Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-10-01355/USCOURTS-caDC-10-01355-0/pdf.json

Parties Involved:
E.I. Du Pont De Nemours and Company
Respondent
National Labor Relations Board
Petitioner

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 19, 2011 Decided June 8, 2012

No. 10-1300

E.I. DU PONT DE NEMOURS AND COMPANY,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

UNITED STEEL, PAPER AND FORESTRY, RUBBER,

MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE 

WORKERS INTERNATIONAL UNION,

INTERVENOR

Consolidated with 10-1301, 10-1353, 10-1355

On Petitions for Review and Cross-Applications for 

Enforcement 

of Orders of the National Labor Relations Board

Steven W. Suflas, argued the cause for petitioner. With 

him on the briefs were Denise M. Keyser, Mark L. Keenan, 

and Brennan W. Bolt. Donna D. Page entered an appearance.

MacKenzie Fillow, Attorney, National Labor Relations 

Board, argued the cause for respondent. With her on the brief 

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 1 of 13
2

were John H. Ferguson, Associate General Counsel, Linda 

Dreeben, Deputy Associate General Counsel, and Robert J. 

Englehart, Supervisory Attorney. Daniel A. Blitz, Attorney, 

entered an appearance.

Matthew J. Ginsburg, argued the cause for intervenor. 

On the brief were Richard J. Brean, Daniel M. Kovalik, and 

James B. Coppess. Mariana L. Padias entered an appearance.

Before: GINSBURG,

* Circuit Judge, and EDWARDS and 

RANDOLPH, Senior Circuit Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

Opinion concurring in part and concurring in the 

judgment filed by Senior Circuit Judge RANDOLPH.

GINSBURG, Circuit Judge: The National Labor 

Relations Board held E.I. Du Pont de Nemours & Co. 

engaged in an unfair labor practice by unilaterally 

implementing changes to its employee benefits program while 

it was between collective bargaining agreements with two 

local unions. Because the Board departed, without giving a 

reasoned justification, from its precedent allowing an 

employer unilaterally to change wages, hours, or working 

conditions when doing so is in keeping with the employer’s 

past practice, we grant Du Pont’s petitions for review of the 

Board’s order and deny the Board’s cross-applications for 

enforcement.

 * As of the date the opinion was published, Judge Ginsburg 

had taken senior status.

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 2 of 13
3

I. Background

Du Pont offers its employees a package of benefits it 

calls Beneflex, of which the Beneflex Medical component has 

an open enrollment period each Autumn. The plan documents 

for Beneflex and for Beneflex Medical contain the following 

reservation of rights clause:

The Company reserves the sole right to change or 

discontinue this Plan in its discretion provided, 

however, that any change in price or level of coverage 

shall be announced at the time of annual enrollment 

and shall not be changed during a Plan Year unless 

coverage provided by an independent, third-party 

provider is significantly curtailed or decreased during 

the Plan Year.

Du Pont has made changes to Beneflex at the time of 

enrollment each year since at least 1996. Changes to the 

program have included increases in the premiums for medical, 

life, vision, and dental insurance, changes in coverage, and 

the addition and elimination of plan options. These changes 

to Beneflex applied to employees at all Du Pont facilities, to 

union and non-union employees alike.

Du Pont had collective bargaining agreements (CBAs) 

with the local unions at the Company’s production facilities in 

Louisville, Kentucky and Edgemoor, Delaware. Each CBA 

provided for employees to participate in Beneflex “subject to 

all terms and conditions” of the plan. The Beneflex plan 

documents, in turn, contained the reservation of rights clause. 

Until the CBAs at the two locations expired in 2002 and 2004 

respectively, Du Pont had made annual changes to Beneflex 

without bargaining and without objection from the unions. 

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 3 of 13
4

When the CBAs expired, Du Pont and the unions were 

negotiating successor labor contracts but had not reached an 

agreement at either facility. Du Pont then implemented 

changes to Beneflex in anticipation of the annual enrollment 

period, as it had done in previous years.

