Court Opinion

ID: 822781
Source: CourtListenerOpinion
Date Created: 2013-02-28 20:07:21.525679+00
Date Added: 2024-06-11T09:03:14.911524
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 12-1022

NATIONAL LABOR RELATIONS BOARD,

                 Petitioner,

           and

DRIVERS, CHAUFFEURS AND HELPERS LOCAL UNION NO. 639,

                 Intervenor,

           v.

DAYCON PRODUCTS COMPANY, INC.,

                 Respondent.

On Application for Enforcement of an Order of the National Labor
Relations Board. (5-CA-35043)

Argued:   January 31, 2013              Decided:   February 28, 2013

Before NIEMEYER, GREGORY, and DAVIS, Circuit Judges.

Enforcement neither granted nor denied; remanded by unpublished
opinion. Judge Davis wrote the opinion, in which Judge Niemeyer
and Judge Gregory joined.

ARGUED: Paul Rosenberg, BAKER & HOSTETLER, LLP, New York, New
York, for Respondent.      Barbara Ann Sheehy, NATIONAL LABOR
RELATIONS BOARD, Washington, D.C., for Petitioner. John Robert
Mooney, MOONEY, GREEN, BAKER, SAINDON, MURPHY & WELCH, P.C.,
Washington, D.C., for Intervenor.   ON BRIEF: Lafe E. Solomon,
Acting General Counsel, Celeste J. Mattina, Deputy General
Counsel, John H. Ferguson, Associate General Counsel, Linda
Dreeben,   Deputy  Associate   General  Counsel,   Usha Dheenan,
Supervisory Attorney, MacKenzie Fillow, Attorney, NATIONAL LABOR
RELATIONS BOARD, Washington, D.C., for Petitioner.

Unpublished opinions are not binding precedent in this circuit.

                                2
DAVIS, Circuit Judge:

     The National Labor Relations Board (“the Board”) applies to

this Court for enforcement of its decision and order, in which

it found that Daycon Products Company, Inc. (“Daycon”) committed

an unfair labor practice when it unilaterally reduced the wages

of eight of its employees. The Board reached this result without

applying, distinguishing, or even mentioning the “sound arguable

basis”    test   that      Board    precedent     suggests     should      apply.     We

therefore remand this case to the Board for it to apply or

distinguish that test.

                                          I.

                                          A.

     Daycon      is    a   Maryland-based        corporation      engaged        in   the

manufacture      and   distribution       of   janitorial,        maintenance,        and

hardware    supplies.       At     all   times    relevant     to     this       appeal,

Drivers,    Chauffeurs       and    Helpers      Local    Union     No.    639     (“the

Union”) has represented Daycon’s drivers, warehouse employees,

and repairmen. Daycon and the Union entered into a series of

collective-bargaining agreements (“CBAs”), each effective for a

period of several years. One such agreement was in effect from

January    16,     2004,     through      January        31,   2007       (the     “2004

Agreement”). The 2004 Agreement was followed by a new CBA (“the

2007 Agreement”), which, by its terms, was effective from March

3, 2007, through January 31, 2010.

                                          3
        Douglas Webber, the Union’s business agent, was “the main

person for the Union who bargained for” the 2007 Agreement. J.A.

13. 1       During     negotiations,      Webber    requested     information    on

employee wage rates. In response, Daycon sent a chart listing

each employee’s hire date, job title, and wage rate. J.A. 127.

Webber testified that the Union used that chart “to come up with

[its] proposals for the successor contract, for a starting point

of   wages.”         J.A.   16.   As   mentioned   above,   the   parties   reached

agreement. Though the wage rates in the chart were not set out

in the 2007 Agreement, the 2007 Agreement did require Daycon to

give each employee $0.55 annual raises “to his/her rate of pay.”

J.A. 141.

