PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

PERFORMANCE FRICTION CORPORATION,

Petitioner,

v.

NATIONAL LABOR RELATIONS BOARD,

No. 95-3151

Respondent,

UNITED AUTOMOBILE, AEROSPACE &

AGRICULTURAL IMPLEMENT WORKERS,

AFL-CIO, CLC,

Intervenor.

NATIONAL LABOR RELATIONS BOARD,

Petitioner,

v.

PERFORMANCE FRICTION CORPORATION,

No. 96-1096

Respondent,

UNITED AUTOMOBILE, AEROSPACE &

AGRICULTURAL IMPLEMENT WORKERS,

AFL-CIO, CLC,

Intervenor.

On Petition for Review and Cross-application

for Enforcement of an Order

of the National Labor Relations Board.

(11-CA-16040)

Argued: March 6, 1997

Decided: June 30, 1997
Before WILKINSON, Chief Judge, LUTTIG, Circuit Judge,

and BLACK, Senior United States District Judge for the

District of Maryland, sitting by designation.

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Affirmed in part, reversed in part, and remanded by published opinion. Judge Luttig wrote the opinion, in which Chief Judge Wilkinson

and Senior Judge Black joined.

_________________________________________________________________

COUNSEL

ARGUED: William Lawrence Rikard, Jr., PARKER, POE, ADAMS

& BERNSTEIN, L.L.P., Charlotte, North Carolina, for Petitioner.

Robert James Englehart, NATIONAL LABOR RELATIONS

BOARD, Washington, D.C., for Respondent. Marcia Weil Borowski,

STANFORD, FAGAN & GIOLITO, Atlanta, Georgia, for Intervenor.

ON BRIEF: Keith M. Weddington, Stacy K. Weinberg, PARKER,

POE, ADAMS & BERNSTEIN, L.L.P., Charlotte, North Carolina,

for Petitioner. Frederick L. Feinstein, General Counsel, Linda Sher,

Associate General Counsel, Aileen A. Armstrong, Deputy Associate

General Counsel, Frederick C. Havard, Supervisory Attorney,

NATIONAL LABOR RELATIONS BOARD, Washington, D.C., for

Respondent. Stephen A. Yokich, INTERNATIONAL UNION, UAW,

Washington, D.C., for Intervenor.

_________________________________________________________________

OPINION

LUTTIG, Circuit Judge:

Petitioner Performance Friction Corporation appeals from the judgment and order of respondent National Labor Relations Board finding

that petitioner violated sections 8(a)(1) and (a)(3) of the National

Labor Relations Act, 29 U.S.C. § 158(a)(1),(3), by instituting a new

disciplinary system in order to discourage union activity and by discharging pro-union employees under that new system. For the reasons

 2
stated herein, we affirm the Board's conclusions of violation, but

remand for the Board to fashion a more narrowly tailored remedy.

I.

Performance Friction manufactures high-performance, nonasbestos automotive disk brake pads for major automotive manufacturers and for professional race car teams appearing in the Nascar

Winston Cup and Indianapolis 500. J.A. at 859. Since 1986, when

current owner and president Donald Burgoon acquired the company,

Performance Friction's workforce has grown rapidly, from approximately 25 employees in 1986, to 100 employees in 1989, and to

nearly 400 workers in 1994. J.A. at 731, 753, 859. Performance Friction attributes its growth to a commitment to quality which, according

to former employee and union activist Susan Hudson, was almost

fanatical, J.A. at 201; see also J.A. at 962. Over the course of this

period of growth, Performance Friction's annual turnover rate has

been high, the company discharging and replacing virtually its entire

workforce annually. J.A. at 378, 881.

In November 1993, several months before union activity at the

company began, Performance Friction put into place a new compensation plan designed to increase worker productivity. Under this plan,

employees were assigned to one of seven pre-defined pay levels.

From this pre-defined level, employees could advance by taking and

passing, at their own pace, certain job-related tests, rather than await

end-of-the-year evaluation. J.A. at 333-35, 452, 491-92. Shortly after

this plan was instituted, Performance Friction's"scrap rate" (the

monthly amount of scrap material as a percentage of total production,

J.A. at 353-54), improved from 10.9% in December 1993 to 4.2% in

April 1994, dropping to a low of 2.7% in October 1994. J.A. at 1055.