The Board held Du Pont violated Sections 8(a)(1) and 

8(a)(5) of the National Labor Relations Act by making 

unilateral changes to Beneflex during ongoing negotiations 

with the unions. It found Du Pont had never before made 

changes to Beneflex between the expiration of one and the 

negotiation of another CBA, and therefore had not established 

a past practice justifying its unilateral changes to Beneflex 

during such a hiatus. Du Pont petitioned for review of the 

Order and the Board cross-applied for enforcement.

II. Analysis

We will uphold a decision of the Board unless it relied 

upon findings that are not supported by substantial evidence, 

failed to apply the proper legal standard, or departed from its 

precedent without providing a reasoned justification for doing 

so. S & F Mkt. St. Healthcare LLC v. NLRB, 570 F.3d 354, 

358 (D.C. Cir. 2009). Section 8(a)(5) of the Act makes it an 

unfair labor practice for an employer to “refuse to bargain 

collectively with the representatives of his employees,” 29 

U.S.C. § 158(a)(5). An “employer’s unilateral change in 

conditions of employment under negotiation is ... a violation 

of § 8(a)(5), for it is a circumvention of the duty to negotiate 

which frustrates the objectives of § 8(a)(5) much as does a flat 

refusal” to bargain. NLRB v. Katz, 369 U.S. 736, 743 (1962);

see Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 198 

(1991) (“it is difficult to bargain if, during negotiations, an 

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 4 of 13
5

employer is free to alter the very terms and conditions that are 

the subject of those negotiations”).

Under Katz, an employer unilaterally may implement 

changes “in line with [its] long-standing practice” because 

such changes amount to “a mere continuation of the status 

quo.” 369 U.S. at 746; see Courier-Journal, 342 N.L.R.B.

1093, 1094 (2004) (“a unilateral change made pursuant to a 

longstanding practice is essentially a continuation of the status 

quo – not a violation of Section (a)(5)”). The purpose of 

prohibiting unilateral changes is not advanced by freezing in 

place the terms of employment when doing so disrupts the 

established practice for making changes. For this reason, an 

employer may lawfully change the terms of employment 

pursuant to such an established practice. There are, however, 

limits to the scope of the unilateral changes an employer may 

lawfully make during negotiations. More specifically, the Act 

does not permit a unilateral change “informed by a large 

measure of discretion” because “[t]here simply is no way in 

such [a] case ... to know whether or not there has been a 

substantial departure from past practice.” Katz, 369 U.S. at 

746.

The Board has previously approved extensive unilateral 

changes to health care benefit programs during a hiatus 

between CBAs when doing so was the established practice 

and the changes were within an acceptable degree of 

discretion. Thus, in Post-Tribune Co., the Board held it was 

not unlawful for an employer unilaterally to increase 

employees’ required contributions to health care premiums 

because the employer “had a consistent, established past 

practice of allocating health insurance premiums” between 

itself and its employees at a fixed ratio. 337 N.L.R.B. 1279, 

1280 (2002). In Courier-Journal, the Board again approved 

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 5 of 13
6

an increase in the health insurance premium to be paid by 

employees together with “a number of more far-reaching 

changes in the healthcare insurance benefits.” 342 N.L.R.B.

at 1093. There the expired CBA contained a clause providing 

the employer “reserves the right to modify or terminate any 

(or all) benefits ... at any time.” Id. at 1093. After the CBA 

expired, the employer 

changed the amount of employee contributions to 

healthcare premiums; modified the framework for 

determining employee contribution levels; switched 

from an insurance ‘plan year’ starting on July 1 to a 

plan year starting on January 1; introduced separate 

vision and dental coverage plans; terminated the 

bonuses paid to employees who chose to waive the 

[employer’s] healthcare insurance; and substituted two 

plans with [one insurer] for the plans the [employer] 

had previously offered with [other insurers]. 

Id. at 1099. Under the Board’s precedent, therefore, even 

making broad changes to a benefits package can qualify as “a 

well-established past practice” that an employer may lawfully 

continue during a hiatus period. Id. at 1094.

Du Pont first argues the unilateral changes it made to 

Beneflex while negotiating with the unions were lawful 

because they were in line with the Company’s established 

practice. The Board responds that the Company’s practice 

arose pursuant to a management rights clause in the expired 

contracts, and therefore does not justify the unilateral changes 

Du Pont made after the expiration of those contracts. Du Pont 

also argues the changes were “covered by” the expired CBAs, 

a position the Board rejects on the ground the “covered by 

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 6 of 13
7

contract” doctrine applies only if the contract is in effect when 

the employer makes a change.

