Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-01170/USCOURTS-caDC-97-01170-0/pdf.json

Parties Involved:
Capital Cleaning Contractors, Inc.
Petitioner
National Labor Relations Board
Respondent

Document Text:

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 27, 1998 Decided July 17, 1998

No. 97-1170

Capital Cleaning Contractors, Inc.,

Petitioner/Cross-Respondent

v.

National Labor Relations Board,

Respondent/Cross-Petitioner

On Petition for Review and Cross-Application

for Enforcement of an Order of the

National Labor Relations Board

Frederick D. Braid argued the cause for petitioner/crossrespondent, with whom James F. Kenniff was on the briefs.

Ana L. Avendano, Attorney, National Labor Relations

Board, argued the cause for respondent/cross-petitioner, with

whom Frederick L. Feinstein, General Counsel, Linda R.

Sher, Associate General Counsel, Aileen A. Armstrong, DepuUSCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 1 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

ty Associate General Counsel, and Fred L. Cornnell, Supervisory Attorney, were on the brief.

Before: Ginsburg, Henderson, and Randolph, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: Capital Cleaning Contractors,

Inc. petitions for review, and the National Labor Relations

Board cross-applies for enforcement, of a Board order holding

that Capital is a successor employer within the meaning of

NLRB v. Burns International Security Services, Inc., 406

U.S. 272 (1972). The Board held that Capital violated

ss 8(a)(1), (3), and (5) of the National Labor Relations Act, 29

U.S.C. ss 158(a)(1), (3), and (5), by discriminating in hire

against the unionized employees of its predecessor, refusing

to bargain with their union, and establishing without consulting the union the terms and conditions of employment it

would offer initially to the union employees of its predecessor.

Capital argues that (1) the Board's finding that Capital was a

successor because it acted with anti-union animus in refusing

to hire union workers is not supported by substantial evidence; (2) under Burns it was entitled to establish the terms

and conditions of employment it would offer initially to the

employees of its predecessor; and (3) the Board's remedial

order is punitive. For the reasons stated below we reject

Capital's first two arguments but agree that the Board's

order is punitive; therefore, we grant in part and deny in

part both the Company's petition for review and the Board's

application for enforcement.

I. Background

Until May 2, 1992 Ogden Allied Corporation had a contract

to clean the Bulova Corporate Center in Queens, New York,

for which purpose it employed 19 people. Local 32B-32J,

Service Employees International Union, AFL-CIO was the

exclusive bargaining representative of the Ogden cleaning

employees. The collective bargaining agreement (CBA) between Ogden and Local 32 for the years 1990 through 1992

provided for wages of between $8.50 and $9.50 per hour and

for medical and pension benefits.

In the Spring of 1992 the management of the Bulova

building solicited competitive bids for a new cleaning contract.

During the bidding process the manager of the building told

Dennis Kaplan, the vice-president of Capital, that he was not

pleased with the quality of the work Ogden had done. On

April 10, 1992 Capital won the contract, and the Bulova

building became Capital's largest job. As was its general

practice, Capital staffed the building with a subcontractor, in

this instance KCR Maintenance. Because Kaplan was concerned that KCR would not be able fully to staff the Bulova

building, however, he and KCR agreed that he could also hire

some of the Ogden employees to continue working there.

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 2 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Indeed, Kaplan testified that because hiring the Ogden employees "could have made a very smooth transition," he would

have hired all of them if they had passed the screening

interview and if building management had approved.

Also on April 10 Anthony Spataro, the business agent of

Local 32, learned about the Bulova building's switch from

Ogden to Capital. According to Spataro, on April 14 he gave

the Ogden employees copies of Capital's advertisement in the

Yellow Pages and instructed them to call Capital and apply

for a job. On April 15 Spataro drove to Capital's office in

Huntington Station, New York and gave Al Kaplan, the

president of Capital, a letter from the Union. The letter

informed Capital that the Union represented the 19 Ogden

employees; on their behalf it was making an "unconditional

application for continued employment"; and it requested that

Capital contact the Union's law firm "to commence negotiations." Dennis Kaplan testified that this request "seemed a

little rough to us" because it was not a practice with which he

was familiar and because Capital usually staffed a building

with its own people. Spataro testified that he called Capital

four times in mid-April and left messages for Dennis Kaplan,

who never called back.

On or about April 20 Dennis Kaplan went to the Bulova

Center with the following notice addressed to the Ogden

employees:

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 3 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Effective May 2, 1992, we will be the new cleaning

company at the Bulova Building....

Although a number of you have called our office, no

one has submitted an application for work. The union

which represents you with your current employer has

written to us and stated that it is making an "unconditional application for continued employment" for everyone on a list which they enclosed. This is not sufficient

to apply for work with us. You must call our office at

[phone number] and ask for the Personnel Department.

