Court Opinion

ID: 902903
Source: CourtListenerOpinion
Date Created: 2013-06-18 05:17:25.558728+00
Date Added: 2024-06-11T10:23:26.882826
License: Public Domain

Case: 10-60822   Document: 00512276147    Page: 1   Date Filed: 06/17/2013

        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                 Fifth Circuit

                                                                 FILED
                                                               June 17, 2013

                                No. 10-60822                   Lyle W. Cayce
                                                                    Clerk

INDEPENDENT ELECTRICAL CONTRACTORS OF HOUSTON,
INCORPORATED,

                                         Petitioner – Cross-Respondent

v.

NATIONAL LABOR RELATIONS BOARD,

                                         Respondent – Cross-Petitioner

                    Petitions for Review for Enforcement
               of Orders of the National Labor Relations Board

Before JONES, WIENER, and GRAVES, Circuit Judges.
EDITH H. JONES, Circuit Judge:
      A trade group representing over a hundred electrical contractors,
Independent Electrical Contractors of Houston (“IEC-Houston”), petitions for
review of two National Labor Relations Board orders dated August 27 and
September 30, 2010. NLRB cross-petitions for enforcement of the August 27,
2010 order. Because we conclude that the Board denied IEC-Houston due
process of law and misapplied its own precedents, we grant the petition for
review and deny the Board’s cross-petition for enforcement.
     Case: 10-60822      Document: 00512276147         Page: 2    Date Filed: 06/17/2013

                                       No. 10-60822

                                   BACKGROUND
       This opinion seeks to end more than a decade of uncertainty for
IEC-Houston. Commencing in 1996 and 1997, the International Brotherhood of
Electrical Workers (“IBEW”), Local Union No. 716, brought multiple unfair labor
practice charges against IEC-Houston and various of its contractor members.
See KenMor Elec. Co., 355 N.L.R.B. No. 173, 2010 WL 3463868, at *34 (Aug. 27,
2010).1 The General Counsel issued a complaint based on the union's allegations
on October 3, 1997. Id. Further charges were brought against Correct Electrical
and IEC-Houston in an overlapping case presenting almost the same facts. See
Indep.     Elec.   Contractors    of    Houston,    Inc.,   355    N.L.R.B.     No.    225,
2010 WL 3864537 (Sept. 30, 2010). Each complaint alleged that IEC-Houston’s
member employment-assistance programs discriminated against the hiring of
union members and “salts” in violation of Sec. 8(a)(3) of the National Labor
Relations Act, 29 U.S.C. § 158(a)(3).
       As a loose trade association and an affiliate of a national organization,
IEC-Houston has provided services to member contractors in the Houston, Texas
area for several decades. It operated during the period covered by these charges
(1996–97 and 1997–99, respectively) on a very modest budget with four full-time
employees, two of whom were clerical workers. In addition to its training
programs, lobbying, trade shows, and social functions, IEC-Houston offered two

       1
         Houston Stafford Electric, Inc., Case 16-CA-17894, 1998 WL 1985190, at *1 (N.L.R.B.
Div. of Judges Sept. 29, 1998), was the original ALJ opinion which was later supplemented by
Houston Stafford Electric, Inc., Case 16-CA-17894, 2001 WL 1603849 (N.L.R.B. Div. of Judges
Mar. 21, 2001). Upon review, the NLRB also found that IEC committed similar unfair labor
practices in KenMor Electric Co., 355 N.L.R.B. No. 173, 2010 WL 3463868 (Aug. 27, 2010).

                                             2
     Case: 10-60822       Document: 00512276147          Page: 3     Date Filed: 06/17/2013

                                       No. 10-60822

employment services to the members. These services were the focus of unfair
labor charges.
The Shared Man Program
       Since 1955, IEC-Houston has run a program that enables member
contractors who need additional electricians to borrow workers for up to sixty
days from other IEC-Houston contractors who have less work. In 1989, the
program was formalized in writing. It provides several benefits: the borrowing
contractor gains access to trained, reliable help; the lending contractor avoids
paying unemployment benefits; and the employee electricians avoid breaks in
employment. IEC-Houston kept no records about the utilization of this program.
       In a case concerning an IEC-Houston member, the Board held that the
shared man program did not discriminate against union supporters in violation
of § 8(a)(3). Pollock Elec., Inc., 349 N.L.R.B. 708, 710 (2007). The Board’s
opinion reaffirms it had “repeatedly found that hiring policies that give priority
to former employees and recommended employees are not unlawful, even if the
effect of such policies is to limit or exclude union applicants.” Id.2 Pollock
squarely rejected the administrative law judge’s finding of discrimination in the
shared man program. Further, in another case involving an IEC member, the
Board upheld the IEC shared man program. Centex Indep. Elec. Contractors

