to

bargain. Nothing in Insurance Agents ', American Ship, or Katz allows an employer to refuse to

bargain over a mandatory subject by simply declaring the refusal to be an "economic weapon" or

tactic to gain leverage in negotiations. To condone such a proposition would make a mockery of the

bargaining process.

C. The NLRB's Remedy is Sufficiently Administrable

Section 10(c) ofthe NLRA authorizesthe Board, upon finding a violation ofthe Act, to order

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the violator "to take such affirmative action including reinstatement of employees with or without

back pay, as will effectuate the policies of [the Act]." 29 U.S.C. § 160(c) (1988). The Supreme

Court "has repeatedly interpreted this statutory command as vesting in the Board the primary

responsibility and broad discretion to devise remedies that effectuate the policies of the Act, subject

only to limited judicial review." Sure-Tan, Inc. v. NLRB, 467 U.S. 883, 898-99 (1984). And the

Court has cautioned the courts of appeals that "they should not substitute their judgment for that of

the Board in determining how best to undo the effects of unfair labor practices." Id. at 899. Thus,

the Board's choice of remedy "should stand unless it can be shown that the order is a patent attempt

to achieve ends other than those which can fairly be said to effectuate the policies of the Act."

Virginia Elec. & Power Co. v. NLRB, 319 U.S. 533, 540 (1943).

In cases involving a violation ofsection 8(a)(5) based on a company's unilateral alteration of

existing benefits, this court has found it appropriate " "to order restoration of the status quo ante to

the extent feasible, and in the absence of evidence showing that to do so would impose an undue or

unfair burden upon the [employer].' " NLRB v. Cauthorne, 691 F.2d at 1025 (quoting Allied Prods.

Corp., 218 N.L.R.B. at 1246). Such a rule is designed "to prevent the wrongdoer from enjoying the

fruits of his unfair labor practices and gaining undue advantage at the bargaining table when he

bargains about the benefits which he has already discontinued." John Zink Co., 196 N.L.R.B. 942,

942 (1972).

The Company argues that, in this case, because the amount of the wage increases was

discretionary, there is no workable procedure for determining how much back pay any given

employee might be owed. We disagree. The Daily News continued to give annual merit reviews and

performance ratings to both unit and unrepresented employees and to grant merit increases to the

latter group based on those reviews and ratings. Thus, in a back pay proceeding, the Board could

consider, for each unit employee, the amounts ofraises given to unrepresented employees with similar

ratings; the amounts of increases given to the same employee in previous years when his or her rating

was similar; the increases given to other editorial employees with similar ratings in previous years;

and whether the employee was already at or near the top of the salary range for his or her position.

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All of these criteria are sufficiently objective to confine the inquiry as to what the raise would

have been. In addition, the employer remains free to advance any appropriate arguments regarding

how the variousfactors would have been applied in specific cases. In any event, because the evidence

from past years indicates that at least 80% of the eligible employees would have received some

increase, the Board will undoubtedly come closer to approximating what would have occurred by

attempting to estimate back pay, than by denying a back pay remedy altogether. See NLRB v.

Overseas Motors, Inc., 818 F.2d 517, 521 (6th Cir. 1987) ("The Board is required only to adopt a

formula which will give a close approximation of the amount due; it need not find the exact amount

due." (citation omitted)). Moreover, just because the Board's proposed remedy involves some

uncertainty is not sufficient reason to reverse the decision. See NLRB v. International Ass'n of

Bridge, Structural &Ornamental Iron Workers Local 433, 600 F.2d 770, 778-79 (9th Cir. 1979) (A

back pay award should be enforced despite uncertainty asto the identity of the victims of unfair labor

practices.), cert. denied, 445 U.S. 915 (1980); Chemvet Lab., Inc. v. NLRB, 497 F.2d 445, 452-53

(8th Cir. 1974) (Back pay order is enforceable even though amounts of available overtime and

identity of employees who have worked overtime are uncertain.). Given the deferential standard of

review with respect to the Board'sjudgment in this matter, we do not find that the award of back pay

is either unwarranted or an abuse of discretion.

