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Parties Involved:
Davis Memorial Goodwill Industries, Inc.
Petitioner
International Association of Machinists and Aerospace Workers
Intervenor
National Labor Relations Board
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 27, 1997 Decided March 21, 1997

No. 96-1156

DAVIS MEMORIAL GOODWILL INDUSTRIES, INC.,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

INTERNATIONAL ASSOCIATION OF MACHINISTS

AND AEROSPACE WORKERS,

INTERVENOR

On Petition for Review and Cross-Application for

Enforcement of an Order of the

National Labor Relations Board

Ronald A. Lindsay argued the cause for the petitioner. PeterChatilovicz and Michael F. Kleine were

on brief.

William M. Bernstein, Attorney, National Labor Relations Board, argued the cause for the

respondent. Linda R. Sher, Associate GeneralCounsel, and Aileen A. Armstrong, Deputy Associate

General Counsel, were on brief.

Before: GINSBURG, HENDERSON and TATEL, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Davis Memorial Goodwill Industries

(Goodwill) petitions for review of a decision and order of the National Labor Relations Board

(Board) finding that Goodwill violated section 8(a)(1) and (5) of the National Labor Relations Act

(Act), 29 U.S.C. § 158(a)(1), (5), by refusing to bargain with the union that the Board had certified

as the exclusive representative of a unit of Goodwill's employees. Goodwill contends that it was

under no duty to bargain because the unit in question was comprised of workers who did not qualify

as "employees" under the Act either because they were in a primarily rehabilitative relationship with

Goodwill or because they were temporary. We grant Goodwill's petition for review and deny the

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1The JWOD Act establishes procedures for government procurement of commodities and

services from qualified nonprofit agencies for the blind and other severely handicapped

individuals. 

2An organization may follow this practice and still qualify for contracts under the JWOD Act

as long as 75% of the labor is provided by handicapped individuals. 41 U.S.C. § 48b(4)(C). 

3The Act defines "employee" broadly to include "any employee" not expressly exempted by the

Act. 29 U.S.C. § 152(a). Exempt workers include agricultural laborers, providers of domestic

service, independent contractors, supervisors and individuals covered by the Railway Labor Act. 

Id. No explicit statutory exemption applies in this case. However, Goodwill relies on the Board's

caselaw, see, e.g., Goodwill Indus. of Denver, 304 N.L.R.B. 764, 765 (1991), under which a

worker who has a "primarily rehabilitative" relationship with his employer does not qualify as a

statutory employee. See infra Part II. 

Board's cross-petition for enforcement.

I.

Goodwill is a nonprofit District of Columbia corporation that administers a work training

program for handicapped individuals. Participants in the program receive preliminary training from

Goodwill's Rehabilitation Division on matters such as punctuality, personal hygiene, simple legal

problems, housing and personal finance. Participants are then referred to Goodwill's Contracts

Division where they receive on the job training by working on government contracts awarded to

Goodwill pursuant to the Javits-Wagner-O'Day Act (JWOD Act), 41 U.S.C. §§ 46-48.1 Since 1982

a number of handicapped individualsin theGoodwillwork training programhave performed custodial

work under a series of JWOD Act contracts awarded to Goodwill by the Bureau of Engraving and

Printing (BEP). Goodwill attempted to meet the obligations on its BEP contract with a workforce

comprised entirely of handicapped workers but when this was not possible, Goodwillsupplemented

its workforce with non-handicapped workers.2

In August 1994 the International Association of Machinists and Aerospace Workers, AFLCIO (Union) sought to represent a bargaining unit of handicapped and non-handicapped individuals

performing custodial work under Goodwill's contract with BEP. Goodwill opposed the inclusion of

the handicapped workers in the bargaining unit on the ground that as participants in a rehabilitative

work training programtheywere notstatutory"employees" under the Act.3 Goodwill also contended

that the non-handicapped workers in the proposed bargaining unit were not statutory "employees"

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4We also now review the Board's underlying direction of election. Goodwill could not seek

immediate review of that decision because it lacked finality. The proper avenue for review of a

direction of election, and the one Goodwill has followed here, is to precipitate an unfair labor

practice charge by refusing to recognize the union. See Gold Coast Restaurant Corp. v. NLRB,

995 F.2d 257, 267 (D.C. Cir. 1993). 

because their positions were temporary. The Board rejected Goodwill's position and directed that

a representation election be held. Davis Mem'l Goodwill Indus., 318 N.L.R.B. 1044 (1995). The

Union prevailed in the election by a vote of 44 to 11. Goodwill, however, refused to bargain with

the Union. The Board found that Goodwill's refusal to bargain violated section 8(a)(1) and (5) of the

Act, from which decision Goodwill filed the petition for review now before the court.4 Davis Mem'l

Goodwill Indus., 320 N.L.R.B. No. 151 (Apr. 17, 1996).

