Court Opinion

ID: 9483842
Source: CourtListenerOpinion
Date Created: 2023-08-05 09:32:57.180396+00
Date Added: 2024-06-11T17:49:51.982365
License: Public Domain

CUDAHY, Circuit Judge,
concurring in
the judgment.
I agree with the majority that this case represents the archetypical stock transfer situation and that U.S. Can would likely be bound to the master labor agreement on that basis had the Board addressed the issue. See Esmark, Inc. v. NLRB, 887 F.2d 739, 751 (7th Cir.1989). The fact of the matter is, however, that the Board did not pursue this rather simple theory, but instead followed a complex and questionable analysis to the effect that U.S. Can adopted the master labor agreement by its subsequent conduct despite its repeated and vehement statements and actions to the contrary. Because I believe that this novel application of an adoption theory is essentially contrary to important policies of the Act, I would not hold U.S. Can contractually bound under an adoption theory.
The “fundamental premise” of the National Labor Relations Act is “private bargaining under governmental supervision of the procedure alone, without any official compulsion over the actual terms of the contract.” H.K. Porter Co. v. NLRB, 397 U.S. 99, 108, 90 S.Ct. 821, 826, 25 L.Ed.2d 146 (1970); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 45, 57 S.Ct. 615, 628, 81 L.Ed. 893 (1937) (“The theory of the Act is that free opportunity for negotiation with accredited representatives of employees is likely to promote industrial peace and may bring about the adjustments and agreements which the Act in itself does not attempt to compel.”). Each party is free to determine whether the terms of the contract are satisfactory, and negotiation, not compulsion, is the order of the day. 29 U.S.C. § 158(d); see also S.Rep. No. 573, 74th Cong., 1st Sess., 12 (1935). Therefore, the general rule is that “although successor employers may be bound to recognize and bargain with the union, they are not bound by the substantive provisions of a *871collective-bargaining contract negotiated by their predecessors but not agreed to or assumed by them.” NLRB v. Burns Int’l Sec. Servs., Inc., 406 U.S. 272, 284, 92 S.Ct. at 1580 (1972).
The Congressional policy in favor of free bargaining has resulted in a daunting standard to be met if a successor is to be deemed to have adopted or assumed a predecessor’s contract: Courts should use the “utmost restraint in applying an adoption theory, [and] absent clear and convincing evidence of consent either actual or constructive,” the Board should not contractu-f ally bind the successor to the incumbent’s terms. All State Factors, 205 N.L.R.B. 1122, 1127 (1973). Of course, the Board has held in a number of cases that subsequent conduct implementing numerous terms of a labor agreement is sufficient to support a finding that the successor impliedly adopted the agreement. See, e.g., Pine Valley Div. of Ethan Allen, Inc., 218 N.L.R.B. 208, 219 (1975), enf'd in part, 544 F.2d 742 (4th Cir.1976). But when such conduct is coupled with repeated, emphatic and unyielding statements that the successor does not, and will not, adopt the terms of the predecessor’s labor agreement, implementation in the interim of some of the predecessor’s terms cannot clearly and convincingly establish adoption.
During the acquisition negotiations here, there is overwhelming evidence that U.S. Can steadfastly rejected the predecessor’s labor agreement and, in particular, the provision for a multi-plant bargaining unit. The Acquisition Agreement itself contained language unequivocally rejecting the predecessor’s labor agreement and stating that U.S. Can planned to bargain on a plant-by-plant basis. The Agreement provided that “[t]he Surviving Corporation does not agree to accept the terms of any master labor agreement.” Further, at the May 26, 1987, meeting between U.S. Can and union officials, U.S. Can stated that the company intended to negotiate on a plant-by-plant basis, and when asked whether U.S. Can would adopt the master labor agreement, it responded that it would not. The union representatives certainly understood U.S. Can to be rejecting the master agreement but continued to meet with the company in order to persuade it to adopt the agreement and to convince the company of its asserted obligation to abide by the agreement. U.S. Can continued to reject it. In the light of these expressions of non-adoption, I cannot find clear and convincing evidence that U.S. Can meant to adopt the master agreement merely by following some of its terms. It seems to me that company and union may agree to the substance of various union security and economic, terms without there being an implication (as the majority argues) that — in the face of numerous protestations to the contrary — the company has accepted everything.