D. Other Claims

TheCompany'sremaining claimslack merit. First, the Daily News contends that, under Katz,

it is precluded from giving wage increases without a waiver from the Union. According to the

Company, because the Guild expressed the desire to bargain about merit wagesin general, there was

no waiver, and the Company could not give the increases without violating Katz.

This argument is specious. As discussed supra, Katz only forbids a unilateral change of the

employer's existing practices coveringmandatorysubjects ofbargaining. Nothing prevented the Daily

Newsfromcontinuing its existing merit-increase program, particularlysince the Union representative

specifically demanded that the Company keep the program in place pending negotiation.

Furthermore, simply because employees choose to negotiate over an existing term or condition of

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employment does not mean the employer is free to change the term unilaterally in the interim.

Otherwise, Katz' proscription against unilateral change would be meaningless.

The Daily News also argues that the Board's decision should be reversed because it failed to

reach a majority rationale and because the decision to overrule Anaconda Ericcson should not be

enforced retroactively. We reject both of these claims. First, all four participating Board members

did agree on the controlling legal principle that an employer may not unilaterally discontinue an

established practice of granting merit increases even though the employer retained discretion as to

the amount ofthe increases. See DNLA II, 315 N.L.R.B. at 1243-44 (Members Stephens and Cohen,

concurring). Thus, this is not a case where "the Board's failure to articulate which test it was relying

on, or, at a minimum, to explain how the same result could be reached under each of those tests, did

not reflect the reasoned decisionmaking required of administrative agencies." Oil, Chemical &

Atomic WorkersInt'l Union v. NLRB, 46 F.3d 82, 91 (D.C. Cir.) (citing United Food &Commercial

WorkersInt'l Union v. NLRB, 880 F.2d 1422, 1436-37 (D.C. Cir. 1989)), cert denied, 116 S. Ct. 81

(1995).

Second, the retroactive overruling ofAnacondaEriccson does not constitute "anabrupt break

with well-settled policy," United Food & Commercial Workers Local 150-A v. NLRB (Dubuque

Packing Co.), 1 F.3d 24, 34 (D.C. Cir. 1993) (internal quotation omitted), cert. denied, 114 S. Ct.

2157 (1994), sufficient to reverse the Board's decision. Indeed, it is not at all clear that Anaconda

Ericcson was inconsistent with the Board's ruling in this case or that it needed to be overruled. See

note 6 supra. Nevertheless, to the extent the overruling was necessary to clarify the Board's

precedent, such an effort is more appropriately viewed as an "attempt to fill a void in an unsettled

area of the law," which is permissible under Dubuque Packing. 1 F.3d at 34 (internal quotation

omitted).

III. CONCLUSION

This case presents a more simple series of questions than the arguments of the parties or the

long procedural history might lead one to believe. Under Katz, an employer may not unilaterally

change a term or condition of employment with respect to a mandatory subject during the collective

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bargaining process. If an established merit-increase program is fixed as to timing and criteria and

discretionary only as to amount, then the employer is obligated to keep the program in place and

continue to apply the same criteria. Because the Daily News did not use its fixed criteria, but instead

made a decision to discontinue the merit-pay program regardless of individual performance, we find

that it changed an established termof employment with respect to a mandatory subject of bargaining,

thereby violating Katz. Furthermore, the Board's proposed remedy is sufficiently administrable to

justify enforcement. Therefore the petition for review is denied, and the cross-application for

enforcement is granted.

So ordered.

KAREN LECRAFT HENDERSON, Circuit Judge, dissenting:

In NLRB v. Katz, 369 U.S. 736 (1962), the Supreme Court held that an employer violates

section (8)(a)(5) of the National Labor Relations Act (Act) by unilaterally awarding discretionary

merit increases during union negotiations. Now the majority holds it is a violation of the same section

not to award such raises. Neither authority nor reason supports this "catch 22" conundrum.