II.

In Goodwill Industries of Southern California, 231 N.L.R.B. 536, 537-38 (1977), the Board

acknowledged that collective bargaining in the context of a rehabilitative work training programmay

not always effectuate the purposes of the Act. Collectively bargained terms of employment that

would represent obvious gains for employees in another setting can work to the detriment of

participants in a rehabilitative work training program. For example, collective bargaining might

secure higher wages. Higher wages, however, can force the employer to employ more productive

workers who often have less to gain from rehabilitative training. See id. at 537. Recognizing that

in the rehabilitation setting the employer may verywellsafeguard employee interests more effectively

than a union, the Board has adopted a case by case approach in which it asks whether a program has

such rehabilitative elementsthat the participants do not qualify asstatutory employees under the Act.

The Board has summarized its approach as follows:

When the [employment] relationship is guided to a great extent by business

considerations andmaybe characterized as a typicallyindustrialrelationship,statutory

employee status has been found. When the relationship is primarily rehabilitative and

working conditions are not typicalof private sector working conditions, however, the

Board has indicated it will not find statutory employee status.

Goodwill Indus. of Denver, 304 N.L.R.B. 764, 765 (1991).

In this case the Board concluded that Goodwill's handicapped workers at BEP were in a

"typically industrial" rather than a "primarily rehabilitative" relationship on the basis of four factors.

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Specifically, the Board found that the workers experienced long terms of employment, were

disciplined inthe same manner as non-handicapped individuals, were subject to productivitystandards

and received only limited counseling services. The Board's factual findings will be affirmed if they

are supported by substantial evidence in the record as a whole. See Gold Coast Restaurant, 995 F.2d

at 263. Moreover, we give substantial deference to the Board's inferences drawn from the facts. See

Peoples Gas Sys., Inc. v. NLRB, 629 F.2d 35, 42 (D.C. Cir. 1980). We will not, however, "merely

rubber stamp NLRB decisions." Avecor, Inc. v. NLRB, 931 F.2d 924, 928 (D.C. Cir. 1991). Using

these standards, we conclude the Board's findings are not supported by substantial evidence and we

therefore grant the petition for review.

A.

Because the ultimate purpose of a rehabilitative job training program is to place participants

in jobs elsewhere, the Board considers long-term employment in a work training program itself as

detracting from the rehabilitative character of the program. See, e.g., Lighthouse for the Blind of

Houston, 244 N.L.R.B. 1144, 1147 (1979). Here, the Board found evidence of a typically industrial

relationship because the handicapped workers at BEP "experience long periods of employment" with

Goodwill. JA 312. We find that there is absolutely no evidence in the record to support this finding.

Handicapped workers at BEP were assigned positions either as janitors or as elevator

operators. The record shows that in filling the elevator positions, which were less demanding,

Goodwill gave preference to individuals who were physically unable to work as janitors. These

individuals had little prospect of placement outside Goodwill because they were physically unable to

perform janitorial work in the private sector and elevator operator positions, which they could

perform, were scarce. JA 141. Based on the unlikelihood of placement and the fact that 27 of the

35 handicapped workers at BEP were elevator operators, the Board concluded "[t]his ... strongly

suggests that the vast majority of the Employer's handicapped workers are retained for long periods

of employment." JA 315. The Board's reasoning is flawed. Although Goodwill stated a preference

for placing individuals unable to perform janitorial work in elevator operator positions, this tells us

nothing about how many ofthe 27 elevator operators were actually incapable of performing janitorial

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work (and thus unlikely to be placed in the private sector). To answer that question, it is necessary

to examine the record for evidence of the physical condition of the elevator operators rather than

reasoning, asthe Board did, solely from Goodwill's placement policy. Although the record indicates

that one elevator operator suffered from a fused back and therefore supports the Board's conclusion

of long-term employment in that instance, it does not manifest how many (if any) other elevator

operators were similarly disabled.