Tell them you are working at the Bulova Building, and

that you are interested in applying for a job with us.

Make an appointment to fill out an employment application, and bring satisfactory proof that you may lawfully

be employed in this country. We will advise you of our

decision after we complete a reference check.

Starting wages are $5.00 per hour. We do not provide

health insurance, and there is no pension.

Kaplan asked the building supervisor to distribute the notice

to the Ogden employees and to post it near the employees'

locker room. On April 27 Capital also mailed the notice to

each Ogden employee by certified mail.

Also on that date Capital's law firm wrote to the Union,

enclosing the notice offering jobs to the Ogden employees,

and reiterating that the Union's blanket application was not

sufficient; each employee would have to apply individually in

order to get a job. The letter also stated that if Capital hired

a majority of union employees, then it would bargain with the

Union.

In the event, Capital did not hire any of the Ogden

employees. At least three of the employees (Moore, Gallardo,

and Mercado) testified that when they called Dennis Kaplan

to apply for a job and informed him that they were Ogden

employees, he said he was not hiring union workers. Others

(including Diaz-Miranda, Mazurek, and Rojas) testified that

Kaplan told them he did not need them because he was going

to staff the job with his own people. Some of these employees in turn told their co-workers what Kaplan had told them.

Several of the employees testified that they did not apply

for a job with Capital because Kaplan indicated that he would

not hire them. One of the employees said he did not apply

because the salary was too low, another because there were

no benefits. Only one of the employees set up an interview

for the job, and she testified that after one of her co-workers

related his conversation with Kaplan she decided not to keep

her appointment.

Dennis Kaplan testified that he spoke on the telephone

with two or three Ogden employees about a job and told them

about the application procedure. Kaplan told some of the

callers that the job paid $5.00 with no benefits. Kaplan

denied, however, that he told any of the Ogden employees

that he was not hiring union members or that there were no

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 4 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

positions because he was bringing in his own people.

Capital took over the job on May 2. On May 6 the Ogden

employees began picketing the building, which they continued

to do through July.

On July 23 the General Counsel of the Board issued a

complaint against Capital. A hearing was held before an

Administrative Law Judge in March 1993 and in December

the ALJ issued her decision. After observing that "much of

the instant case rests on credibility determinations," she

determined that Dennis Kaplan was "not a credible witness."

Acknowledging that there were inconsistencies in the testimony of the Ogden employees, she concluded that these were

due to the passage of time and to the employees' lack of

sophistication and education. The ALJ then found that although two of the Ogden employees would not have applied

for a job with Capital because of the low wage and lack of

benefits, the other 17 would have applied and would have

been hired by Capital but for its anti-union discrimination.

The ALJ also concluded that Capital was a successor

employer to Ogden and that it was liable under ss 8(a)(1) and

(3) of the Act for refusing to hire union members, and under

ss 8(a)(1) and (5) both for failing to recognize and bargain

with the Union and for unilaterally setting the initial terms

and conditions of employment. The ALJ ordered Capital to

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 5 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

reinstate the 17 affected Ogden employees, to bargain with

Local 32, and to restore retroactively the terms and conditions of employment (including wages and benefits) called for

in the 1990-92 CBA between Local 32 and Ogden. The wage

and benefit remedy runs for the period from May 2, 1992

until such time as Capital negotiates in good faith with Local

32 and reaches either a new agreement or an impasse. The

Board affirmed the ALJ's decision in all relevant respects.

II. Analysis

Capital asserts that the ALJ's conclusion that it discriminated against union members is not supported by substantial

evidence and that therefore it is not a successor to Ogden.

Capital also claims that regardless whether it is a successor it

was entitled to set the initial terms and conditions of employment without first consulting with Local 32. Finally, Capital

argues that the remedy imposed upon it is punitive and

therefore unlawful.

A. Successorship

We will uphold the Board's findings of fact if they are

supported by substantial evidence in the record as a whole.

29 U.S.C. s 160(e); see Allentown Mack Sales & Serv., Inc. v.

NLRB, 118 S. Ct. 818, 823 (1998). To that end we ask

"whether on this record it would have been possible for a

reasonable jury to reach the Board's conclusion." Allentown

Mack, 118 S. Ct. at 823. As is apparent, this is a highly

deferential standard of review. We give the Board even

greater deference with respect to questions of fact that turn

upon motive--in this case whether Capital's refusal to hire

Ogden's employees was based upon anti-union animus. See

Laro Maintenance Corp. v. NLRB, 56 F.3d 224, 229 (D.C.

Cir. 1995). Finally, "[t]he Court must uphold Boardapproved credibility determinations of an ALJ unless they

are 'hopelessly incredible' or 'self-contradictory,' " Elastic

Stop Nut Div. of Harvard Indus., Inc. v. NLRB, 921 F.2d

1275, 1281 (D.C. Cir. 1990), or "patently insupportable," Exxel/Atmos, Inc. v. NLRB, 28 F.3d 1243, 1246 (D.C. Cir. 1994).