The case before us illustrates why this is an important matter of policy. Here, U.S. Can implemented all the economic provisions of the predecessor contract. And it continued all the union-security terms. Certainly, these were important concessions — very much in the interest of employees and the union. U.S. Can, however, chose not to accept the multi-plant bargaining unit or the “master” agreement. The majority says in effect that, when 'an employer accepts 90 percent of an agreement, it will be deemed by adoption to have accepted the other 10 percent. In the future, employers may refuse to accept the 90 percent in hopes of avoiding the 10 percent they do not want. This outcome does not seem to me to advance the public interest.
The majority relies heavily on the fact that U.S. Can implemented the union-security and dues checkoff provisions to find that it adopted its predecessor’s agreement. To implement these provisions in the absence of an agreement, it argues, is illegal. Therefore, because there was no offer and acceptance to create an agreement, and because the implementation of the checkoff and other union-security provisions in the absence of an agreement was arguably illegal, “the only other option is that U.S. Can ... assumed the old agreement as an unwelcome burden, but less of a burden than the strike that might have followed cessation of dues payments.” Ante at 870. What the majority fails to consider, however, is that the “illegality” of a successor’s *872action in voluntarily assuming its predecessor’s union-security terms in the absence of a contract is far from clear. The authority on which the majority relies merely states that an employer is not required to implement union-security provisions in the absence of a contract. The eases do not hold that implementing these terms in the interim period following a takeover is illegal. Litton Fin. Printing Div. v. NLRB, — U.S. -, -, 111 S.Ct. 2215, 2221-22 (1991) (“... union security and dues checkoff provisions are excluded from the unilateral change doctrine because of statutory provisions which permit these obligations only when specified by the express terms of a collective-bargaining agreement.” (emphasis added)); Southwestern Steel & Supply v. NLRB, 806 F.2d 1111, 1113 (D.C.Cir.1986) (same; holding that hiring hall provision is not excepted from unilateral change doctrine); Indiana & Michigan Elec. Co., 284 N.L.R.B. 53, 55 (1987) (noting the exception of permitting unilateral abandonment of union-security and checkoff arrangements after contract expiration in holding that arbitration clause is excepted from unilateral change doctrine); Bethlehem Steel Co., 136 N.L.R.B. 1500, 1502 (1962) (holding that company was free of checkoff obligations upon termination of the contract), enf'd in part sub nom., Industrial Union of Marine & Shipbuilding Workers v. NLRB, 320 F.2d 615 (3d Cir.1963), cert. denied, 375 U.S. 984, 84 S.Ct. 516, 11 L.Ed.2d 472 (1964). Indeed, some cases have even held that observing union-security provisions is not illegal, and that the continuation of such terms does not indicate that a successor adopted the previous contract. O’Connor Co. v. Carpenters Union No. 1408, 702 F.2d 824, 826 (9th Cir.1983) (“The payment of increased wages and fringe benefits and hiring of the carpenters from the Union hiring hall following complete and unequivocal termination of the ... agreement does not indicate consent by the Company to be bound by the new agreement.”); Empire Excavating Co. v. American Arbitration Ass’n, 693 F.Supp. 1557, 1561 (M.D.Pa.) (“The fact that plaintiff continued to employ union members, make fringe benefit contributions, and check off union dues is clearly not dispositive.”), aff'd, 866 F.2d 1409 (3d Cir.1988); General Warehousemen & Employees Union Local No. 636 v. J.C. Penney Co., 484 F.Supp. 130, 134 (W.D.Pa.1980) (“Nor are the checkoff of union dues and the settlement of minor grievances in accord with the old contract, alone, sufficient for the court to infer that the parties agreed to extend the old contract in its entirety.”); Food Handlers Local 425 v. Arkansas Poultry Coop., 199 F.Supp. 895, 901 (W.D.Ark.1961) (“As for the settlement of the minor grievances and the check off of the union dues, there is no indication that these acts were done in reliance on any existing agreement, but rather were carried on as a routine or customary practice of which there was no compelling reason for either party to alter.”), appeal dismissed, 306 F.2d 491 (8th Cir.1962); cf. Burns, 406 U.S. at 291, 92 S.Ct. at 1584 (“In many cases, of course, successor employers will find it advantageous not only to recognize and bargain with the union but also to observe the pre-existing contract rather than to face uncertainty and turmoil.”). This is particularly true in a situation, as here, where the successor intends to hire all of its predecessor’s employees, and thus, it is presumed that the union maintains majority support. Cf. Burns, 406 U.S. at 295, 92 S.Ct. at 1586.
In any event, the legality of observing these union-security provisions without adopting the master contract is not before us. I think it is inappropriate to play chess with the technicalities of contract formation to drag an employer into a contract which it vociferously rejects. The central reality here is that U.S. Can agreed without reservation to follow many of the terms of the old contract — terms of great benefit to the employees and the union— but it unmistakably refused to accept a few terms. That seems to me to be its right unless Burns is a dead letter.