       2
         This proposition is well supported by NLRB precedent. See, e.g., Zurn/N.E.P.C.O.,
345 N.L.R.B. 12, 15 (2005), petition for review denied, 243 F. App’x 898 (6th Cir. 2007); Centex
Indep. Elec. Contractors Ass’n, 344 N.L.R.B. 1393, 1398 (2005) (employer’s preference for
“borrowed employees” lawful); Brandt Constr. Co., 336 N.L.R.B. 733, 733–34 (2001), review
denied sub nom. Int’l Union of Operating Eng’rs Local 150 v. NLRB, 325 F.3d 818, 833–34
(7th Cir. 2003) (preference for known over unknown is lawful); In re Kanawha Stone Co.,
334 N.L.R.B. 235, 236 (2001) (preference for employees on lay off, former employees, and
referrals from existing employees lawful); Belfance Elec., Inc., 319 N.L.R.B. 945, 946 (1995)
(preference for known over unknown is lawful).

                                               3
    Case: 10-60822     Document: 00512276147      Page: 4    Date Filed: 06/17/2013

                                  No. 10-60822

Ass’n, 344 N.L.R.B. 1393, 1403 (2005) (employer’s preference for borrowed
employees lawful).
Application Referral Service
      In 1990, years before the union salting campaign that precipitated the
instant charges, IEC-Houston instituted an application referral service for
members; its purpose is to save them the time and expense of running
employment ads and dealing with staffing agencies. During the period covered
by these charges, electricians looking for work could fill out a five-page
application at the offices of IEC-Houston. The clerical staff would ensure the
application was complete and then identify the worker as “green”
(inexperienced), an apprentice, or a journeyman. The applications were filed
according to these levels and were placed in an active file for thirty days.
Thereafter, all applications were maintained in a file cabinet for a year. An
applicant thus had to fill out a new application each thirty days in order to
remain in the active file. However, since many employers using the service only
wanted to see applications that were up to a few days old, it became common for
applicants to refile their applications more frequently than once a month. About
15–20 applications were filed each day.
      Initially, IEC-Houston did not charge the applicant for this service. In
1997, the association realized that the referral service’s cost ($60,000 to $100,000
annually) was becoming too high. On September 9, it began charging applicants
$50 for each additional application filed within a thirty-day period. The fee was
waived for electricians who had recently been laid off by an IEC-Houston
member.

                                         4
    Case: 10-60822      Document: 00512276147       Page: 5    Date Filed: 06/17/2013

                                   No. 10-60822

      When a member asked to review the applications, they would be made
available for in-person review or by fax according to the skill level and recency
requested. It is undisputed that IEC-Houston sent all the applications on file to
any member as requested. No applications were withheld or modified based on
an applicant’s union affiliation. IEC-Houston hired no electricians itself, but
acted only as a conduit to the members, who each made independent hiring
decisions. Because of its tiny staff, IEC-Houston kept no records showing which
applications went to which recipients, nor did it inform applicants where their
applications had been sent.
IEC-Houston Newsletters
      Two newsletters are material to this case, as the Board held them relevant
to labor law violations. IEC-Houston urged its free speech rights consistent with
NLRA § 8(c). We summarize the articles as background information but do not
consider the legal issues surrounding them.
      In March 1994, the IEC-Houston newsletter contained an article entitled
“IEC members can defeat COMET,”3 written by National IEC First Vice
President Jon Pollock. This article described a tactic whereby union salts (union
organizers) would intentionally induce employers to fire covert salts and then
file NLRB charges. The resulting legal expenses for contractors were often
devastating. Pollock warned that advertising for electricians directly in the
newspapers was “equivalent to waving a red flag to the union.” Moreover, he
opined, “when a stranger shows up looking for work, we are not allowed to ask

      3
        COMET is an acronym for “Construction, Organizing, Membership, Education, and
Training” which was implemented by the IBEW in 1993 to advance unionization among IEC’s
members.

                                          5
     Case: 10-60822         Document: 00512276147        Page: 6    Date Filed: 06/17/2013

                                        No. 10-60822

‘are you here to work or are you here to destroy us?’ Unknown workers may
come with hidden motivations and questionable agendas.”
       To defend against “this union attack,” Pollock advocated the use of IEC
services, such as the application referral service and shared man program, to
“minimize their exposure to risks.” He pointed out that “[m]any IEC chapters
advertise for electrician applications on behalf of [their] members,” and that this
system allowed the contractors to avoid some problems of “hiring off the street.”
“[C]ontractors who are short handed can obtain a fax list of potential applicants,
and they select from it those who have the best credentials.”
       In the March 1996 newsletter, IEC-Houston published an article entitled
“Coping with Labor’s COMET Campaign,” written by Peter Cockshaw, of
“COCKSHAW’S Construction Labor News and Opinion.” Cockshaw observed
that after the Town & Country Electric4 decision, non-union contractors were
“scrambling for strategies to counter new and accelerated union organizing
attacks.” He opined that, “[c]urrently, the best bet for some anti-‘salting’ relief
is the program run by IEC’s Houston Chapter.”
       Bob        Wilkinson,         the     president        of    IE C - H o u s t o n,   is
quoted—inaccurately5—as saying that: “IBEW locals in this area and many
others monitor all ads and then send union members to apply.” Cockshaw states
that “[t]o counter labor’s attack on the open shop’s skills’ sources, the Houston
Chapter and some other IEC affiliates have developed referral procedures. They
advertise on behalf of their members and sign up applicants at various offices.”