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 6 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Under s 8(a)(1) of the Act it is an unfair labor practice for

an employer "to interfere with, restrain, or coerce employees"

in the exercise of their rights to organize, form, join, or assist

a labor organization, and through it to bargain collectively.

Section 8(a)(3) makes it an unfair labor practice for an

employer "by discrimination in regard to hire or tenure of

employment or any term or condition of employment to

encourage or discourage membership in any labor organization." Under s 8(a)(5) it is an unfair labor practice for an

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

When one employer buys out another or by competitive

bidding displaces it, the new employer is under a duty to

bargain with the union with which its predecessor bargained

if (1) the new employer does not make a "significant change"

in the "essential nature" of the business, and (2) "a majority

of the new [employer's] employees were employed by the

predecessor." Elastic Stop Nut, 921 F.2d at 1281; see Fall

River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 41

(1987). Thus, the obligations of successorship depend upon

whether "there is 'substantial continuity' between the new

and predecessor employers." Harter Tomato Prods. Co. v.

NLRB, 133 F.3d 934, 937 (D.C. Cir. 1998) (quoting Fall

River, 482 U.S. at 43). Although a new employer is not

required to hire the employees of its predecessor, see Howard

Johnson Co. v. Detroit Local Joint Executive Bd., 417 U.S.

249, 261 (1974), the new employer may not lawfully refuse to

hire them because of their union affiliation, see Fall River,

482 U.S. at 40; Burns, 406 U.S. at 280 n.5. In determining

whether a new employer that did not hire its predecessor's

union employees discriminated on the basis of their union

membership, the Board looks to whether the employer was

motivated by anti-union animus. Elastic Stop Nut, 921 F.2d

at 1280. If so, then the new employer cannot escape its

obligation to bargain with the union on the ground that the

union does not represent a majority of its employees. Id. at

1282.

If the Board concludes that the new employer refused to

hire the employees of its predecessor based upon anti-union

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 7 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

animus, then the new employer may show as an affirmative

defense that "it would have taken the [same] action regardless of the existence of such animus." Id. at 1280; see NLRB

v. Transportation Management Corp., 462 U.S. 393, 440-43

(1983); Laro Maintenance, 56 F.3d at 228; Wright Line, 251

N.L.R.B. 1083, 1089 (1980), enf'd, 662 F.2d 899 (1st Cir. 1981).

In other words, "a legitimate business purpose may provide a

defense even in the face of anti-union animus." Elastic Stop

Nut, 921 F.2d at 1280.

Capital essentially concedes that it did not make any

"significant change" in the "essential nature" of the business

conducted by Ogden. Instead, Capital argues that it is not a

"successor" to Ogden because it acted lawfully in not hiring a

majority of its employees from among Ogden's workforce. In

particular Capital contends that there is not substantial evidence for the ALJ's finding that it refused to hire the Ogden

employees because of anti-union animus.

We hold that substantial evidence does support the ALJ's

finding that Capital refused to hire 17 of the 19 Ogden

employees because of their union membership. The evidence

shows that Dennis Kaplan (whose denial the ALJ discredited)

informed several of the Ogden employees that he did not

want to hire union members. These employees in turn told

their co-workers about Kaplan's statements. The ALJ could

infer from this evidence that even the employees who did not

talk to Kaplan decided not to apply because of Kaplan's antiunion statements. See, e.g., NLRB v. Staten Island Hotel

Ltd. Partnership, 101 F.3d 858, 861 (2d Cir. 1996) (upholding

finding of anti-union animus from statements such as manager "wasn't going to hire anybody from the union").

Capital mounts four attacks upon this conclusion, none of

which is persuasive. First, Capital asserts that the ALJ

improperly discredited Dennis Kaplan's testimony denying

that he told the Ogden employees he was not hiring union

members. The ALJ rejected Dennis Kaplan's testimony on

the grounds that it is internally inconsistent and that he

attempted to signal an answer to Al Kaplan when the latter

was testifying. As to the inconsistency, Dennis Kaplan testiUSCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 8 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

fied, on the one hand, that in order to ensure a "smooth

transition" he would have hired all of the Ogden employees if

they had passed the screening and if building management

had approved and, on the other hand, that he thought the

Union's unconditional blanket application was "a little rough."

As the ALJ found, these statements are in some tension; in

these circumstances it is not our role to draw from the

evidence inferences different from those the ALJ drew. See

Caterair Int'l v. NLRB, 22 F.3d 1114, 1120 (D.C. Cir. 1994).