We hold Du Pont, by making unilateral changes to 

Beneflex after the expiration of the CBAs, maintained the 

status quo expressed in the Company’s past practice; those 

changes were therefore lawful under Courier-Journal. While 

the CBAs were in effect, Du Pont annually made unilateral 

changes to the package of benefits offered under Beneflex, 

including changes to the premiums the employees paid and to 

the benefits they received. Du Pont made the unilateral 

changes in dispute here after the CBAs had expired, but those 

changes were similar in scope to those it had made in prior 

years. Du Pont’s discretion in making those changes was 

limited by the terms of the reservation of rights clause in the 

Beneflex plan documents, which permitted changes during —

and only during — the annual enrollment period. Moreover, 

here as in Courier-Journal, the employer was obligated under 

its past practice to “treat the [union] employees exactly the 

same as [the non-union] employees,” and so the employer’s 

“discretion was limited” because it “did not have the freedom 

to grant [non-union] employees a benefit and deny same to 

[union] employees.” 342 N.L.R.B. at 1094. Under the 

Board’s precedent, therefore, Du Pont’s making annual 

changes to Beneflex became a term and condition of 

employment the Company could lawfully continue during the 

annual enrollment period, irrespective of whether negotiations 

for successor contracts were then on-going.

The Board concluded Du Pont violated the Act because it 

failed to show “relevant past practice under the CourierJournal cases - annual unilateral changes during hiatus 

periods.” E.I. Du Pont De Nemours, Louisville Works, 355

N.L.R.B. No. 176, at 2 (Aug. 27, 2010). The Board 

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 7 of 13
8

distinguished Courier-Journal on the ground that the 

employer there had “established a past practice of making 

[health care premium] changes both during periods when the 

contract was in effect and during hiatus periods” whereas Du 

Pont has made uncontested unilateral changes to Beneflex 

only while CBAs were in effect. Id. The Board emphasized 

the importance of this “factual distinction” as follows: 

Extending the Courier-Journal decisions to the 

situation presented here would conflict with settled 

law that a management-rights clause does not survive 

the expiration of the contract ... and does not constitute 

a term and condition of employment that the employer 

must continue following contract expiration.

Id.

Be that as it may, whether a management-rights clause 

survives the expiration of the contract is beside the point Du 

Pont is making. The Board has previously recognized that the 

lawfulness of a change in working conditions made after the 

CBA has expired depends not upon “whether a contractual 

waiver of the right to bargain survives the expiration of the 

contract” but rather upon whether the change “is grounded in 

past practice, and the continuance thereof.” Courier-Journal, 

342 N.L.R.B. at 1095. The Sixth Circuit captured the point 

precisely in Beverly Health and Rehabilitation Services, Inc. 

v. NLRB, 297 F.3d 468, 481 (2002): “[I]t is the actual past 

practice of unilateral activity under the management-rights 

clause of the CBA, and not the existence of the managementrights clause itself, that allows the employer's past practice of 

unilateral change to survive the termination of the contract.” 

A subsequent Board decision unambiguously incorporates 

that teaching: “[T]he mere fact that the past practice was 

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 8 of 13
9

developed under a now-expired contract does not gainsay the 

existence of the past practice.” Capitol Ford, 343 N.L.R.B.

1058, 1058 n.3 (2004). Therefore, although the employer 

“cannot rely upon the management rights clause of that 

contract to justify unilateral action,” the “past practice is not 

dependent on the continued existence of the [expired] 

collective-bargaining agreement.” Id.