In Katz, the Supreme Court rejected the contention that, because the merit raises awarded

"were in line with the company's long-standing practice of granting quarterly or semiannual merit

reviews," they "in effect, were a mere continuation of the status quo." 369 U.S. at 746. If awarding

such a raise does not continue the status quo, I do not see how the raise can be "a fixed condition or

term of employment," as the majority would have it. See Phelps Dodge Mining Co. v. NLRB, 22

F.3d 1493 (10th Cir. 1994) ("Payments to employees which are fixed as to timing but discretionary

in amount do not become part of the employees' reasonable expectation and thus are not considered

"terms and conditions' of employment.") (citing Daily News of Los Angeles v. NLRB, 979 F.2d 1571,

1575 (D.C. Cir. 1992)).

The majority strains mightily, but unconvincingly, to escape the inevitable effect of Katz.

Most fundamentally, the majority attempts to portray the annual increases as something other than

"discretionary," dismissing that term as an "appellation" and a "label." Majority Op. (Maj. Op.) at

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1That the discretionary raise was not a "fixed" term of employment is clear from the obvious

impracticality of the Board's remedy, which the majority has endorsed ("that the employees be

paid the "difference between their actual wages and the wages they would have otherwise

received' if the merit increases had not been unilaterally discontinued", 304 N.L.R.B. at 516). As

we observed in our earlier opinion in this case: "Given the ALJ's finding here that the amounts of

raises in the past practice were "totally discretionary', it is altogether unclear how the ALJ or the

Board would enforce its order that the News pay the employees "the difference between their

actual wages and the wages they would have otherwise received', as the latter by hypothesis are

unascertainable." 979 F.2d at 1577 (record citations omitted). 

2The opinions the majority cites from other circuits, see Maj. Op. at 9, are no more helpful. In

NLRB v. Allied Prods. Corp., 548 F.2d 644 (6th Cir. 1977), the court upheld the NLRB's

conclusion that the discontinuance of an annual review program violated the Act, while in NLRB

v. Dothan Eagle, Inc., 434 F.2d 93 (5th Cir. 1970), the raises at issue were not "totally

discretionary" but rather "automatic progression wage increases" of "10 to 15 cents per hour" that

"were regularly granted every six months." 434 F.2d at 96. 

3. Yet the Board itself so described the raises based on the administrative law judge's unassailable

factualfinding that "the amount ofthe increase, if any, istotally discretionary." 304 N.L.R.B. at 514.

Given this total discretion, the Company was bound, as the majority concedes, only to give "an

appropriate increase," if an employee's evaluation so "warranted." Maj. Op. at 3 (emphases added).

Such a program may not have been "whimsical," as the majority states, but it does seem wispish. It

plainly did not create a "fixed" term of employment or give employees any bankable expectations.1

The majority also seeks support from Circuit case law, see Maj. Op. at 12, but its authority

is inapposite. In NLRB v. Blevins Popcorn Co., 659 F.2d 1173 (D.C. Cir. 1981), the merit raise was

"discretionary" onlyin that the amount varied according to the objective criterion ofjob classification.

It did not depend, as the raises here do, on the employer's subjective assessment of the employee's

performance. See Katz, 369 U.S. at 746 (distinguishing "the case asto so-called "merit raises' which

are in fact simply automatic increases to which the employer has already committed himself"). On

the other hand, in UAW v. Allied Prods. Corp., 455 F.2d 1357 (D.C. Cir. 1971), the court, "assuming

that increases pursuant to the merit review plan were wholly discretionary," concluded that

"employees would at least have expected that they would be evaluated according to the plan." 455

F.2d at 1365. Here, as the majority acknowledges, this expectation was satisfied. See Maj. Op. at

5 ("TheCompanydid, however, continue to issue annualperformance appraisalsto all employees.").2

Because the Company's practice of awarding totally discretionary annualmerit raises was not

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a fixed term or condition of employment, I dissent from the majority's denial of the petition for

review.

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