In early February 1994, the United Automobile, Aerospace, Agricultural Implement Workers of America (the "Union") began efforts

to unionize Performance Friction's 400-member workforce. Burgoon,

aided by Mike Ford, his assistant production manager and second-incommand of the company, opposed the Union through what it now

concedes were unlawful labor practices.1 

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1 Performance Friction, for example, does not challenge that it illegally

threatened employees that it would be futile for them to select

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Either shortly before or shortly after the unionization effort began,

the company implemented a new and more strict disciplinary system

which would make it easier for Performance Friction to discharge

employees. J.A. at 864. Under the old disciplinary system, an

employee would be suspended without pay for three days if he committed two major violations in 30 days, and would be discharged for

a third violation within the 30-day period. J.A. at 864. The new system, which was designed to operate in tandem with the new pay level

structure and advancement plan, eliminated the 3-day suspension and

allowed Performance Friction to discipline employees for committing

fewer violations over a longer period of time. Thus, an employee who

committed either two major violations in 90 days or three major violations in six months would be demoted one pay level, or, if he was

already at the lowest pay level, would be discharged. J.A. at 864.

It is not clear how many employees have been discharged under the

new disciplinary system since its institution. However, Performance

Friction had, between April 19, 1994, and the time this case was

heard by the administrative law judge in December 1994, discharged

a total of approximately 180 employees; and, according to its counsel,

the company has now terminated over 300 employees total. J.A. at

1102-05; Petitioner's Reply Br. at 10 n.3. Among the first individuals

discharged under the new disciplinary system were union activists

Martha Hinson, Jerry Kennedy, Merrie Rowe, Hayward Steele, and

Susan Hudson, and they were all discharged between April 19 and

May 24 of 1994. J.A. at 1103. In addition, union supporter Manuel

Mantecon was discharged on May 30 for not returning to work after

having been on medical leave. J.A. at 1102.

In response to these discharges, the Union commenced this litigation on May 23, 1994, initially claiming only that the six union activ-

_________________________________________________________________

the Union as their collective bargaining representative; impliedly

threatened to reduce wages if employees selected the Union to

represent them; interrogated employees about their union sympathies and activities, and the activities and sympathies of fellow

employees; solicited grievances from employees and expressly

or impliedly promised to remedy those grievances in order to

discourage union activities among employees.

J.A. at 884, 915.

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ists listed above had been illegally discharged. Later, however, after

discovering that other employees also had been discharged under the

new disciplinary system, the Union expanded its claims through a

second amended complaint, which charged as follows:

On or about 4-19-94, [Performance Friction] discriminatorily implemented a more [stringent] disciplinary policy in

order to discourage support for, and activities on behalf of

the union.

Pursuant to this unlawfully implemented disciplinary policy,

the employer discharged . . . [five of the six union activists

(excluding Mantecon), as well as Kyle Meyers, Leslie

Teague, Michael Thompson, Nedra Stewart, and Bernard

Young.]

The employer discharged [the six union activists] because of

their membership in, and/or activities on behalf of the union.

J.A. at 926.

At trial, Performance Friction moved to dismiss the claims of Meyers, Teague, Thompson, Stewart, and Young, on the ground that the

General Counsel presented no evidence at all regarding these individuals and, specifically, no evidence regarding their affiliation with or

sympathy for the Union. J.A. at 308. The administrative law judge

denied the motion, and, instead, permitted the General Counsel to

expand the charge yet further, so as also to allege company violations

against "all other unknown and unnamed people" discharged under

the new disciplinary system. J.A. at 314, 904 n.1. At the conclusion

of the hearing, the ALJ held for the General Counsel, finding, as modified by the Board, that Performance Friction had"instituted a new

and more strict disciplinary system in response to employee union

activity both to discourage such activity and to rid itself of Union

activists," J.A. at 884, and that, pursuant to this system, the company

had "discharged union activists and employees Martha Hinson, Merrie Rowe, Haywood Steele, Susan Hudson, Jerry Kennedy, Kyle