As for the ALJ's reliance upon Dennis Kaplan's attempt to

signal an answer to Al Kaplan during the latter's testimony,

Capital does not deny the attempt but contends only that Al

did not see Dennis signal and that Al's testimony was itself

consistent. Neither point is even relevant: The ALJ could

properly draw a negative inference regarding Dennis Kaplan's credibility based upon his attempt to influence the

testimony of another witness during the hearing regardless

whether that attempt succeeded.

Second, Capital disputes the accuracy of Spataro's testimony that he met with the Ogden employees, gave them Capital's telephone number, and told them to apply for a job.

Although there are inconsistencies in the testimony, several

Ogden employees indicated generally that such a meeting

occurred. In any event, the Spataro meeting is not, contrary

to Capital's claim, the "cornerstone" of the General Counsel's

case, nor even a necessary factual predicate for the ALJ's

determination that Capital refused to hire the Ogden employees because of anti-union animus. There is no dispute that at

least some of the Ogden employees called Capital to inquire

about a job: Dennis Kaplan so testified and the notice Capital

mailed to the employees stated that "a number of you have

called our office." The relevant issue is whether Dennis

Kaplan told the employees who called that he was not hiring

union members--not, as Capital would have it, whether a

union representative or someone else told the employees to

apply.

Third, Capital contends that this court should itself discredit the testimony of the Ogden employees to the effect that

Kaplan made anti-union statements. Capital here refers to

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 9 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

certain inconsistencies and minor contradictions in the testimony of the employees upon matters other than the relevant

question--that is, whether Kaplan made the anti-union statements. The ALJ specifically credited the employees' testimony upon this issue. The problems to which Capital points do

not, even in the aggregate, rise to a level that would cast

doubt upon the ALJ's decision to credit the relevant testimony. In addition, the ALJ specifically credited the testimony

of two of the employees based upon their "demeanor" and

apparent "truthful[ness]," and we cannot say that their testimony is "hopelessly incredible." Elastic Stop Nut, 921 F.2d

at 1281 (upholding ALJ's decision to credit testimony of

witness claiming he was told to limit the hiring of union

members).

Fourth, Capital suggests that we should discredit the Ogden employees' testimony about Dennis Kaplan's anti-union

statements because several of those employees required a

translator for their testimony. Be that as it may, several

witnesses testified in English when recounting their telephone conversations with Kaplan. Indeed, all the most

damning witnesses--those who testified most clearly that

Kaplan said he was not hiring union members (Moore, Gallardo, and Mercado)--testified in English about their conversations with Kaplan.

Notwithstanding this substantial evidence that Kaplan told

the Ogden employees that he would not hire union members,

Capital argues that it is not a successor because it did not

hire a majority (or indeed, any) of Ogden's employees. Capital contends that it did not (and could not) hire any Ogden

employees because they simply did not apply, and that they

did not apply because they were not satisfied with the terms

Capital offered. Although several of the Ogden employees

did testify that they were not happy with the terms offered

by Capital, only two of them (Reinoso and Rojas) gave either

the low wage or lack of benefits offered by Capital as the sole

reason they did not apply, and the ALJ properly excluded

those two from relief under the order. More important,

several of the employees testified expressly that they did not

apply because of Kaplan's statements. And as noted above,

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 10 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

those employees told their co-workers what Kaplan had said,

making it a fair inference for the ALJ that the other employees did not apply for the same reason. In short, we agree

with the Sixth Circuit that "where an employer makes known

to prospective employees his refusal to hire them because of

union affiliation, their failure to apply is no defense." American Press, Inc. v. NLRB, 833 F.2d 621, 627 (1987).

Capital's final argument is that regardless whether it acted

with anti-union animus to discourage Ogden's employees from

applying for jobs, it would lawfully have refused to hire most

of them if they had applied. Capital contends that it would

not have hired a majority of union employees because the

building management had expressed dissatisfaction with Ogden's performance. There was no testimony, however, that

the building management had singled out any individual

employees. Therefore, Capital has failed utterly to show that

it would not have hired a majority of its employees from

among Ogden's workers absent its anti-union animus.

In sum, Capital was a successor to Ogden. It violated

ss 8(a)(1) and (3) by refusing to hire the Ogden employees

because of their union membership, and it violated ss 8(a)(1)

and (5) by refusing to recognize and bargain with the union.

B. Setting the Initial Terms

Capital argues that even if it did engage in anti-union

discrimination it did not violate ss 8(a)(1) and (5) of the Act

by unilaterally--that is, without first bargaining with the

Union--setting the initial terms and conditions under which it

would hire the Ogden employees. Citing NLRB v. Burns

International Security Services, Inc., 406 U.S. 272 (1972),

Capital argues that it was entitled to set the initial terms and

conditions upon which it would offer employment when it won

the bid for the Bulova office building. In Burns the employer

hired a majority of its employees from among the employees

of its predecessor but refused to bargain with their union.