The Board's conclusion isfurther undermined by the fact that Goodwill employsfive full time

placement counselors that were available to place handicapped workers at BEP in private sector

employment. Based on its finding that the majority of handicapped workers at BEP was incapable

of performing private sector work, the Board concluded that the counselors were "of limited service

to the handicapped workers at the BEP location." JA 315. As discussed above, the Board's

reasoning with respect to the number of handicapped workers capable of private sector employment

was flawed because unsupported by the record. The Board's failure to give sufficient weight to the

role of the five placement counselors was likewise flawed. Cf. NLRB v. Lighthouse for the Blind of

Houston, 696 F.2d 399, 403 (5th Cir. 1983) (absence of formal placement program is evidence of

typically industrial relationship).

B.

The Board also supported its typically industrial relationship conclusion with the finding that

"handicapped workers are subject to the same disciplinary systemas non- handicapped workers." JA

315. There is no dispute that handicapped workers and non-handicapped workers received the same

employee handbook in which Goodwill stated work rules and personnel policies. However, as the

Board itself has emphasized, the relevant question in determining whether a disciplinary system

evidences a typically industrial or a primarily rehabilitative relationship is not what rules handicapped

workers must follow but the penalties they face for breaking those rules. See Goodwill Indus. of

Tidewater, 304 N.L.R.B. 767, 768 (1991).

The record does not support the Board's finding that handicapped and non-handicapped

employees were subject to the same disciplinary sanctions. Handicapped workers with disciplinary

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problems could not be discharged by the Contracts Division but instead were referred to the

Rehabilitation Division for counseling and further training. They then either went back to BEP or

were placed in some other position within Goodwill. By contrast, non-handicapped workers who

violated workplace rules could be disciplined (and ultimately terminated) by the Contracts Division

itself. 

C.

Although handicapped workers at BEP were subject to productivity standards, we disagree

with the Board's conclusion that the productivity standards evidenced a typically industrial

relationship. Productivity standards were important in three respects. First, handicapped workers

were paid a wage keyed to their productivity. For example, a handicapped worker who performed

at 77% productivity made 77% of the Department of Labor mandated wage. JA 49-50. Second,

handicapped workers had to be capable of working at 75% productivity before Goodwill referred

them to the Contracts Division, JA 70, and, once referred, those workers who failed to maintain a

level of 75% productivity were sent back to the Rehabilitation Division for further training. JA 71.

Finally, once a handicapped worker surpassed 80% productivity, Goodwill attempted to place that

worker in private sector employment through its Placement Department. JA 104. Merit pay

increases have been considered evidence of a typicallyindustrialsetting. See Lighthouse forthe Blind

of Houston, 696 F.2d at 406. Here the variable wage structure may have encouraged handicapped

workers to increase their productivity but any resemblance to a typically industrial relationship is

outweighed by the fact that handicapped workers who exceeded 80% productivity were referred for

placement in the private sectora practice antithetical to what one would expect to find in a typically

industrial relationship. The typical employer does not use a variable wage rate to increase

productivity in order to find a different employer for the most productive of its workers. Moreover,

the purpose of a rehabilitative job training program is to get participants to the level where they are

productive enough to find employment in the private sector. To the extent the variable wage rate did

increase productivity, this result is consistent with a primarily rehabilitative relationship. Also, the

80% referral standard was consistent with a primarily rehabilitative relationship because it allowed

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Goodwill to assess when a handicapped worker had reached a sufficient level of productivity to make

private sector placement feasible.

With respect to the 75% productivity standard for obtaining and keeping a job at BEP, the

Board suggests that the Contracts Division acted like a typically industrial employer who maintains

productivity minima. The Board, however, relied on an artificial distinction between Goodwill's

Rehabilitation Division and Contracts Division. Although the bargaining unit in this case was limited

to Goodwill workers who, through Goodwill's Contracts Division, worked at BEP, the employer in

this case is Goodwillnot its Contracts Division. In determining whether Goodwill's 75%

productivity standard supportsthe Board'sfinding of a typically industrialrelationship, therefore, we

must look beyond how Goodwill treated its workers while they were in the Contracts Division. Here

Goodwill's Rehabilitation Division first raises the employees to the 75% standard and then offers

additional training if the employees should fall below the standard while in its Contracts Division.