        Nearly two years into the 2007 Agreement, after looking

into an unrelated payroll issue in January 2009, Daycon’s human

resources director, Jodie Kendall, conducted a general audit of

employee wage rates. She discovered that due to clerical errors,

eight employees -- all within the bargaining unit – had received

raises in 2004 that were slightly greater than those established

by the 2004 Agreement. Kendall estimated that as a result of

these errors, the employees had been “overpaid to the tune of

about $80,000” since 2004. J.A. 57. She then met with Daycon’s

        1
       Citations to the “J.A.” refer to the Joint Appendix filed
by the parties.

                                            4
president, John Poole, and they decided to reduce the wage rates

of the eight employees.

      On April 16, 2009, Kendall sent a letter to the affected

employees   setting    out    the     wage   discrepancies     and   indicating

Daycon’s intent to “correct[]” the “overpayment.” J.A. 200. The

following day, Kendall and Daycon’s attorney, Jay Krupin, met

with Webber to discuss the issue. Webber, who was provided with

the April 16 letter at that meeting, stated his view that a wage

reduction would violate the then operative 2007 Agreement. In a

letter to Krupin dated April 23, 2009, Webber communicated the

Union’s intent not to “renegotiate the wage rates that [were]

agreed upon” in the 2007 Agreement. J.A. 201. On May 1, 2009,

Krupin sent Webber a letter setting out the total overpayments,

and   threatening     “to    seek    recovery    for    the   full   amount    of

overpayments   mistakenly           remitted    to     the    bargaining      unit

employees” if “the Union continue[d] to contest [Daycon’s] right

to correct the error on a going forward basis . . . .” J.A. 203-

04.

      On May 20, 2009, Kendall sent Webber a fax setting out the

pay discrepancies, as well as the “bonus” amounts that Daycon

planned to give five of the employees to ease their transition

to reduced wage rates. After receiving the fax, Webber called

Kendall and told her that the Union did not agree to a bonus or

a reduction of wage rates, and would seek to enforce the 2007

                                        5
Agreement. Daycon paid the first of three planned installments

of the bonuses on May 22, 2009, when the eight workers’ wage

rates    were   reduced.        It   did    not   pay    the   second     or   third

installments.

                                           B.

       The Union filed an unfair labor practice charge with the

Board on June 4, 2009. The Board’s Acting General Counsel then

issued a complaint, alleging that Daycon violated the National

Labor Relations Act (“the Act”) by unilaterally reducing the

contractual wage rates of the eight employees.

       An administrative law judge (“ALJ”) conducted a hearing on

the matter on November 9 and 10, 2009. On January 8, 2010, the

ALJ issued a decision recommending dismissal of the complaint.

The ALJ concluded that Daycon’s actions merely “restored the

agreed upon wages to conform them to those previously negotiated

by the parties.” J.A. 81. Accordingly, the ALJ found that Daycon

“did    not   engage   in   a    mid-term       modification   of   the    parties’

collective-bargaining           agreement.”        Id.    In     reaching       this

conclusion, the ALJ relied principally on two Board decisions.

First, the ALJ cited Eagle Transport Corp., 338 NLRB 489 (2002),

“for the proposition that an Employer’s administrative error in

a paycheck may be corrected without violating the Act.” J.A. 81.

Next, the ALJ cited Foster Transformer Co., 212 NLRB 936 (1974),

                                           6
for the proposition that wage rates mistakenly inflated “at some

time in the distant past” need not be perpetuated. J.A. 82.

       The General Counsel and the Union each filed exceptions to

the    ALJ’s     decision.         Daycon     filed     three     one-sentence        cross-

exceptions, one of which challenged the ALJ’s rulings limiting

questioning      of       Webber    concerning        the     content    of    negotiations

leading up to the CBAs.

       The   Board        rejected      the   ALJ’s      conclusion       in    a   decision

issued on August 12, 2011. The Board found that “the current

wage actually earned by each employee in early 2007” was “the

basis for computing wages and wage rates in” the 2007 Agreement.

J.A. 78. “Consequently, once [Daycon] entered into the [2007

Agreement],          it   was      barred     from     unilaterally       altering      unit

employees’       wage       rates       contained       therein.”        Id.    The   Board

distinguished Eagle Transport and Foster because in neither case

was a CBA in effect. J.A. 77 n.3. It noted that the allegation

of an unlawful midterm contract modification involved the 2007

Agreement, not the 2004 Agreement, and that it “need not pass

here    on     the    question         whether       [Daycon]    could    lawfully     have

corrected its mistake at any point prior to the execution of the

[2007   Agreement].”            J.A.    77.   The     Board     “disregarded”       Daycon’s

cross-exceptions because it found that they “lack[ed] supporting

argument and d[id] not meet the minimum requirements of Sec.

