Opinion ID: 398952
Heading Depth: 1
Heading Rank: 2

Heading: Withdrawal from Multiemployer Bargaining Units: Extreme

Text: Financial Pressures 7
8 Disputing the Board's conclusion that it unlawfully refused to bargain, Priester contends that its withdrawal was justified by serious economic difficulties. The Board argues that Priester's financial troubles were not acute enough to permit it to abandon an established multiemployer bargaining unit after negotiations had begun. The standard guiding our consideration of these arguments is tailored to afford appropriate deference to the Board's expertise in applying the general provisions of the Act to the complexities of industrial life. NLRB v. Erie Resistor Corp., 373 U.S. 221, 236, 83 S.Ct. 1139, 1150, 10 L.Ed.2d 308 (1963). Whether Priester's conduct amounts to a statutory refusal to bargain is a mixed question of fact and law, requiring an examination of the legal effect of a given set of facts. The NLRB's resolution of such questions is to be upheld if reasonable, consistent with the Act, and based on findings supported by substantial evidence. NLRB v. Yeshiva University, 444 U.S. 672, 691, 100 S.Ct. 856, 867, 63 L.Ed.2d 115 (1980); Ford Motor Co. v. NLRB, 441 U.S. 488, 496-97, 99 S.Ct. 1842, 1848-49, 60 L.Ed.2d 420 (1979). 2 Respect for the Board's expertise is particularly proper here, since Congress' deliberate inaction with regard to multiemployer bargaining indicates a commitment by Congress of the issues it raises to the Board's specialized judgment. Charles D. Bonanno Linen Service, Inc. v. NLRB, --- U.S. ----, ----, 102 S.Ct. 720, 723, 70 L.Ed.2d --- (1982); NLRB v. Truck Drivers Union, 353 U.S. 87, 96, 77 S.Ct. 643, 647, 1 L.Ed.2d 676 (1957) (Buffalo Linen). 9
10 Section 9(a) of the NLRA, 29 U.S.C. § 159(a), provides that employee bargaining representatives shall be selected by the majority of the employees in a unit appropriate for such purposes. Section 9(b) charges the Board with the responsibility of deciding whether the unit appropriate for the purposes of collective bargaining shall be the employer unit, craft unit, plant unit or subdivision thereof.... 29 U.S.C. § 159(b). Nowhere does the Act mention multiemployer bargaining units; the prototypical unit envisioned by the NLRA is employerwide or smaller. Despite the absence of explicit statutory authority, however, bargaining between employer coalitions and large unions representing their workers predates the NLRA and has expanded since its enactment. It also has been held to fall within the Board's purview. In Buffalo Linen, the Supreme Court inferred an intent that the Board continue to certify and regulate multiemployer units from Congress' rejection of efforts to curb multiemployer bargaining. Id. at 96, 77 S.Ct. at 647. The Court reaffirmed this position in Bonanno. Id. at ---, 102 S.Ct. at 725. 11 The prevalence of multiemployer bargaining 3 is attributable to the advantages it offers employers and unions, especially in certain types of industries in which employerwide bargaining may be difficult. Each side may be able to obtain an improved bargaining position, more reliable information on competitive conditions, and the opportunity for less frequent and less costly negotiations. The enhanced stability in labor-management relations that may result is also a pronounced objective of national labor policy. See NLRA § 1, 29 U.S.C. § 151. As we recently noted, (t)he mechanism of a MEBU (multiemployer bargaining unit) can serve an important function in promoting efficient and consistent bargaining in an industry, as well as promoting the bedrock goal of industrial peace. Baton Rouge Building and Construction Trades Council v. E. C. Schafer Construction Co., 657 F.2d 806, 811 (5th Cir. 1981). 12 Multiemployer bargaining units are viable only if stable. To ensure stability, the Board has adopted guidelines governing resignation from such units, with the goal of removing the threat of withdrawal as a bargaining tool. Under these guidelines, announced in Retail Associates, 120 N.L.R.B. 388 (1958), upon adequate notice a party may withdraw freely prior to the commencement of negotiations for a new contract. After negotiations have begun, however, withdrawal is permissible only with consent of the parties involved 4 or in unusual circumstances. This standard has won judicial approval. 