Court Opinion

ID: 801894
Source: CourtListenerOpinion
Date Created: 2012-06-08 14:57:06+00
Date Added: 2024-06-11T15:02:27.636928
License: Public Domain

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
                              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.
                              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.
                               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
                               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
                               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
                               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 Courier-
Journal 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
                               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 management-
rights 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
                               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 management-
rights clause were unlawful, see Beverly Health & Rehab.
Servs., 335 N.L.R.B. 635, 636-37 (2001); Guard Publ’g Co.,
                               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.
     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.
                               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.
                               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.