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LABOR BOARD v. AMERICAN INS. CO.
1. Under the National Labor Relations Act, as amended, the National Labor Relations Board may not, either directly or indirectly, compel concessions or otherwise sit in judgment upon the substantive terms of collective bargaining agreements. Pp. 401-404.
2. It is not per se an "unfair labor practice" under 8 (a) (1) or (5) of the Act for an employer to bargain for the inclusion in a collective bargaining agreement of a "management functions clause" providing that the right to select, hire, promote, discharge, demote or discipline for cause and to determine the schedules of work, is a prerogative of management on which the employer's final decision shall not be subject to arbitration. Pp. 404-409.
(a) The Act does not empower the Board to disrupt common collective bargaining practices by forbidding employers to bargain for flexible treatment of such matters and by requiring them to include in labor agreements provisions establishing fixed standards for work schedules or any other condition of employment. P. 408.
(b) The duty to bargain collectively is to be enforced by application of the good-faith bargaining standards of 8 (d) to the facts of each case rather than by prohibiting all employers in every industry from bargaining for management functions clauses altogether. P. 409.
4. That a collective bargaining agreement between the union and the employer was negotiated and signed did not render this cause moot. P. 399, n. 4.
The Court of Appeals granted in part and denied in part enforcement of an order of the National Labor Relations Board, 89 N. L. R. B. 185, requiring an employer to bargain collectively with a union and, in effect, forbidding the employer to bargain for any "management functions clause" covering a condition of employment. 187 F.2d 307. This Court granted certiorari. 342 U.S. 809 . Affirmed, p. 410.
Mozart G. Ratner argued the cause for petitioner. With him on the brief were Solicitor General Perlman, George J. Bott, David P. Findling and Marcel Mallet-Prevost.
Louis J. Dibrell argued the cause for respondent. With him on the brief were M. L. Cook and Charles G. Dibrell, Jr.
The Office Employees International Union, A. F. of L., Local No. 27, certified by the National Labor Relations Board as the exclusive bargaining representative of respondent's office employees, requested a meeting with respondent for the purpose of negotiating an agreement governing employment relations. At the first meetings, [343 U.S. 395, 397] beginning on November 30, 1948, the Union submitted a proposed contract covering wages, hours, promotions, vacations and other provisions commonly found in collective bargaining agreements, including a clause establishing a procedure for settling grievances arising under the contract by successive appeals to management with ultimate resort to an arbitrator.
On January 10, 1949, following a recess for study of the Union's contract proposals, respondent objected to the provisions calling for unlimited arbitration. To meet this objection, respondent proposed a so-called management functions clause listing matters such as promotions, discipline and work scheduling as the responsibility of management and excluding such matters from arbitration. 2 The Union's representative took the position "as soon as [he] heard [the proposed clause]" that the Union would not agree to such a clause so long as it covered matters subject to the duty to bargain collectively under the Labor Act.
"The right to select and hire, to promote to a better position, to discharge, demote or discipline for cause, and to maintain discipline and efficiency of employees and to determine the schedules of work is recognized by both union and company as the proper responsibility and prerogative of management to be held and exercised by the company, and while it is agreed that an employee feeling himself to have been aggrieved by any decision of the company in respect to such matters, or the union in his behalf, shall have the right to have such decision reviewed by top management officials of the company under the grievance machinery hereinafter set forth, it is further agreed that the final decision of the company made by such top management officials shall not be further reviewable by arbitration."
While the proceeding was pending, negotiations between the Union and respondent continued with the management functions clause remaining an obstacle to agreement. During the negotiations, respondent established new night shifts and introduced a new system of lunch hours without consulting the Union.
On May 19, 1949, a Union representative offered a second contract proposal which included a management functions clause containing much of the language found in respondent's second counterproposal, quoted above, with the vital difference that questions arising under the Union's proposed clause would be subject to arbitration as in the case of other grievances. Finally, on January 13, 1950, after the Trial Examiner had issued his report but before decision by the Board, an agreement between the Union and respondent was signed. 4 The agreement contained a management functions clause that rendered nonarbitrable matters of discipline, work schedules and other matters covered by the clause. The subject of promotions [343 U.S. 395, 400] and demotions was deleted from the clause and made the subject of a special clause establishing a union-management committee to pass upon promotion matters.