Meyers, Bernard Young, Leslie Teague and others," in violation of

sections 8(a)(1) and (3) of the National Labor Relations Act.2 J.A. at

_________________________________________________________________

2 Sections 8(a)(1) and (3) of the National Labor Relations Act provide

that

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902. The ALJ and Board also found that the company had discharged

Manuel Mantecon because of his union activities, in violation of the

Act, albeit not under the new system. J.A. at 902. 3

The Board ordered Performance Friction to "[c]ease and desist

from . . . [i]nstituting a new and stricter disciplinary system in

response to employee union activity to discourage such activity or to

rid itself of union activists," J.A. at 903, and, in addition, to not only

re-instate those named individuals as to whom the General Counsel

presented proof of unlawful discrimination, but to re-instate, with

backpay, all individuals who were discharged under the new disciplinary system. Thus, the Board ordered Performance Friction to take

the following "affirmative action":

(a) Rescind the new and stricter disciplinary system which

was instituted by [Performance Friction] in response to

employee union activity.

(b) Rescind any disciplinary action taken pursuant to the

stricter disciplinary system which system [Performance

Friction] instituted in response to employee union activity.

_________________________________________________________________

(a) It shall be an unfair labor practice for an employer --

(1) to interfere with, restrain, or coerce employees in the

exercise of the rights guaranteed in section 157 of this

title;

* * *

(3) 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 . . . .

29 U.S.C. § 158(a)(1),(3).

3 The Board omitted Michael Thompson and Nedra Stewart because the

record did not establish that they were discharged under the new disciplinary system. However, under the Board's order, the General Counsel

would have the opportunity, in the compliance stage of the litigation, to

establish that Thompson, Stewart, or any other employee, was discharged

under the new system, and hence, illegally. J.A. at 902 n.2.

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(c) Offer Manuel Mantecon, who was unlawfully discharged for engaging in union activities, and Martha Hinson, Merrie Rowe, Haywood Steele, Susan Hudson, Jerry

Kennedy, Kyle Meyers, Bernard Young, Leslie Teague, and

any other employee unlawfully discharged pursuant to the

new disciplinary system, immediate and full reinstatement

to their former jobs or, if those jobs no longer exist, to substantially equivalent positions, without prejudice to their

seniority or other rights and privileges; and to make them

whole with backpay . . . plus appropriate interest, for any

loss of earnings they may have suffered as a result of the

discrimination against them.

J.A. at 903. As to the unnamed individuals, Performance Friction

would have the opportunity, during the compliance phase of the litigation, to prove that they would have been discharged even under the

old disciplinary system; otherwise, Performance Friction was required

to re-instate them with backpay regardless of their union affiliation.

J.A. at 885, 902 n.2.

On appeal, Performance Friction first argues that the Board's findings that Performance Friction instituted the new disciplinary system

unlawfully and that it unlawfully discharged union activists under that

system and because of their union activity are not supported by "substantial evidence." Performance Friction argues, second, that the

Board's order, that Performance Friction rescind the new system and

re-hire all employees discharged under it, is overbroad.

II.

Notwithstanding Performance Friction's arguments to the contrary,

"substantial evidence," see McLean Trucking v. NLRB, 719 F.2d

1226, 1227 (4th Cir. 1983), supports the Board's conclusions that the

company unlawfully implemented its new disciplinary system on

April 19, 1994 -- shortly after the Union began organizing the company's workforce -- in order to discriminate against the Union and

union adherents, see NLRB v. Frigid Storage, 934 F.2d 506, 510 (4th

Cir. 1991) ("A new system for discipline violates the Act if implemented in retaliation for union activity."); see also Electri-Flex Co.

v. NLRB, 570 F.2d 1327, 1334 (7th Cir.), cert. denied, 439 U.S. 911

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(1978), and that the company then proceeded to use that system to

unlawfully discharge known union supporters Hinson, Kennedy,

Rowe, Steele, and Hudson. The Board's conclusion that Performance

Friction discharged Mantecon in violation of the National Labor Relations Act is likewise supported by substantial evidence.

