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Parties Involved:
National Labor Relations Board
Respondent
Sierra Realty Corp.
Petitioner

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 26, 1996 Decided May 3, 1996

No. 95-1349

SIERRA REALTY CORP.,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

On Petition for Review and Cross-Application for

Enforcement of an Order of the

National Labor Relations Board

Sidney Orenstein argued the cause and filed the briefs for petitioner.

William A. Baudler, Attorney, National Labor Relations Board, argued the cause for respondent.

With him on the brief were Linda R. Sher, Associate General Counsel, Aileen A. Armstrong, Deputy

Associate General Counsel, and Peter D. Winkler, Supervisory Attorney.

Before: SILBERMAN, RANDOLPH, and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH,Circuit Judge: Sierra Realty Corporation manages commercial real estate in New

York. From 1984 until 1992, two employees of Supreme Building Maintenance Corporation

provided maintenance services for one of Sierra Realty's buildings in Manhattan. Supreme paid its

employees and then billed Sierra Realty the gross payroll, including fringe benefits, plus 3% for

supervision and 20% for administrative overhead and profit. By 1992, the building was losing money

due to vacancies, rent reductions and high operating costs. Sierra Realty therefore decided to end

its contract with Supreme and to employ its own maintenance crew, for fewer hours and at lower

wages and benefits. Sierra Realty filled the two positions without offering jobs to Supreme's

employeesHector Delgado and Oswaldo De LaRosaboth of whomwere members ofthe Service

Employees International, Local 32B-32J. Supreme had a collective bargaining agreement with this

union, which represented 200 of its employees working at 300 customer locations.

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The National Labor Relations Board found that in making its hiring decision, Sierra Realty

violated § 8(a)(3) of the National Labor Relations Act by discriminating against the two workers on

the basis of their union membership. The Board also found that because Sierra Realty would have

hired the two employees but for its unlawful discrimination, Sierra Realty was a successor to

Supreme. Therefore, finding that the two-person workforce at the Manhattan building constituted

an appropriate bargaining unit, the Board held that Sierra Realty violated § 8(a)(5) by refusing to

bargain with the employees' union.

Section 8(a)(3) makesit an unfair labor practice for an employer to "discourage membership

in any labor organization" by "discriminat[ing] in regard to hire or tenure of employment." 29 U.S.C.

§ 158(a)(3). If the employer's actions do not have an "inherently destructive" effect on union

activityall agree Sierra's did notthe Board focuses on the motivation for the employer's action.

The Board must establish that the employer's actions were motivated by an anti-union animus. If the

Board succeeds, the employer still can successfully mount an affirmative defense by showing that it

would have taken the same action in the absence of anti- union considerations. NLRB v. Wright Line,

251 N.L.R.B. 1083 (1980), enforced, 662 F.2d 899 (1st Cir. 1981), cert. denied, 455 U.S. 989

(1982); Elastic Stop Nut Div. of Harvard Indus. v. NLRB, 921 F.2d 1275, 1279-80 (D.C. Cir. 1990).

No one questions Sierra Realty'sright to terminate its contract with Supreme and hire its own

maintenance employees in order to save money, as it did on June 1, 1992. In bringing the

maintenance work in-house, the company had no obligation to bargain with the union concerning its

hiring decisions. NLRB v. Burns Int'l Security Servs., Inc., 406 U.S. 272, 294-95 (1972). As far as

the labor laws are concerned, the company's only duty was to make those decisions on a basis other

than hostility to a union. It is a given that Sierra Realty's failure to hire Delgado and De LaRosa

stemmed from the company's desire to reduce costs at the building. Sierra Realty Corp., 317

N.L.R.B. 832, 841 (1995). Although terminating the contract eliminated the 23% add-on Supreme

had been charging, Sierra Realty looked for greater savings by reducing wages, benefits and hours.