5 Subsequent decisions by the Board and the courts have defined what sorts of circumstances are unusual enough to excuse untimely withdrawal. In Bonanno, the Supreme Court resolved a split among the circuits by upholding the Board's and this court's view that a bargaining impasse alone does not trigger a right to withdraw unilaterally. NLRB v. Marine Machine Works, 635 F.2d 522 (5th Cir. 1981); Hi-Way Billboards, Inc., 206 N.L.R.B. 22 (1973). Three other situations, however, have been held to excuse untimely withdrawal. At least one court, though not the Board, has held that an employer may withdraw where the employer association's negotiating committee does not fairly represent its interests. NLRB v. Siebler Heating & Air Conditioning, Inc., 563 F.2d 366 (8th Cir. 1977), cert. denied, 437 U.S. 911, 98 S.Ct. 3104, 57 L.Ed.2d 1142 (1978). Withdrawal after negotiations have commenced also has been permitted where the unit has been seriously fragmented, e.g., NLRB v. Southwestern Colorado Contractors Ass'n, 447 F.2d 968, 969-70 (10th Cir. 1971); Typographic Service Co., 238 N.L.R.B. 1565 (1978), or where an employer is suffering from extreme financial pressures. Priester contends that its withdrawal is excused by this last exception. 13 Although the Board has permitted some resignations from multiemployer bargaining due to economic circumstances, it consistently has maintained that the employer's financial plight must be truly critical before withdrawal will be excused. The withdrawing employer must face dire economic circumstances, i.e., circumstances in which the very existence of an employer as a viable business entity has ceased or is about to cease. Hi-Way Billboards, Inc., supra, 206 N.L.R.B. at 23 (emphasis in original). The NLRB has approved withdrawal only when the employer has demonstrated that it was in immediate jeopardy of at least partial closing. The Board's action in U. S. Lingerie Corp., 170 N.L.R.B. 750 (1968), illustrates this position. The employer in that case, a member of an employer association, had filed a bankruptcy reorganization petition and was attempting to reach an accommodation with its creditors to permit a relocation of its business. When it finally secured an arrangement enabling it to close and relocate, negotiations for a new collective bargaining agreement were already underway. The employer then belatedly withdrew from the association. The NLRB approved the withdrawal, noting that the employer had informed the union of its grave economic situation before negotiations had begun. Similarly, in Spun-Jee Corp., 171 N.L.R.B. 557 (1968), the employer sought special treatment from the union because of economic difficulties before the commencement of a new round of bargaining. It informed union officials that its plant would have to be relocated in the event of a wage increase. The Board held that the firm's subsequent withdrawal was excused by severe financial pressures. The NLRB also approved a withdrawal when the employer was threatened with the immediate loss of its entire skilled work force. Atlas Electric Service Co., 176 N.L.R.B. 827 (1969) (alternate holding). In contrast, the Board affirmed an ALJ's denial of an employer's claim of financial hardship based on a sudden loss of one fourth of its business. Serv-All Co., 199 N.L.R.B. 1131 (1972). 14 The few courts that have considered the issue have adopted the Board's strict approach. The only decision allowing a withdrawal during negotiations for financial reasons found a satisfactory showing of extreme financial hardship threatening the existence of the employer. NLRB v. Custom Sheet Metal & Service Co., 666 F.2d 454 (10th Cir. 1981) (emphasis in original). In that case, the employer was a member of an employer association in the midst of a strike following the failure of negotiations aiming toward a new labor contract. It was informed by a customer responsible for seventy-five percent of its business that future business would be transferred to other suppliers unless a current order was filled on schedule. Confronted with this grim prospect, the employer withdrew from the employer association conducting the negotiations. The court overruled the Board's determination that the withdrawal was unjustified, concluding that the imminent threat of a crippling loss of business was sufficient to excuse a belated withdrawal. The court found that the timing of the employer's action verified that its sole motivation was to protect its business. Moreover, the court noted that the employer was already receiving individualized treatment from the union because of a change in its business from construction to manufacturing sheet metal products. The remaining members of the association received no special treatment from the union. Id. at 456. 15 The court distinguished its decision in NLRB v. Tulsa Sheet Metal Works, Inc., 367 F.2d 55 (10th Cir. 1966), where it held that the employer's claim that a new agreement would be financially ruinous did not justify withdrawal. 6 The court explained that in the case before it, unlike Tulsa Sheet Metal, the employer was faced with the immediate loss of its principal customer. The employer in Tulsa Sheet Metal also was a solid member of the employer organization, while the withdrawing employer in Custom Sheet Metal was a new member who had been receiving special concessions from the union due to the unique nature of its business. Id. at 459. 