Performance Friction's assertion that it implemented the new disciplinary system in November 1993 (before the arrival of the Union and

therefore independent of any union activity), at the same time it

implemented its new compensation system, is belied by considerable

evidence. First, Mike Ford himself testified in sworn affidavit that the

new disciplinary system had been implemented in April 1994. J.A. at

977. Although Ford later recanted that testimony at trial, J.A. at 72,

we cannot say that the Board erred in crediting Ford's sworn affidavit

over his eleventh hour recantation. Moreover, Ford's affidavit testimony was corroborated by the fact that, as the administrative law

judge found, between November 1, 1993 and April 19, 1994, "[n]o

fewer than 11 instances of discipline were issued . . . not only on

forms used under the old system, but clearly utilizing the rules of the

old system," J.A. at 868. For example, on January 19, 1994, an

employee named Jerry Wright was charged with a "minor" violation

for failing to properly complete quality paperwork, J.A. at 1360, even

though under the new disciplinary system that violation would have

been categorized as "major," J.A. at 964. Furthermore, prior to April

1994, the handbooks that Performance Friction distributed to new

employees still included the rules for the old disciplinary system. J.A.

at 161.

Substantial evidence also supports the Board's finding that Performance Friction used this new system to discourage union activity and

thin its ranks of union activists by unlawfully discharging Hinson,

Kennedy, Rowe, Steele, and Hudson. Performance Friction does not

contest that, as to all of these individuals except Steele, it was fully

aware of their pro-union sentiments. See Goldtex Inc. v. NLRB, 14

F.3d 1008, 1011 (4th Cir. 1994) (describing "the most basic element

of an unlawful discharge -- namely, that the employer [be] aware of

the discharged employee's protected activities."); see also J.A. at 277-

78, 364, 377, 797-99. And the Board could have inferred that Burgoon and Ford were aware that Steele, too, was pro-Union, from the

fact that Steele's supervisor knew of his pro-union sentiments, J.A. at

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88-91, and that Steele reported to the police that he had witnessed

Burgoon and Ford nearly run over two Union activists with their

truck, J.A. at 93. Moreover, all of these individuals were among the

very first employees disciplined and discharged under the new system, and each of their discharges were for questionable violations of

company policy. Hinson was discharged for violating the seldomenforced rule of not wearing safety glasses. J.A. at 138. Rowe was

discharged after missing work because she could not find a babysitter

to care for her child, even though other employees were permitted to

miss work under similar circumstances. J.A. at 284-85. Hudson was

disciplined for making a defective product, even though she had earlier been commended for spotting the defect in that very product, and

notwithstanding the fact that she was operating a malfunctioning

machine. J.A. at 182-84. Steele, who was discharged just one week

after reporting the truck incident to the police, J.A. at 94, was cited

for completing faulty paperwork; however, unlike with past instances,

Steele's supervisor refused to show him the alleged errors. J.A. at

101-02. Finally, although the evidence against Kennedy was the

weakest, even there, Kennedy was issued a violation for missing Saturday work where he himself did not actually sign up for it, but,

rather, was signed up for it by his supervisor. J.A. at 593-94.

Similarly, although Mantecon was not discharged under the new

disciplinary system, substantial evidence supports the Board's conclusion that he, too, was fired in retaliation for his pro-Union activities.

As with the others, Performance Friction was aware that Mantecon

was actively pro-Union, J.A. at 798, and it discharged him under

suspicious circumstances. When Mantecon returned to work after an

authorized sick leave, the company told him that he had been discharged over three weeks earlier on May 4, 1994, J.A. at 251, even

though his authorized period of convalescence did not end until May

18, J.A. at 969, and notwithstanding the fact that several company

documents indicate that he was discharged on May 30, J.A. at 965,

1102.

We therefore affirm the Board's findings that Performance Friction

implemented the new disciplinary system in order to discourage union

activity and rid itself of union activists, and that the company then

proceeded to discharge certain known union activists pursuant to that

system and/or in retaliation for their pro-union activities.

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III.

Although the Board did not err in determining that Performance

Friction violated sections 8(a)(1) and (a)(3) of the Act, we believe the

Board did exceed its remedial authority when it ordered Performance

Friction to cease and desist from enforcing, and actually rescind, the

new disciplinary system, and to reinstate with backpay all employees

who had been discharged under that system, whether or not anti-union

animus underlay their discharges.