                                                 7
102.46(b) of the Board’s Rules and Regulations.” J.A. 77 n.1.

The Board summarized its holding as follows:

      In   sum,  while  the   2007-2010  wage[]   rates  and
      subsequent raises for the eight employees in dispute
      may represent a perpetuation of an erroneous prior pay
      raise, they nevertheless represent the bargain struck
      in good faith by the parties. [Daycon] could not
      thereafter modify those wages during the contract term
      without the Union’s consent. When it did so, it
      violated Section 8(a)(5) and (1) and Section 8(d) of
      the Act.

J.A. 78.

      Daycon filed a motion for reconsideration, which the Board

denied. The Board then applied to this Court for enforcement of

its order. 2 The Union filed a separate brief after we granted its

motion to intervene; as well, the Board ceded some of its time

allotted for oral argument to the Union.

                                            II.

      Daycon’s    principal         argument       is        that   an       employer       is

permitted to reduce unilaterally employee wage rates inflated by

an   administrative      error,     regardless      of       whether     a    new    CBA    is

executed after the error. Daycon also argues that because the

Board     interpreted         the     complaint         to     allege        a      contract

modification     under    §    8(d)    of    the   Act,       Daycon     needed      only    a

      2
       Daycon chose not to file a cross-petition for review of
the Board’s order.

                                            8
“sound arguable basis” for its interpretation of the contract to

avoid a violation.

                                             A.

       “Board findings of fact are conclusive as long as they are

‘supported by substantial evidence on the record considered as a

whole.’” Evergreen Am. Corp. v. NLRB, 531 F.3d 321, 326 (4th

Cir. 2008) (quoting 29 U.S.C. § 160(e)). “Substantial evidence

is ‘such relevant evidence as a reasonable mind might accept as

adequate to support a conclusion.’” Evergreen, 531 F.3d at 326

(quoting      Richardson       v.    Perales,      402       U.S.    389,     401     (1971)).

“While       the   Board       may     not    base          its     inference        on    pure

speculation[,]       it    may       draw    reasonable           inferences        from    the

evidence.” Overnite Transp. Co. v. NLRB, 280 F.3d 417, 428 (4th

Cir.     2002)     (en    banc)       (alteration,           ellipsis,        and    internal

quotation marks omitted).

       Although questions of law are ordinarily reviewed de novo,

if     the    Board’s      construction           of        the   Act    is     “reasonably

defensible,” Ford Motor Co. v. NLRB, 441 U.S. 488, 497 (1979),

“it    is    entitled     to   considerable            deference,”      Bonnell/Tredegar

Indus., Inc. v. NLRB, 46 F.3d 339, 343 (4th Cir. 1995). “No

special deference is extended to the Board’s interpretation of

collective bargaining contracts, but courts are mindful of the

Board’s      considerable           experience         in     interpreting          collective

                                             9
bargaining      agreements.”     Id.       at   343    (citations     and   internal

quotation marks omitted).

      “An agency is by no means required to distinguish every

precedent cited to it by an aggrieved party.” LeMoyne-Owen Coll.

v. NLRB, 357 F.3d 55, 60 (D.C. Cir. 2004). “But where . . . a

party makes a significant showing that analogous cases have been

decided differently, the agency must do more than simply ignore

that argument.” Id. at 61.

      Under Section 8(a) of the Act,

      It shall be an unfair labor practice for an employer--
           (1) to interfere with, restrain, or coerce
           employees   in   the   exercise  of   the   rights
           guaranteed   in   section   157  of   this   title
           [protecting, among other things, the right to
           bargain collectively]; [and]

                                             . . .

           (5) to refuse to bargain collectively with the
           representatives of his employees . . . .