The administrative law judge, ruling in the company'sfavor and relying on Vantage Petroleum Corp.,

247 N.L.R.B. 1492 (1980), concluded that Sierra Realty failed to hire Delgado and De LaRosa "in

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order to avoid the Union wage scale," which was "different from refusing to hire employeesin order

to avoid the Union." Sierra Realty, 317 N.L.R.B. at 841. The Board thought otherwise: "They

were refused hire solely because of their union wages and the unlawfulness of that decision is in no

wayminimized or affected bythe fact that Respondent may have believed that by hiring themit would

cost it money or time and effort in bargaining with the Union." Id. at 834. Vantage Petroleum did

not apply, the Board said, because in "that case the employees conditioned their job applications on

their existing union wages and benefits." Id. at 834-35.

It is a bit misleading to frame the problem here in terms of Sierra Realty's "refusing" to hire

Delgado and De LaRosa. Putting the matter this way, as the Board did, suggests that these

individuals applied for a job and that Sierra Realty turned them down. Something rather different

occurred. Neither Delgado and De LaRosa ever asked Sierra Realty to continue their employment.

Neither submitted an application for employment. When they met with the company's vice president

in early May 1992, they expressed no interest in remaining at this job. In referring to a "refusal" to

hire, the Board must have had in mind an undated mailgram a union officer sent to Sierra Realty. The

mailgram stated that the union represented the employees at the Manhattan building, that the union

had learned of Sierra Realty's decision to performits ownmaintenance work there, and that "we make

unconditional application for continued employment of " Delgado and De LaRosa. Id. at 834.

Stressing the "unconditional," the Board treated the mailgram as the equivalent of an

employment applicationwithout any strings attached. On this basis the Board rejected the company's

contention that it failed to offer employment to Delgado and De LaRosa because it believed they

would not accept the lower pay, lower benefits and lower working hoursthe company planned to put

in effect on June 1. There are several problems with the Board's reasoning. One stems from the fact

that the mailgram was not an individual employment application. It was a communication from the

union on behalf of the union's members. As such it imposed no obligation on Sierra Realty. The

company had no relationship with the union. And it had no duty to begin a relationship by dealing

with the union in its representational capacity. Burns Int'l Servs., 406 U.S. at 295. Furthermore, it

is inconsistent for the Board to say that Sierra Realty "refused" to hire these individuals because the

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company thought it would have to pay them at the union wage, and then to conclude that in light of

the "unconditional" nature of the offer made by the union on their behalf, the company knew it could

have paid them less than the union wage. The two propositions cannot stand together.

As to the company's explanation for its actions, Sierra Realty knew that under the terms of

the collective bargaining agreement betweenSupreme and the union, Supreme's workers were entitled

to exercise their seniority rights and retain their jobs with Supreme at the same wage and benefit

levels. When a senior employee was laid off he could transfer to another building and displace a less

senior employee. Delgado and De LaRosa had worked for Supreme for 14 and 13 years respectively.

Supreme had been in businessfor only14 years. These individuals were necessarily among Supreme's

most senior employees and the record shows that Sierra Realty knew as much. Sierra Realty's vice

president told Delgado and De LaRosa that they should go to the union and invoke their seniority

rights so that they could continue working for Supreme at the same union-negotiated wage rate.

Sierra Realty had made it clear that it wanted to hire its own people to work "less hours at

lower fringe benefits and wages." In light of Sierra's intentions and its knowledge of Delgado and

De LaRosa'srights under the collective bargaining agreement, SierraRealtyassumed that theworkers

would not accept the lower wages and benefits it was offering. Given these circumstances, the case

is indistinguishable from Vantage Petroleum, on which the ALJ relied.

Vantage Petroleum had been awarded a contract to operate gasoline service stations on state

parkways then being run by Exxon and Mobil. A union steward acting on behalf of several union

members who were working for Exxon pursuant to a collective bargaining agreement expressed

interest in continued employment. Like Sierra Realty, Vantage Petroleum did not negotiate with the

union, it did not offer employment to the Exxon workers, and it did not hire them. The Board ruled

that Vantage Petroleum had not violated § 8(a)(3).