16 The Board's dire circumstances test, applied in Custom Sheet Metal, is an effort to achieve a sound equilibrium among the conflicting legitimate interests that arise in multiemployer bargaining. NLRB v. Truck Drivers Union, supra, 353 U.S. at 96, 77 S.Ct. at 648. Such bargaining is feasible only if those that consent to participate are bound by the results. 7 Permitting withdrawal by employers who are struggling under the threat of imminent failure acknowledges that these employers are in no position to adhere to the agreement negotiated by the group. Limiting the right to withdraw to these employers discourages others from attempting to fabricate financial emergencies to evade unfavorable agreements, while it accommodates true hardship. We approve the Board's rule as a reasonable construction of the Act adopted to reinforce the collective bargaining process. 17
18 Priester bore the burden of demonstrating the gravity of its economic condition. NLRB v. Acme Wire Works, Inc., 582 F.2d 153, 158 (2d Cir. 1978). It adduced no financial statements, nor any evidence of the added cost the wage increase would impose, even though it submitted that it could not withstand the burden of the increase because of dire economic circumstances. The only evidence the company presented was the testimony of its president, Lee Priester, Jr. 8 He stated that business had been slipping in recent years due to keen competition and the reluctance of bonding companies to extend security on large projects because of the advancing age of Mr. Priester and his brother, the principal owners of the company. According to his testimony, the company earned over $17,000 in 1976, but lost approximately $40,000 in 1977, the year of the negotiations, and $70,000 in 1978. These losses were accompanied by a decrease in volume of business. 19 Although Mr. Priester's testimony may establish that the company was in a depressed state, it does not suggest that it was in the throes of an immediate crisis. Because its principal figures were in their mid-seventies, the company was experiencing a gradual decline. Unlike the employer in Custom Sheet Metal and the Board's decisions, Priester was not facing a choice between withdrawal and financial ruin. Neither bankruptcy nor dissolution was imminent. In 1976, the year preceding the negotiations, Priester in fact had shown a profit. The 1977 losses were significant, but it was not established that they were realized in their entirety by the time the company withdrew in August of that year. The 1978 losses obviously did not influence Priester's decision to withdraw in 1977. The company's action logically is to be tested by considering the actual motivation of the employer seeking to withdraw from the unit, NLRB v. Custom Wood Specialties, Inc., 622 F.2d 381, 385 (8th Cir. 1980), not by examining plausible rationales constructed with the benefit of hindsight. To justify its untimely withdrawal, Priester needed to show more profound economic difficulties, and needed to make this showing through proof more specific than the oral testimony of its president. 20 Priester's conduct reveals that it did not view its circumstances as critical in 1977. It could have withdrawn from the unit unilaterally before negotiations began, or given the union notice of a need for specialized treatment, but did neither. 9 Instead, the company assumed a leading role in the negotiations. Its first complaint of financial hardship and threat of withdrawal came at the climax of negotiations, when it disapproved of a wage increase proposal made by other members of the employer association. There was no evidence of any abrupt change in financial position that might have compelled a sudden shift in the company's attitude. If it were embroiled in financial difficulties sufficient to excuse withdrawal, it would not have concealed its woes until the negotiations were nearly concluded. Furthermore, after the first unfair labor practice charge was filed against Priester, in connection with a settlement it signed a letter of assent to the new collective bargaining agreement. If its plight were genuinely severe, it could not have signed such an agreement in good faith. Such behavior suggests that Priester's withdrawal was prompted by disappointment with the outcome of the negotiations, rather than by extreme economic pressures. Clearly, dissatisfaction with proposed wage scales is not justification for withdrawal from the unit. NLRB v. Tulsa Sheet Metal, Inc., supra, 367 F.2d at 58. 21 The Board's judgment that Priester violated the Act is consistent with precedent and reasonable in view of the need to preserve the stability of multiemployer bargaining units. Central Florida Sheet Metal Contractors Ass'n v. NLRB, 664 F.2d 489, 496 (5th Cir. 1981). Its restriction of the occasions when an employer may withdraw from a unit due to financial circumstances is calculated to ensure multiemployer bargaining's continued vitality.