Id. at 275-76. The Board held that the employer had violated

s 8(a)(5) and as a remedy imposed upon it the CBA that had

been signed by its predecessor. Although the Supreme

Court agreed with the Board that Burns had a duty to

bargain with the union representing the employees of its

predecessor, id. at 277-81, it did not agree with the Board's

choice of a remedy. As the Court stated:

It does not follow ... from Burns' duty to bargain that it

was bound to observe the substantive terms of the

collective-bargaining contract the union had negotiated

with [the predecessor] and to which Burns had in no way

agreed.

Id. at 281-82. The Court explained:

Although a successor employer is ordinarily free to set

initial terms on which it will hire the employees of a

predecessor, there will be instances in which it is perfectUSCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 11 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

ly clear that the new employer plans to retain all of the

employees in the unit and in which it will be appropriate

to have him initially consult with the employees' bargaining representative before he fixes terms. In other situations, however, it may not be clear until the successor

employer has hired his full complement of employees

that he has a duty to bargain with a union, since it will

not be evident until then that the bargaining representative represents a majority of the employees in the unit as

required by s 9(a) of the Act, 29 U.S.C. s 159(a).

Id. at 294-95.

Thus, the general rule of Burns and its progeny is that a

successor employer is, like any non-union employer, free to

set the initial terms upon which it offers employment. In the

ordinary case the successor's obligation to bargain with the

union accrues only when it has hired a "substantial and

representative complement" of its work force, Fall River, 482

U.S. at 47, 52 (clarifying timing of bargaining obligation), and

a majority of those employees were employed by its predecessor. If it is "perfectly clear" ex ante, however, that the

successor employer "plans to retain all of the employees in

the unit," then Burns requires the successor to bargain with

the union even before setting the initial terms of employment.

Burns, 406 U.S. at 294-95. This has come to be known as the

"perfectly clear" exception to Burns.

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 12 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

In Burns the Court did not address a situation where the

successor, based upon anti-union animus, unlawfully refused

to hire the employees of its predecessor. For cases involving

such discrimination the Board has adopted what it calls in its

brief a "corollary" to the perfectly clear exception: If the

successor employer refuses to hire its predecessor's employees because of anti-union discrimination, then the Board

presumes that but for the unlawful discrimination the new

employer would have hired all or substantially all of those

employees when it first started hiring. The Board's rationale

for this presumption is that when a new employer discriminates against union adherents the remedy is to instate or

reinstate them; assuming therefore that they had been employed all along, it is reasonable further to assume that a

majority of the employees are in favor of the union. It

follows that the employer had an obligation from the outset to

bargain with the union. See, e.g., Kallmann v. NLRB, 640

F.2d 1094, 1100-01 (9th Cir. 1981).

In effect, when a successor refuses to hire its predecessor's

employees based upon anti-union animus, the successor loses

the right unilaterally to set the initial terms and conditions of

employment; it must first bargain with the union. In upholding the Board in this respect we join every other court to

have considered the issue. See, e.g., Pace Indus., Inc. v.

NLRB, 118 F.3d 585, 593-94 (8th Cir. 1997); U.S. Marine

Corp. v. NLRB, 944 F.2d 1305, 1320 (7th Cir. 1991) (en banc);

American Press, Inc. v. NLRB, 833 F.2d 621, 624-25 (6th Cir.

1987); Shortway Suburban Lines, Inc., 286 N.L.R.B. 323, 328

(1987), enf'd mem., 862 F.2d 309 (3d Cir. 1988); Potter's Drug

Enterprises, Inc., 233 N.L.R.B. 15, 20 (1977), enf'd mem., 584

F.2d 980 (9th Cir. 1978); see also Karl Kallmann d/b/a Love's

Barbeque Restaurant No. 62, 245 N.L.R.B. 78, 82 (1979)

(applying perfectly clear exception because of uncertainty

caused by failure to hire union members due to anti-union

animus), enf'd in relevant part, 640 F.2d 1094 (9th Cir. 1981).

We conclude that the Board was correct in holding that

Capital violated ss 8(a)(1) and (5) of the Act by setting its

initial terms and conditions of employment without first barUSCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 13 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

gaining with Local 32. Having earlier determined (in Part

II.A) that Capital was a successor employer to Ogden, we

now hold that because Capital refused to hire the Ogden

employees based upon their union membership, the Board

properly presumed that but for such discrimination Capital

would have hired a majority of the Ogden employees from the

outset. Accordingly, Capital had a duty to bargain with

Local 32 and therefore did not have the right unilaterally to

set the terms and conditions upon which it offered employment.