In this case, the Board said that its Vantage Petroleum decision turned on the fact that the

Exxon employees had conditioned their application for employment with Vantage Petroleumon their

receiving the same wages and benefits, while here, Sierra Realty merely assumed that Supreme's

employees would not accept lower wages and benefits. Sierra Realty, 317 N.L.R.B. at 834-35. The

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Board's distinction does not hold up. Only somenot allExxon employees eventually demanded

to be hired at their existing wages. And their demand came well after Vantage Petroleumhad already

made its hiring decisions and filled the jobs. Vantage Petroleum, 247 N.L.R.B. at 1492-93. The

question in Vantage Petroleum, and the question here, was whether the new employer violated §

8(a)(3) when it made its hiring decisions. On that subject, Vantage Petroleum held: "consistent with

Respondent's awareness that the Exxon employees were then working for a higher rate than it was

willing to pay, Respondent had reason to assume that those employees in all likelihood would not

want to suffer a reduction in that rate." Id. at 1493 (italics added). This quotation contains a legal

principle. Under § 8(a)(3), a new employer who will be paying lower wages has no duty sua sponte

to make offersto current union workersif the employer hasreason to assume the workers would not

want to perform the same job for less money. Such an employer has not discriminated on the basis

of union affiliation in hiring workers within the meaning of § 8(a)(3) as first interpreted in Phelps

Dodge Corp. v. NLRB, 313 U.S. 177, 182-87 (1941).

Applied to this case, the Vantage Petroleum rule leads not to the Board's conclusion, but to

its opposite. Sierra Realty presented a far more compelling case than Vantage Petroleum. The

choice facing the Exxon employeesin Vantage Petroleum wasto seek employment elsewhere or take

a pay cut. Without offering them a job, the new employer assumed that, given these options, the

employees would prefer to seek employment elsewhere. No such choice faced Delgado or De

LaRosa. As Sierra Realty knew, these two employees would be able to exercise their seniority rights

and retain their jobs with Supreme. The collective bargaining agreement between Supreme and the

union guaranteed as much. Only if Delgado and De LaRosa signed up with Sierra Realty would they

suffer a loss of pay or benefits. It is irrational to suppose that any rational human being, in this

situation, would throw away years of seniority and give up a higher paying job in order to accept a

job involving the same type of work in the same general location at lower wages and benefits, and

fewer hours. Yet this is precisely what the Board must have supposed in finding a § 8(a)(3) violation

in this case. If the new employer in Vantage Petroleum had "reason to assume" the employees there

would "in all likelihood" not be interested in staying on after the takeover, Sierra Realty had all the

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more reason for assuming that these two employees would be unwilling to give up their jobs with

Supreme in order to start working for Sierra Realty.

Vantage Petroleum is important for another reason. We have already mentioned the union's

correspondence with Sierra Realty and the failure of Delgado and De LaRosa to ask the company to

retain them. In Vantage Petroleum the Board discussed the same type of situation, ruling that the

new employer "had no obligation ... to initiate the employment relationship," and that it was "within

its rights to expect that persons seeking employment with it would first submit applications." 247

N.L.R.B. at 1494. That a union official in Vantage Petroleum made overtures to new employer on

behalf of union members had no effect on the Board's decisionand it therefore should not have had

any effect here.

Vantage Petroleum, in short, should have been controlling. The Board did not purport to

overrule that decision or to qualify it in anyway. Compare Daily News of Los Angeles v. NLRB, 979

F.2d 1571, 1574-76 (D.C. Cir. 1992), withConsolidated Freightways v. NLRB, 892 F.2d 1052, 1056

(D.C. Cir. 1989). Having misapplied the legal principle set down in Vantage Petroleum, the Board

is unable to support its § 8(a)(3) finding against Sierra Realty with substantial evidence. The Board's

finding of a § 8(a)(5) violation also cannot stand; it rested on the § 8(a)(3) violation. Sierra Realty's

petition for review is granted and enforcement of the Board's order is denied.

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