While these negotiations were in progress, the Board's Trial Examiner conducted hearings on the Union's complaint. The Examiner held that respondent had a right to bargain for inclusion of a management functions clause in a contract. However, upon review of the entire negotiations, including respondent's unilateral action in changing working conditions during the bargaining, the Examiner found that from and after November 30, 1948, respondent had refused to bargain in a good faith effort to reach agreement. The Examiner recommended that respondent be ordered in general terms to bargain collectively with the Union.
On respondent's petition for review and the Board's cross-petition for enforcement, the Court of Appeals for the Fifth Circuit agreed with the Trial Examiner's view that the Act does not preclude an employer from bargaining for inclusion of any management functions clause in a labor agreement. The Court of Appeals further found that the evidence does not support the view that respondent failed to bargain collectively in good faith by reason of its bargaining for a management functions clause. As a result, enforcement of the portion of the Board's order directed to the management functions clause (par. 1 (a)) was denied. Other portions of the Board's order (pars. 1 (b) and 2 (a)) were enforced because respondent's unilateral action in changing working conditions during bargaining does support a finding that respondent had not bargained collectively in good faith as required by the Act. 187 F.2d 307. We granted certiorari on petition of the Board for review of the denial of enforcement as to paragraph 1 (a) of the Board's order. 342 U.S. 809 .
First. The National Labor Relations Act is designed to promote industrial peace by encouraging the making of voluntary agreements governing relations between unions [343 U.S. 395, 402] and employers. 6 The Act does not compel any agreement whatsoever between employees and employers. 7 Nor does the Act regulate the substantive terms governing wages, hours and working conditions which are incorporated in an agreement. 8 The theory of the Act is that the making of voluntary labor agreements is encouraged by protecting employees' rights to organize for collective bargaining and by imposing on labor and management the mutual obligation to bargain collectively.
Thus it is now apparent from the statute itself that the Act does not encourage a party to engage in fruitless marathon discussions at the expense of frank statement and support of his position. And it is equally clear that the Board may not, either directly or indirectly, compel concessions or otherwise sit in judgment upon the substantive terms of collective bargaining agreements.
Second. The Board offers in support of the portion of its order before this Court a theory quite apart from the [343 U.S. 395, 405] test of good faith bargaining prescribed in Section 8 (d) of the Act, a theory that respondent's bargaining for a management functions clause as a counterproposal to the Union's demand for unlimited arbitration was, "per se," a violation of the Act.
Counsel for the Board do not contend that a management functions clause covering some conditions of employment is an illegal contract term. 15 As a matter of fact, a review of typical contract clauses collected for convenience in drafting labor agreements shows that management functions clauses similar in essential detail to the clause proposed by respondent have been included in contracts negotiated by national unions with many employers. 16 The National War Labor Board, empowered [343 U.S. 395, 406] during the last war "[t]o decide the dispute, and provide by order the wages and hours and all other terms and conditions (customarily included in collective-bargaining agreements)," 17 ordered management functions clauses included in a number of agreements. 18 Several such clauses ordered by the War Labor Board provided for arbitration in case of union dissatisfaction with the exercise of management functions, while others, as in the clause proposed by respondent in this case, provided that management decisions would be final. 19 Without intimating any opinion as to the form of management functions [343 U.S. 395, 407] clause proposed by respondent in this case or the desirability of including any such clause in a labor agreement, it is manifest that bargaining for management functions clauses is common collective bargaining practice.
Conceding that there is nothing unlawful in including a management functions clause in a labor agreement, the Board would permit an employer to "propose" such a clause. But the Board would forbid bargaining for any such clause when the Union declines to accept the proposal, even where the clause is offered as a counterproposal to a Union demand for unlimited arbitration. Ignoring the nature of the Union's demand in this case, the Board takes the position that employers subject to the Act must agree to include in any labor agreement provisions establishing fixed standards for work schedules or any other condition of employment. An employer would be permitted to bargain as to the content of the standard so long as he agrees to freeze a standard into a contract. Bargaining for more flexible treatment of such matters would be denied employers even though the result may be contrary to common collective bargaining practice in the industry. The Board was not empowered so to disrupt collective bargaining practices. On the contrary, the term "bargain collectively" as used in the Act "has been considered to absorb and give statutory approval to the philosophy of bargaining as worked out in the labor movement in the United States." Telegraphers v. Railway Express Agency, 321 U.S. 342, 346 (1944).
