Opinion ID: 397942
Heading Depth: 1
Heading Rank: 3

Heading: Application of the Unusual Circumstances Standard

Text: 14 We recognize at the outset of our analysis that a combination of events-a striking labor force, a threat from the Company's major customer to purchase ordered goods elsewhere, and an apparent lack of progress in negotiating a new Kitchen Equipment Addendum-left the Company in an extremely difficult financial situation. Suddenly faced with the imminent loss of a customer which purchased 75% of its production, and having lost other customers since the initiation of the strike, 15 the Company withdrew from the Association and gave prompt notice of this decision to its employees and the Union. We believe the evidence in the case justifies the Company's withdrawal on the first theory encompassed by the unusual circumstances standard-extreme financial hardship threatening the existence of the employer. 15 The Board does not contest the determination that the Company was faced with the immediate loss of three-fourths of its business, but reaches the conclusion that such circumstances do not threaten the very existence of the Company. We disagree, for it appears to us that the impending loss of 75% of the Company's business does threaten its very existence, especially in an era of high interest rates and heavy debt financing. 16 The Board's decision does not indicate the percentage of business loss which would satisfy the extreme financial hardship test, but if 75% was deemed insufficient, one can only wonder as to the percentage the Board would have found sufficient-85%, 90%, 95% ... 100%? 16 The timing of Billy Herron's decision to withdraw his Company from the Association, which came on the heels of Sonic's call informing him it had located other equipment suppliers, also indicates that Herron was motivated by vital economic considerations in his decision rather than anti-union sentiment. Indeed, there is no evidence that at the time of Herron's decision to withdraw he was motivated by considerations other than the financial position of the Company. We note that Herron had been a Union member himself, and voluntarily entered the Company into a collective bargaining agreement with the Union in 1975. The evidence indicates that the Company was willing to work with the Union in reaching agreement on a new Kitchen Equipment Addendum. As the United States Court of Appeals for the Eighth Circuit recently noted, (T)he soundness of a withdrawal from a multi-employer unit 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) (emphasis added). Such reasoning, applied to this case, dictates a result in favor of the Company in view of the perilous economic conditions facing the Company and the total lack of evidence of bad faith towards the Union. 17 The facts in this case are distinguishable from those facing this court in NLRB v. Tulsa Sheet Metal Works, Inc., 367 F.2d 55 (10th Cir. 1966), where the employer's unusual circumstances argument was rejected. In Tulsa Sheet Metal, the firm which withdrew from the multi-employer association had been a solid member of the association for twelve years at the time of its withdrawal. By contrast, the Company in the case at bar had been a member of the Association for only two years, during which time its business operation radically changed from on-site construction to in-plant manufacturing. Even though Custom Sheet Metal was a party to the contract executed between the Association and the Union during the 1975-77 period, as a result of the transformation in its operation, the Company reached agreement with the Union on a Kitchen Equipment Addendum which significantly modified the wage, job classification, and union security provisions applicable to the other members of the Association. This modification of the contract, which applied to one member of a multi-employer Association consisting of approximately 44 members, indicates that the Union was aware of the unique position of the Company in the Association and suggests that the Company's withdrawal was indeed prompted by unusual circumstances. 17 18 Finally, and most significant, is the fact that the Company in this case was faced with serious economic difficulties due to the imminent loss of 75% of its business, a situation not present in the Tulsa Sheet Metal case. In summary, Tulsa Sheet Metal is simply a different case from the one now before the court. The facts are distinguishable-the rejection of the unusual circumstances argument not applicable to the case at bar. 19 Apart from the issue of whether unusual circumstances existed, there is a serious question in this case as to whether the Board's remedy can properly be imposed upon the Company. Because the Company is no longer engaged in the building and construction industry, the Company would ostensibly violate section 8(f) of the National Labor Relations Act, 29 U.S.C. § 158(f), by executing a contract which limits employment to those with minimum training or experience qualifications (i.e., journeyman and apprentice sheet metal workers-Article III) and which contains an eight-day union security clause (Article V). In recognition of the fact that the contract contains provisions which are illegal 18 as applied to a manufacturing concern, the Board has ordered the Company to execute the agreement, but not to give effect to the illegal provisions. The Board has cited our decision in Tulsa Sheet Metal as authority for this remedy, but here again we reject the Board's contention. 20 We recognize that the governing standard for determining whether a Company should be ordered to execute a collective bargaining agreement was enunciated by this court in Tulsa Sheet Metal : Employment contracts should not be completely obliterated because some provisions are beyond the legal limits of the parties' bargaining power, unless such illegal provisions permeate the complete contract to such an extent as to affect its enforceability entirely. 19 The Tulsa Sheet Metal court, relying in part upon a savings and severability provision in the contract, went on to hold that provisions regarding subcontracting and union security were not basic to the whole scheme of the contract. 20 21 In this case, the illegal provisions regard union security and, more importantly, the minimum qualifications for commencing employment. The contract in question refers to only two classifications of workers who can be employed by the company-journeyman, and apprentice sheet metal workers-and other sections of the contract are entwined with this classification, including the wage scale to be paid by the Company. If any provision of a collective bargaining agreement is truly vital, it is a provision pertaining to the classification of employees, and this seems especially true when the wage scale in a contract is directly tied to the classification scheme. Moreover, the contract in the case at bar contains no savings and severability clause, unlike the agreement in Tulsa Sheet Metal. We seriously question the wisdom of ordering the Company to sign a contract, but not to give effect to a provision regarding minimum employee qualifications which forms the very foundation on which the agreement rests. As the Supreme Court recognized in NLRB v. Rockaway News Supply Co., Inc., 345 U.S. 71, 78, 73 S.Ct. 519, 523, 97 L.Ed. 832 (1953), (t)here may be cases where a forbidden provision is so basic to the whole scheme of a contract and so interwoven with all its terms that it must stand or fall as an entirety. We believe that such a case is now before us, 21 in contrast to that facing the court in Tulsa Sheet Metal. 22 22 In summary, we conclude that the Company's withdrawal from the Association was justified on the ground that it was faced with extreme financial hardship threatening its existence as an employer. Unlike Tulsa Sheet Metal, here there is ample evidence in the record of extreme financial hardship sufficient to invoke the unusual circumstances standard. Moreover, the Board has misread our decision in Tulsa Sheet Metal in formulating a remedy in the case at bar. We find the remedy proffered by the Board inapplicable on the ground that a provision of the contract which the Board has excused the Company from executing permeate(s) the complete contract to such an extent as to affect its enforceability entirely. 23 Finally, we reiterate the lack of even a scintilla of evidence of anti-union sentiment on the Company's behalf at the time the decision was made to withdraw the Company from the Association. Although the Board's decision is entitled to considerable deference by a reviewing court, where the Board's order has no reasonable basis in law or is fundamentally inconsistent with the structure of the Act it should not be enforced. NLRB v. Bartlett-Collins Co., 639 F.2d 652, 655 (10th Cir. 1981), citing Ford Motor Co. v. NLRB, 441 U.S. 488, 497, 99 S.Ct. 1842, 1849, 60 L.Ed.2d 420 (1979). 23 For the reasons stated above, we hold on these facts that unusual circumstances clearly existed so as to justify the Company's withdrawal from the multi-employer association bargaining unit and the Company's subsequent refusal to execute the 1977-79 agreement. We find that the Board's decision to the contrary is not supported by substantial evidence on the record as a whole, 24 and therefore conclude that the Company did not violate sections (8)(a) (1) and (5) of the National Labor Relations Act as charged by the Board. 24 Enforcement of the Board's order is denied.