Capital raises two arguments to the contrary but they are

both misconceived. First, Capital asserts that the Board's

corollary to the perfectly clear exception is inconsistent with

Burns. In Burns, however, the successor did not violate the

Act by unlawfully refusing to hire a majority of union employees. On the contrary, the successor did, in fact, hire them;

its dereliction was in failing to bargain with their union. For

that unfair labor practice the proper remedy was a bargaining

order. In a case like this, however, where Capital's antiunion discrimination makes it difficult to determine how many

of its predecessor's employees it would have hired if it had

not unlawfully discriminated against union adherents, it is

only reasonable for the Board to presume that the successor

would have hired a majority of union members and therefore

had an obligation from the outset to bargain with the union

rather than unilaterally setting the terms of employment.

Therefore, the Board's reasoning is consistent with the perfectly clear exception in Burns. The other cases upon which

Capital relies, Spruce Up Corp., 209 N.L.R.B. 194 (1974)

(interpreting the perfectly clear exception), enf'd mem. sub

nom. Stone and Webster Engineering Corp. v. NLRB, 510

F.2d 966 (4th Cir. 1975), and International Association of

Machinists and Aerospace Workers v. NLRB, 595 F.2d 664

(D.C. Cir. 1978) (approving the Board's reasoning in Spruce

Up), are inapposite because the successor employers there

did not discriminate against union adherents.

Second, Capital asserts that its case is unique because it

expressly offered employment to its predecessor's unionized

employees. That is true in form but not in substance, for as

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 14 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

we have seen Capital actively discouraged the Ogden employees from applying by telling them that it was not hiring union

members.

In sum, because Capital refused to hire the Ogden employees based upon anti-union animus, the Board properly presumed that absent discrimination Capital would have hired a

majority of union members, and therefore had a duty to

bargain with the Union. The Board also correctly held that

by refusing to hire union members, Capital lost its right to

set the initial terms and conditions of employment, and hence

violated ss 8(a)(1) and (5), when it nonetheless set wages and

working conditions without first bargaining with the union.

C. The Remedy

Capital's final argument is that the Board's remedy for its

violations--requiring it "to restore retroactively [the] preexisting terms and conditions of employment" set forth in the

CBA between Ogden and Local 32--is unlawful because it is a

penalty. We agree.

Preliminarily the Board contends that Capital waived this

argument by failing to raise it with sufficient specificity

before the Board. See 29 U.S.C. s 160(e); 29 C.F.R.

s 102.46(b)(1). Capital told the Board in its exceptions to the

decision of the ALJ that it objected "to the entire Remedy

... because ... there were no violations of the Act." That

broadside is sufficient in the circumstances of this case,

however, under the Board's regulation providing:

If a supporting brief is filed the exceptions document

shall not contain any argument or citation of authority in

support of the exceptions, but such matters shall be set

forth only in the brief.

29 C.F.R. s 102.46(b)(1). Capital clearly did make the present argument in its brief to the Board when it stated (among

other things) that

ordering Capital to institute the terms in effect under the

Ogden-Local 32 collective bargaining agreement would

not only be violative of Burns, but it would also be an

unlawful, punitive order at odds with the purposes of the

Act.

We think Capital complied with its obligations under both

the statute and the regulation when it alerted the Board in its

exceptions that it objected to the remedy and then stated its

specific reasoning in its brief to the Board. Certainly the

Board cannot contend that it lacked notice that Capital was

making this argument. See Consolidated Freightways v.

NLRB, 669 F.2d 790, 794 (D.C. Cir. 1981) ("[T]he critical

inquiry is whether the objections made before the Board were

adequate to put the Board on notice that the issue might be

pursued on appeal"). Accordingly, we hold that Capital did

not waive its objection to the Board's remedy.

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 15 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

As to the merits, we hold that the Board's remedy is

punitive and therefore unlawful. Section 10(c) of the Act

states that the Board may issue

an order requiring [a person who committed an unfair

labor practice] to cease and desist from such unfair labor

practice, and 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. s 160(c). The Supreme Court has more than once

indicated that the goal of the remedy is "to restore the

situation 'as nearly as possible, to that which would have

obtained but for the illegal discrimination.' " Sure-Tan, Inc.

v. NLRB, 467 U.S. 883, 900 (1984) (quoting Phelps Dodge

Corp. v. NLRB, 313 U.S. 177, 194 (1941)). That is, the

Board's remedy must be truly remedial and not punitive. See

NLRB v. Strong, 393 U.S. 357, 359 (1969); Republic Steel

Corp. v. NLRB, 311 U.S. 7, 10-12 (1940); Grondorf, Field,

Black & Co. v. NLRB, 107 F.3d 882, 888 (D.C. Cir. 1997).

More particularly, the Court has stated that "a backpay

remedy must be sufficiently tailored to expunge only the

actual, and not merely speculative, consequences of the unfair labor practices." Sure-Tan, Inc., 467 U.S. at 900 (emphases in original). Therefore, although a reviewing court

must give special respect to the Board's choice of remedy,

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 16 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

NLRB v. Gissel Packing Co., 395 U.S. 575, 612 n.32 (1969),

we must also be mindful

not [to] function simply as the Board's enforcement arm.