Congress provided expressly that the Board should not pass upon the desirability of the substantive terms of [343 U.S. 395, 409] labor agreements. Whether a contract should contain a clause fixing standards for such matters as work scheduling or should provide for more flexible treatment of such matters is an issue for determination across the bargaining table, not by the Board. If the latter approach is agreed upon, the extent of union and management participation in the administration of such matters is itself a condition of employment to be settled by bargaining.
Accordingly, we reject the Board's holding that bargaining for the management functions clause proposed by respondent was, per se, an unfair labor practice. Any fears the Board may entertain that use of management functions clauses will lead to evasion of an employer's duty to bargain collectively as to "rates of pay, wages, hours and conditions of employment" do not justify condemning all bargaining for management functions clauses covering any "condition of employment" as per se violations of the Act. The duty to bargain collectively is to be enforced by application of the good faith bargaining standards of Section 8 (d) to the facts of each case rather than by prohibiting all employers in every industry from bargaining for management functions clauses altogether.
Third. The court below correctly applied the statutory standard of good faith bargaining to the facts of this case. It held that the evidence, viewed as a whole, does not show that respondent refused to bargain in good faith by reason of its bargaining for a management functions clause as a counterproposal to the Union's demand for unlimited arbitration. Respondent's unilateral action in changing working conditions during bargaining, now admitted to be a departure from good faith bargaining, is the subject of an enforcement order issued by the court below and not challenged in this Court.
Last term we made it plain that Congress charged the Courts of Appeals, not this Court, with the normal and primary responsibility for reviewing the conclusions of [343 U.S. 395, 410] the Board. We stated that this Court "is not the place to review a conflict of evidence nor to reverse a Court of Appeals because were we in its place we would find the record tilting one way rather than the other, though fair-minded judges could find it tilting either way." Labor Board v. Pittsburgh S. S. Co., 340 U.S. 498, 503 (1951). We repeat and reaffirm this rule, noting its special applicability to cases where, as here, a statutory standard such as "good faith" can have meaning only in its application to the particular facts of a particular case.
[ Footnote 1 ] 49 Stat. 449 (1935), 29 U.S.C. 151 et seq., as amended, 61 Stat. 136 (1947), 29 U.S.C. (Supp. IV) 151 et seq.
"SEC. 7. Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, . . . .
"(5) to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 9 (a).
"(d) For the purposes of this section, to bargain collectively is the [343 U.S. 395, 399] performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, but such obligation does not compel either party to agree to a proposal or require the making of a concession: . . . .
"SEC. 9. (a) Representatives designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes, shall be the exclusive representatives of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment: . . . ."
[ Footnote 4 ] Respondent's suggestion that negotiation of a contract rendered the case moot has been properly rejected below. See Labor Board v. Mexia Textile Mills, 339 U.S. 563 (1950); Labor Board v. Pool Mfg. Co., 339 U.S. 577 (1950).
"(a) Upon request, bargain collectively with Office Employees International Union, A. F. L., Local No. 27, as the exclusive representative of all its employees in the appropriate unit described above with respect to rates of pay, wages, hours of employment, and other conditions of employment; . . . ."
[ Footnote 6 ] 61 Stat. 136 ("Findings and Policies"); Consolidated Edison Co. v. Labor Board, 305 U.S. 197, 236 (1938).
[ Footnote 7 ] Labor Board v. Jones & Laughlin Steel Corp., 301 U.S. 1, 45 (1937).
"The Railway Labor Act, like the National Labor Relations Act, does not undertake governmental regulation of wages, hours, or working conditions. Instead it seeks to provide a means by which agreement may be reached with respect to them. The national interest expressed by those Acts is not primarily in the working conditions as such. So far as the Act itself is concerned these conditions may be as bad as the employees will tolerate or be made as good as they can bargain for. The Act does not fix and does not authorize anyone to fix generally applicable standards for working conditions. . . ."
[ Footnote 9 ] Houde Engineering Corp., 1 N. L. R. B. (old) 35 (1934), decided by the National Labor Relations Board organized under 48 Stat. 1183 (1934).
"The committee wishes to dispel any possible false impression that this bill is designed to compel the making of agreements or to permit governmental supervision of their terms. It must be stressed that the duty to bargain collectively does not carry with it the duty to reach an agreement, because the essence of collective bargaining is that either party shall be free to decide whether proposals made to it are satisfactory.