29 U.S.C. § 158.

      Section     8(d)      defines     collective         bargaining       as    “the

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 . . . .” 29 U.S.C. § 158(d).

“An   employer’s     duty    under     §     8(d)     to   engage    in   collective

bargaining      prohibits      it     from      unilaterally        terminating    or

modifying a collective bargaining agreement during the effective

                                           10
term    of      the    agreement.”     Bonnell,    46       F.3d   at    342   (citing   29

U.S.C.      §    158(d)).     Neither   party     is    obligated        “to   discuss   or

agree to any modification of the terms and conditions contained

in” a CBA. 29 U.S.C. § 158(d). “Moreover, a violation of § 8(d)

constitutes an unfair labor practice under § 8(a)(1) and (5) of

the Act.” Bonnell, 46 F.3d at 343.

       Put simply, it is an unfair labor practice for a party to a

CBA to modify a term of employment contained in the CBA without

the other party’s consent.

                                           B.

       Daycon first argues that Eagle Transport, 338 NLRB at 493-

94, Foster, 212 NLRB at 936, and Dierks Forests, Inc., 148 NLRB

923, 925-26 (1964), establish that “an employer may unilaterally

correct         an    administrative    error     resulting        in    employees    being

paid more than is required under its existing policies.” Daycon

Br. 10. Notably absent from these cases, however, is an 8(d)

analysis discussing an alleged contract modification, like the

one on which the Board based its decision here. Indeed, the

Board       specifically      declined     to     “pass      here       on   the   question

whether [Daycon] could lawfully have corrected its mistake at

any point prior to the execution of the [2007 Agreement].”

       As    the      Board   correctly   notes        in   its    brief,      “Daycon   has

cited no authority showing that an employer’s mistake during a

prior contract term excuses a mid-term modification during a

                                           11
subsequent contract signed by the parties.” Board Br. 19. We

thus    have    no    hesitation      in     concluding    that     neither    Eagle

Transport,      Foster,      nor   Dierks    Forests   bear   on    the    contract-

modification ground on which the Board ruled here.

                                            C.

       Daycon    also   argues      that    the   Board   failed    to    apply   the

appropriate legal test, which it argues is the “sound arguable

basis” test. It further argues that if that test is applied,

Daycon satisfies it.

       An   example     of    the    Board’s      application      of    the   “sound

arguable basis” test is Bath Iron Works Corp., 345 NLRB 499

(2005), enforced sub nom. Bath Marine Draftsmen Assn. v. NLRB,

475 F.3d 14 (1st Cir. 2007). There, the Board stated the test as

follows: “[w]here an employer has a ‘sound arguable basis’ for

its interpretation of a contract and is not ‘motivated by union

animus or . . . acting in bad faith,’ the Board ordinarily will

not find a violation.” Bath Iron Works, 345 NLRB at 502 (citing

NCR Corp., 271 NLRB 1212, 1213 (1984)(emphasis added)). The idea

behind this test is that “a mere breach of contract is not in

itself an unfair labor practice,” NCR Corp., 271 NLRB at 1213

n.6, and “the Board will not enter the dispute to serve the

                                            12
function       of         arbitrator      in      determining            which       party’s

interpretation is correct,” id. at 1213. 3

     Though the Board has provided little guidance as to what

makes    an   argument       “sound”     and   “arguable,”         it    has    focused   on

reasonableness,            stating   that      where        both   parties       “present[]

reasonable interpretations of the applicable contract language,”

the employer has a sound arguable basis and there is no unfair

labor practice. Bath Iron Works, 345 NLRB at 503. In Bath Iron

Works, for example, the central issue was whether the employer

violated the Act by merging its pension plan with that of its

corporate          parent,     without      the        consent     of        three    unions

representing         the     employees.     Id.    at       499.   Each      relevant     CBA

referred to plan documents in the section dealing with employee

benefit plans, and two of the three CBAs explicitly stated that

the terms and conditions of employee benefit plans were governed

by plan documents. Id. at 499-500. The employer cited several

articles      in    the    plan   documents       as    a    source     of    authority   to

implement the merger, and argued that it therefore had a “sound

arguable basis” to merge the plans without modifying the CBA.