Although the Board's remedial power is broad, encompassing the

power to order "such affirmative action including reinstatement of

employees with or without back pay, as will effectuate the policies"

of the Act, 29 U.S.C. § 160(c); see also NLRB v. Williams

Enterprises, 50 F.3d 1280, 1289 (4th Cir. 1995), that broad authority

is not without "limitations." See, e.g., Ultrasystems Western

Constructors v. NLRB, 18 F.3d 251, 258 (4th Cir. 1994); cf. Sure-Tan

Inc. v. NLRB, 467 U.S. 883, 900 (1984). Among those limitations, an

"order . . . must . . . be congruent with the scope of discrimination,

so that its enforcement neutralizes the discrimination, and does not go

beyond." Ultrasystems, 18 F.3d at 259.

Here, the Board's order that the company permanently rescind its

disciplinary policy and rehire all employees discharged under that

policy exceeds the scope of the Board's remedial authority. That an

employer may have instituted a broad business plan out of anti-union

animus simply does not ipso facto establish that the enforcement of

the provisions of that plan thereafter constitutes anti-union discrimination. In other words, it does not follow from the fact that a company

adopts a particular policy out of impermissible motives, that its application of that policy in all instances will have the impermissible discriminatory effects reached by the Act. This is to say, of course, no

more than that a policy or plan may be instituted for prohibited reasons (and therefore run afoul of the Act's proscriptions) yet be both

facially neutral and enforced nondiscriminatorily.

Accordingly, an order like that entered by the Board in this case,

which essentially presumes discrimination by the company in its discharges under a facially neutral business plan, exceeds even the

Board's concededly broad remedial authority. It is only slight hyper-

 10
bole that such an order is the equivalent of a hostile government

takeover of a company through administrative agency regulation.

Were we to place our imprimatur on such an order, we would in effect

be acquiescing in the Board's substitution of its own "business judgment" for the employer's legitimate business judgment, in contravention of our established precedent that, "[w]here . . . there is no

evidence that the company discharged particular employees in order

to discourage union membership or activities, the company is entitled

to its own assessment of an employee's worth, an assessment which

must be respected by the Board." Goldtex Inc. , 14 F.3d at 1012; see

also NLRB v. Wright-Line, 662 F.2d 899, 903 (1st Cir.), cert. denied,

455 U.S. 989 (1982) (warning against restricting an"employer's freedom to apply legitimate performance standards").

Indeed, this case is paradigmatic of the perniciousness of such an

overly broad remedial order. There is absolutely no evidence that any

individual other than the five known Union activists discharged under

the new disciplinary system, was so discharged because of his union

affiliation or sympathies. The evidence does not even reveal whether

the unknown individuals whom the Board has ordered the company

to rehire were pro-Union, ambivalent towards the Union, or ardent

opponents of the Union. Yet, the Board order requires Performance

Friction not only to rehire with backpay all of these identified and

unidentified individuals, but also to rescind the company's entire personnel disciplinary system, a system which the Board does not even

suggest facially discriminates against pro-union employees, and as to

which no finding of discriminatory application has been made beyond

the five individual instances which occurred in the one-month period.

The folly of such an order is borne out by the NLRB counsel's

acknowledgment at argument that Performance Friction could rescind

its "unlawful" disciplinary policy on one day and lawfully reimplement the exact same plan the next day, provided that the company satisfies the Board that it has been purged of its malevolence

toward the union.

In recognizing that the Board exceeds the outer limits of its authority when issuing orders of the type at issue here, we are not alone

among our sister circuits. In two cases directly analogous to the case

sub judice, for example, the District of Columbia Circuit similarly

vacated the Board's remedial orders and remanded with instructions

 11
to tailor the orders more narrowly so as not to prohibit lawful

employer activity. See McGraw-Edison Co. v. NLRB, 533 F.2d 1266,

1268-69 (D.C. Cir. 1976); Gold Coast Restaurant v. NLRB, 995 F.2d

257, 268-69 (D.C. Cir. 1993). In those cases, the Board concluded,

and the court affirmed, that the companies had unlawfully instituted

disciplinary and warning systems in order to discriminate against the

unions, see 533 F.2d at 1268; 995 F.2d at 267-68, just as we have

concluded here that substantial evidence supports the Board's conclusion that Performance Friction instituted its disciplinary system in