"But, after deliberation, the committee has concluded that this fifth unfair labor practice should be inserted in the bill. It seems clear that a guarantee of the right of employees to bargain collectively through representatives of their own choosing is a mere delusion if it is not accompanied by the correlative duty on the part of the other party to recognize such representatives as they have been designated (whether as individuals or labor organizations) and to negotiate with them in a bona fide effort to arrive at a collective bargaining agreement. . . ." S. Rep. No. 573, 74th Cong., 1st Sess. 12 (1935).
See H. J. Heinz Co. v. Labor Board, 311 U.S. 514 (1941).
[ Footnote 11 ] The Board applied the good faith test of bargaining from the outset. 1 N. L. R. B. Ann. Rep. 85-87 (1936). Cases in the Courts of Appeal approving and applying the good faith test of bargaining are collected in 29 U.S.C.A. 158, note 265.
[ Footnote 12 ] H. R. Rep. No. 245, 80th Cong., 1st Sess. 19 (1947).
[ Footnote 13 ] H. R. 3020, 80th Cong., 1st Sess., 2 (11) (1947).
[ Footnote 14 ] Note 3, supra. The term "concession" was used in place of "counterproposal" at the suggestion of the Chairman of the Board that the statutory definition of collective bargaining should conform to the meaning of good faith bargaining as understood at the passage of the Wagner Act. S. Rep. No. 105, 80th Cong., 1st Sess. 24 (1947); Hearings before House Committee on Education and Labor on Amendment to the National Labor Relations Act, 80th Cong., 1st Sess. 3174-3175 (1947). See H. R. Rep. No. 510, 80th Cong., 1st Sess. 34 (1947).
[ Footnote 15 ] Thus we put aside such cases as Labor Board v. National Maritime Union, 175 F.2d 686 (C. A. 2d Cir. 1949) (bargaining for discriminatory hiring hall clause), where a party bargained for a clause violative of an express provision of the Act.
[ Footnote 16 ] H. R. Doc. No. 125, 81st Cong., 1st Sess. 3-10 (1949) (U.S. Dept. of Labor Bull. No. 908-12); Collective Bargaining Contracts (B. N. A. 1941), 363-368; Classified Provisions of Thirty-Seven Collective Bargaining Agreements for Wage Earners in the Iron and Steel Industry (American Iron & Steel Inst. 1948), 68-73; Tested Clauses for Union Contracts (Labor Relations Inst. 1945), 11-16; Welty, Labor Contract Clauses (1945), 76-82; Hoebreckx, Management Handbook for Collective Bargaining (1947), 177-182; Smith, Labor Law Cases and Materials (1950), 1008-1011; Industrial Relations Research Service Study No. 1, Management's Prerogatives (1945), App.; Pace, Management Prerogatives Defined in Union Contracts (Calif. Inst. Tech. 1945); Teller, Management Functions under Collective Bargaining (1947), 427-437 (23 out of 53 collective bargaining agreements examined by the author contained management functions clauses).
Writers advocating inclusion of detailed management functions clauses in collective bargaining agreements urge the desirability of defining the respective functions of management and labor in matters such as work scheduling consistent with the needs of the particular industry. See Cox and Dunlop, Regulation of Collective Bargaining [343 U.S. 395, 406] by the National Labor Relations Board, 63 Harv. L. Rev. 389 (1950); Hill and Hook, Management at the Bargaining Table (1945), 56-138; Teller, Management Functions under Collective Bargaining (1947), 114-116. Separate views on "Management's Right to Manage" were presented by the Labor and Management members of The President's National Labor-Management Conference, November 5-30, 1945, U.S. Dept. of Labor Bull. No. 77 (1946), 56-62.
[ Footnote 17 ] 57 Stat. 163, 166 (1943).
[ Footnote 18 ] United Aircraft Corp., 18 War Lab. Rep. 9 (1944); Mead Corp., 8 War Lab. Rep. 471 (1943); Hospital Supply Co., 7 War Lab. Rep. 526 (1943). See also McQuay-Norris Mfg. Co., 28 War Lab. Rep. 211 (1945); Teller, Management Functions under Collective Bargaining (1947), 29-49.