Because an employer may make unilateral changes 

insofar as doing so is but a continuation of its past practice, 

we see no reason it should matter whether that past practice 

first arose under a CBA that has since expired. Nor did the 

Board in Capitol Ford, where it upheld as lawful the 

employer’s unilateral changes to employee compensation and 

paid holidays on the basis of an established practice even 

though the employer (and its predecessor) had never before 

made such changes when a CBA was not in force. 343 

N.L.R.B. at 1058. The Board has not offered any reason 

whatsoever for thinking a unilateral action being taken during 

a hiatus period, although expressly deemed immaterial in 

Capitol Ford, should be dispositive in this case. Indeed, the 

Board did not so much as cite Capitol Ford or Beverly Health 

& Rehabilitation Services, Inc., 346 N.L.R.B. 1319 (2006), 

where the Board again said that “without regard to whether 

the management-rights clause survived, the [employer] would 

be privileged to have made the unilateral changes at issue if 

[its] conduct was consistent with a pattern of frequent 

exercise of its right to make unilateral changes during the 

term of the contract,” id. at 319 n.5. Although the Board had 

in several earlier cases held unilateral changes made pursuant 

to a past practice developed under an expired managementrights clause were unlawful, see Beverly Health & Rehab. 

Servs., 335 N.L.R.B. 635, 636-37 (2001); Guard Publ’g Co., 

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 9 of 13
10

339 N.L.R.B. 353, 355-56 (2003), the Board clearly took a 

different position in its more recent decisions.

Accordingly, we hold the Board failed to give a reasoned 

justification for departing from its precedent. On remand, the 

Board must either conform to its precedent in Capitol Ford 

and in the 2006 iteration of Beverly Health Services or explain 

its return to the rule it followed in its earlier decisions. See 

Manhattan Ctr. Studios, Inc. v. NLRB, 452 F.3d 813, 816 

(D.C. Cir. 2010) (“If we conclude that the Board misapplied 

or deviated from its precedent, we often remand with 

instructions to remedy the misapplication [or] deviation”).*

III. Conclusion

For the reason set out above, Du Pont’s petitions for 

review are granted and the Board’s cross-applications for 

enforcement are denied. We remand the case to the Board for 

further proceedings consistent with this opinion.

So ordered.

 * Because we grant the petitions for review on this ground, we 

do not reach Du Pont’s alternative argument that the changes were

“covered by” the expired CBAs.

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 10 of 13
RANDOLPH, Senior Circuit Judge, concurring in part and

concurring in the judgment: When the National Labor Relations

Board deviates from precedent without “offer[ing] any reason

whatsoever for” doing so, Maj. Op. at 9, its action is “arbitrary

and capricious” under § 706(2) of the Administrative Procedure

Act, 5 U.S.C. § 706(2).1 In such cases, the APA instructs

reviewing courts to “hold unlawful and set aside” such “agency

action.” Id. (emphasis added). Despite this command, many of

our NLRB decisions simply remand to the Board for further

proceedings without requiring anything to be “set aside.” See,

e.g., Manhattan Ctr. Studios, Inc. v. NLRB, 452 F.3d 813, 821

(D.C. Cir. 2006) (per curiam); LeMoyne-Owen Coll. v. NLRB,

357 F.3d 55, 61 (D.C. Cir. 2004); Randell Warehouse, 252 F.3d

at 448-49; Brusco Tug & Barge Co. v. NLRB, 247 F.3d 273, 278

(D.C. Cir. 2001); Lee Lumber & Bldg. Material Corp. v. NLRB,

1

 Although we did not decide whether the APA applies to

judicial review of Board orders in Diamond Walnut Growers, Inc. v.

NLRB, 113 F.3d 1259, 1266 (D.C. Cir. 1997) (en banc), later cases

make clear that it does. See, e.g., NLRB v. Ky. River Cmty. Care, Inc.,

532 U.S. 706, 712 (2001); Allentown Mack Sales & Serv., Inc. v.

NLRB, 522 U.S. 359, 374 (1998); Pirlott v. NLRB, 522 F.3d 423, 432

(D.C. Cir. 2008); W & M Props. of Conn., Inc. v. NLRB, 514 F.3d

1341, 1348 (D.C. Cir. 2008); Tasty Baking Co. v. NLRB, 254 F.3d

114, 123 (D.C. Cir. 2001); Randell Warehouse of Ariz., Inc. v. NLRB,

252 F.3d 445, 449 (D.C. Cir. 2001); Willamette Indus., Inc. v. NLRB,

144 F.3d 877, 880 (D.C. Cir. 1998); see also NLRB v. Curtin

Matheson Scientific, Inc., 494 U.S. 775, 803-04 (1990) (Scalia, J.,

dissenting). This makes sense given that the APA applies to final

agency actions “except to the extent that statutes preclude judicial

review, or agency action is committed to agency discretion by law.”