It is our responsibility to examine carefully both the

Board's findings and its reasoning, to assure that the

Board has considered the factors which are relevant to

its choice of remedy, selected a course which is remedial

rather than punitive, and chosen a remedy which can

fairly be said to effectuate the purposes of the Act.

Peoples Gas Sys., Inc. v. NLRB, 629 F.2d 35, 42 (D.C. Cir.

1980).

As we have seen (in Part II.B.1) the Board properly

concluded that Capital violated ss 8(a)(1) and (5) of the Act

by setting the initial terms of employment without first

bargaining with Local 32. As part of the remedy for this

violation the Board ordered Capital

to restore retroactively preexisting terms and conditions

of employment, including wage rates and benefit plans,

and make the employees whole by remitting all wages

and benefits that would have been paid absent such

unilateral changes from May 2, 1992, until [Capital]

negotiates in good faith with Local 32B-32J or to impasse.

The Board's rationale for this type of remedy appears in its

opinion in State Distributing Company:

[I]t is appropriate to calculate backpay on the basis of

the contractual rates paid by the predecessor (in other

words, the existing terms and conditions of employment)

because the successor's unlawful failure to recognize and

bargain with the union has left us without an adequate or

reasonable alternative basis for calculating what rates

would have been arrived at through lawful bargaining.

As noted above in connection with the uncertainties

regarding hiring, it is proper to resolve uncertainties

against the one whose unlawful acts have created those

uncertainties.

* * *

The remedy the Board has chosen has the drawback of

retroactively imposing on the [successor employer] terms

and conditions of employment that had been set by the

contract negotiated by its predecessor, but it has the

advantage of giving some recompense to the victims of

the discrimination and preventing the [successor employer] from enjoying a financial position that is quite possibly more advantageous than the one it would occupy had

it behaved lawfully. A remedy that allowed to stand the

reduced terms and conditions of employment that the

[successor employer] imposed unilaterally would give full

effect to the right of a Burns successor to set its own

terms, but this would quite possibly leave victims uncompensated and it would confer Burns rights on an employUSCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 17 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

er that has not conducted itself like a lawful Burns

successor because it has unlawfully blocked the process

by which the obligations and rights of such a successor

are incurred. A remedy such as the court suggested in

[Kallmann v. NLRB, 640 F.2d 1094, 1103 (9th Cir. 1981)

(holding that "an appropriate back pay remedy cannot

require Kallmann to pay the higher rate [in the predecessor's CBA] beyond a period allowing for a reasonable

time of bargaining" because "Kallmann would not have

agreed to union demands to pay the higher rate")] ... is

virtually impossible to calculate, and to the extent that it

involves imposing contractual terms based on this Agency's conjecture without an adequate factual basis, it

seems hardly preferable to imposing on the [successor

employer] the terms under which the [predecessor's]

employees had worked just before the [successor employer] took over the enterprise.

282 N.L.R.B. 1048, 1049 (1987).

We disagree with the Board's reasoning and conclude that

requiring Capital to reimburse the Ogden employees at the

rate set by the CBA between Ogden and Local 32 for the

entire period from the violation (May 2, 1992) until such

future time as Capital reaches a new agreement or an impasse with Local 32 is punitive rather than remedial. Preliminarily, we reject the Board's implicit assumption that, if

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 18 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Capital had not violated ss 8(a)(1) and (5) by unilaterally

setting the initial terms of employment, then it would have

agreed to the CBA into which its predecessor had entered.

Neither the "perfectly clear" exception in Burns nor the

Board's corollary thereto for cases (such as this) in which the

successor discriminates against union adherents requires that

the successor agree to the terms of the CBA between the

predecessor and the union; nor could they. See H.K. Porter

Co. v. NLRB, 397 U.S. 99, 102 (1970) (Board does not have

"power to compel a company ... to agree to any substantive

contractual provision" in a CBA). By engaging in anti-union

discrimination the successor loses only the right to set initial

terms without first bargaining with the union; it does not lose

the right to take an initial bargaining position with the union

and to bargain hard from that point. See 29 U.S.C. s 158(d)

(the obligation to bargain "does not compel either party to

agree to a proposal or require the making of a concession").

As the Ninth Circuit held in Kallmann:

Even though under the facts of this case [the successor

employer] had a duty to consult with the union before

unilaterally changing the terms of employment, as a

successor employer he had no obligation to accept his

predecessor's labor agreement.

640 F.2d at 1103; see also Burns, 406 U.S. at 284 ("[A]lthough successor employers may be bound to recognize and

bargain with the union, they are not bound by the substantive

provisions of a [CBA] negotiated by their predecessors but

not agreed to or assumed by them"); New Breed Leasing

Corp. v. NLRB, 111 F.3d 1460, 1470 (9th Cir. 1997) (O'Scannlain, J., dissenting) ("The [perfectly clear] exception only

imposes a duty on the successor to 'consult' with the union

before it sets the initial terms and conditions of employment.