Disputes as to the content of management functions clauses have also been considered by the present Wage Stabilization Board, Basic Steel Industry. 18 Lab. Arb. Rep. 112 (1952) (recommendation that proposed changes in clause be rejected), and by a Presidential Emergency Board, Northwest Airlines, Inc., 5 Lab. Arb. Rep. 71 (1946) (recommendation that clause be incorporated in agreement).
[ Footnote 19 ] Compare East Alton Mfg. Co., 5 War Lab. Rep. 47 (1942) (arbitration provision ordered), with Atlas Powder Co., 5 War Lab. Rep. 371 (1942) (arbitration provision denied).
Union objections to a management functions clause as covering matters subject to collective bargaining did not deter the War Labor Board from ordering such a clause where deemed appropriate in a particular case. Curtiss-Wright Corp., 25 War Lab. Rep. 83, 114-115 (1945).
[ Footnote 20 ] This is not the case of an employer refusing to bargain over an issue on the erroneous theory that, as a matter of law, such an issue did not involve a "condition of employment" within the meaning of the Act. Compare Inland Steel Co. v. Labor Board, 170 F.2d 247 (C. A. 7th Cir. 1948) (pensions); Labor Board v. J. H. Allison & Co., 165 F.2d 766 (C. A. 6th Cir. 1948) (merit wage increases).
[ Footnote 21 ] Note 3, supra. See Bus Employees v. Wisconsin Board, 340 U.S. 383, 399 (1951).
[ Footnote 22 ] The Board's argument would seem to prevent an employer from bargaining for a "no-strike" clause, commonly found in labor agreements, requiring a union to forego for the duration of the contract the right to strike expressly granted by Section 7 of the Act. However, the Board has permitted an employer to bargain in good faith for such a clause. Shell Oil Co., 77 N. L. R. B. 1306 (1948). This result is explained by referring to the "salutary objective" of such a clause. Bethlehem Steel Co., 89 N. L. R. B. 341, 345 (1950).
[ Footnote 23 ] See Labor Board v. Crompton Mills, 337 U.S. 217, 226 -227 (1949).
MR. JUSTICE MINTON, with whom MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS join, dissenting.
I need not and do not take issue with the Court of Appeals' conclusion that there was no absence of good faith. Where there is a refusal to bargain, the Act does not require an inquiry as to whether that refusal was in good faith or bad faith. 3 The duty to bargain about certain subjects is made absolute by the Act. 4 The majority seems to suggest that an employer could be found guilty of bad faith if it used a "management functions" clause to close off bargaining about all topics of discussion. Whether the employer closes off all bargaining or, as in this case, only a certain area of bargaining, he has refused to bargain as to whatever he has closed off, and any discussion of his good faith is pointless.
That portion of 8 (d) of the Act which declares that an employer need not agree to a proposal or make concessions does not dispose of this case. Certainly the Board lacks power to compel concessions as to the substantive terms of labor agreements. But the Board in this case was seeking to compel the employer to bargain about subjects properly within the scope of collective [343 U.S. 395, 413] bargaining. 5 That the employer has such a duty to bargain and that the Board is empowered to enforce the duty is clear.
An employer may not stake out an area which is a proper subject for bargaining and say, "As to this we will not bargain." To do so is a plain refusal to bargain in violation of 8 (a) (5) of the Act. If employees' bargaining rights can be cut away so easily, they are indeed illusory. I would reverse.
"Q. Now, as I understand your testimony, you have said that Company said you would have to agree . . . .
"A. It was the condition of a contract.
"Q. Now, how often, if it was more than once, did the Company state that or something similar to that . . . did they only say it once or did they state it more than once?
"A. I can't testify as to the number of times. I will say they said it several times.
[ Footnote 2 ] There is similarly a difference between a union voluntarily disbanding, and the employer insisting that it disband as a condition of granting a wage increase. Cf. McQuay-Norris Mfg. Co. v. Labor Board, 116 F.2d 748.
[ Footnote 3 ] The only exception is that an employer in good faith can challenge the majority status of the bargaining representative and request proof that it does in fact have such status. Cf. Joy Silk Mills, Inc. v. Labor Board, 87 U.S. App. D.C. 360, 369, 185 F.2d 732, 741.
[ Footnote 4 ] J. I. Case Co. v. Labor Board, 321 U.S. 332 ; H. J. Heinz Co. v. Labor Board, 311 U.S. 514, 525 .

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