I also write separately to disagree with the majority’s characterization of what is required of Burns successors that plan to hire all or substantially all of the incumbent employees. In Bums, the Supreme *873Court held that a successor has the right “to set initial terms on which it will hire the employees of a predecessor.” Id. at 294, 94 S.Ct. at 1585. But this right was coupled with a duty to bargain with an incumbent union before fixing the initial terms of employment when it is “perfectly clear” that the new employer plans to retain all or substantially all of the predecessor’s employees. Id. at 294-95, 94 S.Ct. at 1585-86. This means that a successor who hires or plans to hire all or substantially all of the predecessor’s employees is bound to the predecessor’s terms until bargaining to impasse. This obligation is not contractual but is imposed by federal labor law. Cf. Litton, — U.S. at -, 111 S.Ct. at 2225 (explaining the unilateral change doctrine: “[the] terms and conditions continue in effect by operation of the NLRA. They are no longer agreed-upon terms; they are terms imposed by law, at least so far as there is no unilateral right to change them.”). One difference between a contractual obligation and a statutory duty is that the former binds the successor to the agreement for the duration of the contract; the latter only until impasse. Once the parties have reached impasse, the statutory obligation to the predecessor’s terms is satisfied and the successor can invoke its right to set the initial terms of employment.
The majority indicates that the obligation to bargain to impasse does not entail an obligation “to open one’s doors offering the predecessor’s terms.” Ante at 869. It relies on certain cases suggesting that a successor is not bound by the predecessor’s terms until bargaining to impasse unless (1) the successor intended to hire all or substantially all of the predecessor’s employees, and (2) it intended to do so on identical terms. See generally U.S. Marine Corp. v. NLRB, 944 F.2d 1305, 1328-29 (7th Cir.1991) (en banc) (Easterbrook, J., dissenting), cert. denied, — U.S. -, 112 S.Ct. 1474, 117 L.Ed.2d 618 (1992). This formulation makes the successor’s obligation to the predecessor’s terms dependent upon whether it intended to adopt the terms during the interim. This second requirement, however, is plainly inconsistent with the requirements of Bums. For Burns is properly interpreted to hold that a successor planning to hire all of its predecessor’s employees must bargain to impasse before it can fix new terms. The intent requirement would imply that a successor may change the terms from those of the predecessor before bargaining to impasse. Burns indicates that successors have no such power. Thus, I agree with the majority that a successor planning to hire all or substantially all of the predecessor’s employees is not obligated to open its doors on the predecessor’s terms — but, in the event it wants.to begin operating during the interim period before bargaining to impasse, it must do so on the predecessor’s terms or on those upon which the company and union have agreed. This is the interpretation of Burns which the Board has applied here and elsewhere. It is an approach that balances the important need for the successor employer to be able to set new terms for a “fresh start” while preserving the labor relations framework to which substantially all the employees are accustomed and committed.
Although the majority states that we “sidestepped” this question in U.S. Marine, we noted there that, when all or substantially all of the employees are hired by a successor, “the employer [is] obliged to consult with the union before setting new terms.” Id. at 1321-22 n. 22. Like Judge Will in his concurring opinion, it is extraordinarily difficult for me to distinguish this obligation from a duty to observe the predecessor’s terms and to refrain from setting new terms until bargaining to impasse. In the interest of clarity, I prefer the latter formulation and will adhere to it here without attempting definitively to parse U.S. Marine, which, of course, came at the question in the context of providing a remedy for other violations.
U.S. Can concedes that it discontinued the Inter-Plant Job Opportunity program (IPJO) without first bargaining to impasse. There is substantial evidence to support the Board’s finding that U.S. Can planned to retain all or substantially all of the employees. when it unilaterally discontinued IPJO. Therefore, I would enforce that part of the *874Board’s decision finding an unfair labor practice under § 8(a)(5) even without a finding that U.S. Can failed to exercise the privilege to set its own terms, because I would find that U.S. Can did not have that privilege until it bargained to impasse.
Successors that retain all or substantially all of the predecessor’s employees, therefore, must follow the old contract until bargaining to impasse. Successor employers should not, however, against their express wish and in the absence of persuasive evidence, be deemed to have adopted the old contract. To hold otherwise is to create incentives for the obviously undesirable course of not hiring the existing workforce. For these reasons, I respectfully concur in the judgment enforcing the Board’s order.