The duty to consult however does not imply an obligation to

accept the old terms of employment"); U.S. Marine Corp.,

944 F.2d at 1329 (Easterbrook, J., dissenting) (same).

We conclude that in order to approximate what would have

occurred but for Capital's violation of the Act, and thus to

avoid penalizing Capital, the Board should have imposed upon

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 19 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Capital the terms of the prior CBA only for "a period

allowing for a reasonable time of bargaining." Kallmann,

640 F.2d at 1103. After a reasonable period of bargaining the

parties would either have negotiated a new wage rate or

reached impasse. No one can know with certainty what wage

Capital would have agreed to but the best evidence of the

wage it would have had to pay in order to get labor is the rate

it (through its subcontractor) actually paid the new employees

who did the work previously done by the Ogden employees.

A remedy based upon the wage actually paid makes more

sense than a remedy based upon the prior CBA wage because

there is no reason to believe that Capital would have agreed

to paying any more than it had to for labor; the Board's

alternative presumption that Capital would have agreed gratuitously to pay the higher CBA rate is unreasonable and, as

a result, punitive. Cf. U.S. Marine Corp., 944 F.2d at 1330

(Easterbrook, J., dissenting) ("The Board's rationale is unrelated to the anticipated (or actual) outcome of bargaining").

If the Board nonetheless believes that, owing to some special

circumstances, Capital in fact would have agreed in negotiations with the Union to pay a higher rate than it had to pay

for alternative labor, then the Board may, of course, put on

evidence to prove what the rate would have been.

Contrary to the Board's claim in State Distributing, our

understanding of the appropriate remedy does not give the

wrongdoing employer the right to set initial terms of employment: the remedial wage is still initially--and for the reasonable period during which the employer should have bargained

with the union--the rate in its predecessor's CBA. We

simply observe that in order realistically to approximate what

would have happened absent discrimination the Board must

take account of what actually did happen. Doing so focuses

the Board's efforts upon the only proper remedial goal,

namely, placing the employees in the situation they would

have enjoyed but for Capital's having unlawfully refused to

hire them.

We recognize that our view of the limitation s 10(c) places

upon the remedial authority of the Board in this type of case

conflicts with that of several other circuits. See New Breed

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 20 of 21
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Leasing Corp. v. NLRB, 111 F.3d 1460, 1467-69 (9th Cir.

1997); NLRB v. Staten Island Hotel Ltd. Partnership, 101

F.3d 858, 861-62 (2d Cir. 1996); U.S. Marine Corp. v. NLRB,

944 F.2d 1305, 1319-24 (7th Cir. 1991) (en banc); see also

Pace Indus., Inc. v. NLRB, 118 F.3d 585, 593-94 (8th Cir.

1997) (brief discussion); NLRB v. Horizons Hotel Corp., 49

F.2d 795, 806 (1st Cir. 1995) (same); Systems Management,

Inc. v. NLRB, 901 F.2d 297, 307-09 (3d Cir. 1990) (granting

enforcement of remedial order but suggesting that Board

might limit term of back-pay to time for bargaining to

impasse). Other courts, however, have taken an approach

similar to ours. See Armco, Inc. v. NLRB, 832 F.2d 357, 365

(6th Cir. 1987); Kallmann v. NLRB, 640 F.2d 1094, 1103 (9th

Cir. 1981); NLRB v. Dent, 534 F.2d 844, 846-47 (9th Cir.

1976); see also New Breed Leasing, 111 F.3d at 1469-72

(O'Scannlain, J., dissenting); U.S. Marine, 944 F.2d at 1327-

31 (Easterbrook, J., dissenting). As we see it, the alternative

adopted by the Board conflicts with two cardinal principles of

labor law: (1) an employer cannot be required to accept

contractual terms to which it did not agree, and (2) the

Board's remedial order must be just that--remedial--and not

punitive.

III. Conclusion

We hold that (1) there is substantial evidence in the record

supporting the Board's determination that Capital violated

ss 8(a)(1) and (3) of the Act by refusing to hire the Ogden

employees based upon their union membership; (2) as a

successor employer, Capital violated ss 8(a)(1) and (5) of the

Act by refusing to recognize and bargain with Local 32; and

(3) Capital again violated ss 8(a)(1) and (5) by setting initial

terms and conditions of employment before negotiating with

Local 32. We also hold that (4) the Board's remedy--

imposing upon Capital the terms of its predecessor's CBA

from the date of the violation until the conclusion of future

negotiations--is punitive and therefore invalid. We therefore

remand the case to the Board for further proceedings consistent with this opinion.

So ordered.

USCA Case #97-1170 Document #367545 Filed: 07/17/1998 Page 21 of 21