Id. at 500. The General Counsel, on the other hand, argued that

the plan documents were not part of the CBAs and did not contain

     3
       The 2007 Agreement provides for arbitration “[i]n the
event of a dispute regarding [its] application or interpretation
. . . .” J.A. 157-58.

                                            13
a right to merge the plan. Id. at 503. The Board concluded that

the General Counsel’s interpretation was “no more [reasonable]

than the [employer’s],” and thus dismissed the complaint. Id.

      In other cases applying the “sound arguable basis” test to

reject the General Counsel’s unfair labor practice allegations,

the Board has also found the competing contract interpretations

to be substantially equally reasonable. See NCR Corp., 271 NLRB

at 1213 (“The Board is not compelled to endorse either of these

two   equally          plausible     interpretations         of     the     contract’s

operation     in    this    case.”);     Vickers,    Inc.,    153    NLRB    561,    570

(1965)     (finding       that     the   employer’s       interpretation      of     the

disputed contract clause “not only was reasonable . . . but also

was an interpretation which found tacit support from the Union’s

conduct”).

      In   the     case    at    hand,   because    the   Board     interpreted      the

complaint to allege a contract modification under § 8(d), the

central inquiry is what wage rates (if any) were embodied in the

2007 Agreement. See 29 U.S.C. § 158(d) (stating that neither

party is obligated “to discuss or agree to any modification of

the   terms      and      conditions     contained    in”     a   CBA).     The     2007

Agreement required Daycon to give each employee $0.55 annual

raises “to his/her rate of pay.” J.A. 141. The Board concluded

that, through this language, the 2007 Agreement contained “the

current wage actually earned by each employee in early 2007,”

                                           14
when the agreement was executed. J.A. 78. Daycon argues, to the

contrary, that “rate of pay” refers to wage rates without the

mistakenly given raises.

       As noted above, Daycon had provided the Union with a list

of employees and their wage rates during negotiations for the

2007 Agreement. We think this fact suggests that both parties

understood “his/her rate of pay” to refer to those rates; there

is no contrary indication that “rate of pay” refers to the rates

that would have existed had Daycon not made the clerical errors

years earlier, during the term of the 2004 Agreement. It is thus

most     probable      that      the     Board     concluded     that    Daycon’s

interpretation of the CBA was not sound or arguable. (Indeed,

counsel so contended at oral argument.) But because the Board

failed   to    even    mention    the   “sound    arguable     basis”   test,   let

alone apply it, we are left to guess at its reasoning. This

Court thus “really has no way of knowing if the rationale it

discerns is in fact that of the agency, or one of [our] own

devise. Yet only the former can provide a legitimate basis for

sustaining agency action.” LeMoyne, 357 F.3d at 61.

       In one short paragraph in its brief, the Board argues that

the contract provides no basis for unilaterally modifying wage

rates,   and    that    the   Board     was    therefore   permitted    to   reject

Daycon’s “strained” argument without even mentioning the test.

Board Br. 15. But we think that is an argument as to the result

                                          15
of applying the test, not the applicability of the test itself.

Under the circumstances, we think it appropriate to give the

Board the chance to expressly apply or distinguish the “sound

arguable basis” test. 4

                                 III.

     For the reasons set forth, the application for enforcement

of the Board’s order is neither granted nor denied, and the

matter is remanded for further proceedings not inconsistent with

this opinion. Cf. Manhattan Ctr. Studios, Inc. v. NLRB, 452 F.3d

813, 816 (D.C. Cir. 2006) (“The Board cannot ignore its own

relevant precedent but must explain why it is not controlling.”)

(quotation marks and citation omitted); id. (“If we conclude

that the Board misapplied or deviated from its precedent, we

often     remand     with      instructions   to   remedy    the

misapplication/deviation.”).

                                                        REMANDED

     4
        We are satisfied that the Board acted within its
discretion in refusing to consider Daycon’s cross-exception and
denying Daycon’s motion to reconsider. We thus decline to
conclude, as Daycon argues, that the Board’s decision rests on
issues which were not fully or fairly litigated.

                                  16