The situation, therefore, is different from that of a private sector employer who hires workers already

able, it is anticipated, to satisfy productivity standards and then discharges those who fail to meet

expectations. In this respect the Board failed to adequately distinguish Goodwill Industries of

Denver, 304 N.L.R.B. 764, and Goodwill Industries of Tidewater, 304 N.L.R.B. 767, two cases in

which the Board found handicapped workers to be in a primarily rehabilitative relationship. In both

cases the Board relied on the fact that the handicapped workers were allowed to work at their own

pace and were not subject to discipline. See Denver, 304 N.L.R.B. at 765; Tidewater, 304 N.L.R.B.

at 768. Similarly, Goodwill's handicapped workers were allowed to work at their own pace, so long

as they did not fall below 75% of the norm. Moreover, as noted, handicapped workers who did fall

below that level were not disciplined but received further training.

D.

Not surprisingly, an important ingredient of primarily rehabilitative employment relationships

is the availability of counseling. See Goodwill Indus. of Denver, 304 N.L.R.B. at 765; Goodwill

Indus. of Tidewater, 304 N.L.R.B. at 768. The Board found that Goodwill "provided only limited

counseling services." JA 312. Again the record provides scant evidence to support the Board's

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finding.

A Goodwill counselor visited the BEP site weekly and counseling was available any time

off-site at the handicapped worker'srequest. Furthermore, the Board failed to give weight to the fact

that Goodwill counseled and trained workers extensively through its Rehabilitation Division before

placing them at BEP. As discussed above in the context of productivity standards, we see no reason

why it should matter whether the counseling was provided under the auspices of the Rehabilitation

Division or the Contracts Division. Because the employer in this case is Goodwill, not its Contracts

Division, the question we must ask is whether Goodwill provided counseling services. The record

doesindeed show that Goodwill counselors worked with handicapped individualsfor periodsranging

from several weeks to several years before referring them to the Contracts Division for on the job

training. JA 133-34.

III.

Temporary workers do not qualify as statutory employees. See Pen Mar Packaging Corp.,

261 N.L.R.B. 874 (1982). An employee is considered temporary if "the prospect of termination was

sufficiently finite on the eligibility date to dispel reasonable contemplation of continued employment

beyond the term for which the employee was hired." St. ThomasSt. John Cable TV, 309 N.L.R.B.

712, 713 (1992).

We find that the Board erred in concluding that the non-handicapped employees working at

BEP were not temporary. All non-handicapped workers were required to sign a form containing an

express statement that they were being hired for temporary positions:

It is fully understood that if I'm non-handicapped and hired for one of Goodwill's

janitorial contract sites, I'm strictly in a ninety-day temporary position, unless

otherwise stated by my supervisor or granted an extension, and that I can be moved

or terminated without notice if my slot in [sic] needed for a handicapped individual.

JA 256. The Board contends that this statement is inconclusive in light of a provision in Goodwill's

employee handbook that states "staff and service employees are reviewed once a year." JA 229. The

annual evaluation provision was applicable to Goodwill's non-handicapped workers because they fell

within the definition of "service employees." Thus the provision appears to conflict with their

acknowledged status as temporary employees hired for only ninety days. The "staff and service

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employees" language in the annual evaluation provision covers groups of Goodwill employees

broader than the non-handicapped workers performing custodial work at BEP. For example, the

provision covers employees such as counselors and administrative personnel who have long term

positions with Goodwill. Considering the provision's broad sweep, we can fairly conclude that the

non-handicapped workers were nonetheless temporary without rendering the evaluation provision

meaningless. Finally, we note that the record is devoid of empirical evidence showing that the

non-handicapped workers' time on the payroll in fact exceeded the ninety-day termstated in the form

they signed. We therefore conclude that they were temporary workers and thus did not qualify as

statutory employees.

* * *

The record in this case shows that Goodwill disciplined its handicapped workers in a manner

significantly different from its discipline of non-handicapped workers, allowed its handicapped

workers to work at their own pace, provided counseling and training and had as a goal finding

permanent employment for its handicapped workersin the private sector. These are the same factors

the Board has previously used to declare handicapped workers to be in a primarily rehabilitative

relationship. See, e.g., Goodwill Indus. of Denver, 304 N.L.R.B. 764, 765; Goodwill Indus. of

Tidewater, 304 N.L.R.B. 767, 768-69. The Board has had its chance to develop a record that would

distinguish the instant case from its decisions in Denver and Tidewater and has failed. Because the

Board has pointed to nothing to convince us that further development of the record could serve to

distinguish Denver and Tidewater, we decline to remand the case to the Board for further findings.

For the foregoing reasons, we grant the petition for review and deny the cross-petition for

enforcement. 

So ordered.

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