order to discriminate against the Union. In each of these cases, the

District of Columbia Circuit held that the Board's remedies -- which

required the companies inter alia to cease and desist from "[o]rdering

supervisors to issue written warnings to employees suspected of

engaging in union activities," 533 F.2d at 1266-67 n.1, and "instituting a formal written warning system because its employees engaged

in activities on behalf of the Union," 995 F.2d at 268 -- were overbroad because they "[caught] within [their] sweep not only prohibited

conduct such as that which formed the basis for the finding of unfair

labor practices here, but a number of otherwise valid management

practices." 533 F.2d at 1268. As a consequence of the overbreadth of

the Board's orders, the court reasoned, the employers would have

been prevented "from making future changes in[their] disciplinary

system[s] in a non-retaliatory fashion," 995 F.2d at 268, and "prohibit[ed] [from issuing] written warning[s] and [taking] numerous other

supervisory actions which have no relation to union activity," see 533

F.2d at 1269.

In both McGraw-Edison and Gold Coast Restaurant, the court

required the Board to amend its orders in precisely the way that we

require the Board to modify its orders herein. The court required the

Board to refashion its orders so that the employers could take any of

the actions prohibited by the Board's original orders, provided that

the actions were taken for legitimate business purposes unrelated to

the employees' union activities; that is, so that the orders "recognize[d] the area in which the company [could] properly operate" free

from agency interference. See McGraw-Edison, 533 F.2d at 1269.

Thus, in McGraw-Edison, the court required the Board to modify

its order that the employer cease and desist from"[o]rdering supervisors to issue written warnings to employees suspected of engaging in

 12
union activities," so as to include an exception "for good cause unrelated to union activity"; its order to cease and desist from

"[m]aintaining surveillance over employees suspected of engaging in

union activities," so as to include the same exception; its order to

cease and desist from "[i]ssuing permanent written warnings, contrary

to past plant practice, to union sympathizers when suspected of

engaging in union activities," so as to allow the company to "change

its practice[s] . . . upon proper notice and for reasons unrelated to

union activity"; its order to cease and desist from "[o]therwise threatening union sympathizers with discharge for engaging in union activities," so as not to prevent the company from"threaten[ing]

[employees] with or actually discharg[ing] [them] for good cause

unrelated to union activity"; and, most significantly for purposes of

the case before us, its order to cease and desist from "[t]ightening up

enforcement of plant rules in order to discourage union activities

among its employees," so as to respect the company's right to

"tighten up" enforcement of plant rules "for reasons unrelated to

union activity." See 533 F.2d at 1269 n.8.

In Gold Coast Restaurant, the court similarly directed the Board to

modify its order restraining the employer from "instituting a formal

written warning system because its employees engaged in activities

on behalf of the Union," so as only to prohibit the employer from

instituting such a warning system "in order to harass, intimidate or

retaliate against employees engaged in union activities", and its order

to cease and desist from "issuing written warnings to its employees

pursuant to the written warning system," so as only to prohibit the

employer from issuing such warnings "in order to harass, intimidate

or retaliate against employees engaged in union activities." See 995

F.2d at 263, 267, 269.

In accord with these authorities, and for the reasons explained, we

likewise vacate the Board's remedial order in this case and remand

with directions to the Board to modify its order against Performance

Friction so as to permit the company to retain in effect its disciplinary

policy implemented on April 19, 1994, unless substantial evidence

develops that that policy is being enforced in a manner discriminatory

toward the Union or the company's pro-union employees. Additionally, the Board's revised order should not require the company to reinstate with backpay, Kyle Meyers, Bernard Young, Leslie Teague,

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Michael Thompson, and Nedra Stewart, or any other employee except

those discussed in Part II supra, until such time as it is proven that

their discharges were the consequence of their pro-Union affiliation

or sentiments.

The judgment of the Board is affirmed in part and reversed in part,

and the case is remanded with instructions to fashion a remedial order

consistent with this opinion and with the powers conferred upon the

Board.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED 

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