5 U.S.C. § 701(a)(1) & (2); see also ATTORNEY GENERAL’S MANUAL

ON THE ADMINISTRATIVE PROCEDURE ACT 9 (1947) (“The

Administrative Procedure Act applies, with certain exceptions [not

relevant here], to every agency and authority of the Government.”

(emphasis added)); id. at 15, 98 (indicating that the APA applies to

Board orders). There are no such limitations in the National Labor

Relations Act.

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 11 of 13
2

117 F.3d 1454, 1460 (D.C. Cir. 1997) (per curiam); Gen.

Electric Co. v. NLRB, 117 F.3d 627, 636 (D.C. Cir. 1997).

It is easy to see why we remand: to give the Board another

chance to explain “apparent departures from precedent.” Gen.

Electric, 117 F.3d at 636. Less clear is why remand-only is a

proper disposition in view of § 706(2)’s command that the court

“set aside” the unlawful agency action. One explanation is that

the court simply has not given any particular thought to this

remedial wrinkle. There is some evidence to support this theory.

In other failure-to-explain cases, we have vacated the Board’s

order in addition to remanding. See, e.g., Trump Plaza Assocs.

v. NLRB, No. 10-1412, 2012 WL 1654939, at *3, 7 (D.C. Cir.

May 11, 2012); Nathan Katz Realty, LLC v. NLRB, 251 F.3d

981, 993 (D.C. Cir. 2001); Bufco Corp. v. NLRB, 147 F.3d 964,

971 (D.C. Cir. 1998); Teamsters Local Union Nos. 822 & 592

v. NLRB, 956 F.2d 317, 321 (D.C. Cir. 1992); see also Pirlott,

522 F.3d at 432. Yet there is no difference between these

decisions and those in which the court seems to order only a

remand. No opinion of our court has ever tried to reconcile the

two lines of cases or even recognized the split.

I explained in Comcast Corp. v. FCC, 579 F.3d 1, 10 (D.C.

Cir. 2009) (Randolph, J., concurring), and Checkosky v. SEC, 23

F.3d 452, 491 (D.C. Cir. 1994) (separate opinion of Randolph,

J.), why courts holding an administrative rule or order unlawful

must vacate the offending agency action in light of APA §

706(2). But orders of the National Labor Relations Board are

somewhat unique. Unlike the orders of other administrative

agencies, Board orders are not self-executing. “A party can . .

. violate the order with impunity. To put teeth into one of its

orders the Board must persuade a court of appeals to enforce the

order – in effect, to issue an injunction commanding obedience

. . ..” NLRB v. Thill, Inc., 980 F.2d 1137, 1142 (7th Cir. 1992);

see also Mitchellace, Inc. v. NLRB, 90 F.3d 1150, 1159 (6th Cir.

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 12 of 13
3

1996); NLRB v. Long Island Coll. Hosp., 20 F.3d 76, 82 (2d Cir.

1994); ROBERT A. GORMAN & MATTHEW W. FINKIN, BASIC

TEXT ON LABOR LAW 14 (2d ed. 2004). One may therefore say

that when a court grants a petition for review and denies the

Board’s cross-application for enforcement of its order (its

“agency action”), there effectively is nothing left to set aside.

There is no agency action that commands, dictates, or requires.

Unlike a remand-only disposition in other areas of the law, no

party is required to comply with the unlawful order while the

Board reconsiders the matter on remand. The court’s judgment

enforcing the Board’s order, and only that judgment, mandates

obedience. In the limited universe of the National Labor

Relations Act, therefore, the grant of a petition for review and

the denial of a cross-application for enforcement may be viewed

as the equivalent of setting aside the Board’s order. Or one may

say that in such cases the court’s failure to vacate the Board’s

order constitutes harmless error.

Still, it is more tidy and certainly more in keeping with the

APA to vacate unlawful orders when we remand cases to the

Board. I therefore would vacate the Board’s order before

remanding.

USCA Case #10-1355 Document #1377716 Filed: 06/08/2012 Page 13 of 13