       4
           NLRB v. Town & Country Elec., Inc., 516 U.S. 85, 116 S. Ct. 450 (1995).
       5
        While the article purportedly contains several quotes by Bob Wilkinson concerning
IEC-Houston’s application service and shared man program, most of the “quotes” are verbatim
excerpts from the statements made by Jon Pollock in the March 1994 newsletter.

                                               6
     Case: 10-60822        Document: 00512276147           Page: 7     Date Filed: 06/17/2013

                                        No. 10-60822

Wilkinson described the program: “Contractors who are short-handed can obtain
a fax list of potential applications. They then select those who have the best
credentials. Aside from helping to avoid potential ‘salting’ problems, this process
eliminates duplication of effort among member firms.” Finally, Wilkinson
reaffirmed that IEC’s programs were created long before the COMET Program,
but stated that even though “it was created for other reasons, this arrangement
minimizes our members’ exposure to the current ‘salting’ risk.” Wilkinson
concluded that charges brought by the IBEW against the IEC’s programs do not
bother him “because [he] realizes that business agents who filed the complaints
are just doing their jobs.”
The KenMor Decision
       The first unfair labor practices complaint alleged violations of § 8(a)(3) and
derivative violations of § 8(a)(1): that the respondents refused to hire or consider
hiring various applicants because of their union affiliations and participation in
protected activities.        Moreover, the complaint alleged that IEC-Houston
maintained a referral system that discriminated against the hiring of union-
affiliated employees. KenMor, 2010 WL 3463868, at *34.
       After a hearing in 1998, the Administrative Law Judge (ALJ) found that
“several of I.E.C.’s practices tend to exclude Union members from consideration
for employment, and are therefore unlawful” under “8(a)(3) and (1)”6 of the
NLRA. Houston Stafford Elec., Inc., Case 16-CA-17894, 1998 WL 1985190, at

       6
          Violations of § 8(a)(3) are often derivative violations of § 8(a)(1), and the phrasing
“8(a)(3) and (1)” is common to indicate a derivative violation. Metro. Edison Co. v. NLRB,
460 U.S. 693, 698 n.4, 103 S. Ct. 1467, 1471 n.4 (1983). Freestanding and independent
violations of § 8(a)(1) are established through a different doctrinal test, see id. No independent
§ 8(a)(1) violation was alleged in the charge.

                                                7
     Case: 10-60822         Document: 00512276147         Page: 8     Date Filed: 06/17/2013

                                        No. 10-60822

*13, 19 (N.L.R.B. Div. of Judges Sept. 29, 1998). The ALJ found that because all
of IEC-Houston’s members were non-union, the shared man program would
exclude almost all union workers from the program and that the program was
inherently discriminatory. Id. at *14.7 Next, the ALJ found that the $50 fee for
additional applications was inherently discriminatory because union members
had to pay, but the fee was not charged to workers recently laid off by IEC-
Houston’s non-union members.               Id. at *14–15.       Moreover, the ALJ found
discriminatory IEC-Houston’s refusal to tell applicants to whom their
applications were distributed.             Id. at *15.8       Rejecting the respondent’s
explanation of its practices, the ALJ held that the applicants were “trapped in
a system where [they] could not find out whether [their] application[s] had ever
been considered,” and that the system was thus unlawful. Id. Finally, the ALJ
found that the two newsletter articles were “background evidence” of anti-union
animus that supported the ALJ’s § 8(a)(3) violation findings.                       IEC filed
exceptions to the ALJ’s decision. Id.
       More than nine years later, after an intervening remand,9 the Board
finally ruled in KenMor Electric Co., 2010 WL 3463868. The Board held that
IEC’s programs constituted unfair labor practices, but did not rely on “§ 8(a)(3)
and (1).” Indeed, the Board did not adopt the findings of the ALJ concerning

       7
           This ruling is foreclosed by a long line of NLRB precedent, see note 2 supra.
       8
        The ALJ mentions that this violates § 8(a)(1), but then concludes the system is “a
discriminatory hiring system,” which is a § 8(a)(3) violation.
       9
         On June 13, 2000, the NLRB remanded this case for further consideration in light of
its decision in FES, 331 N.L.R.B. 9 (2000), supplemented by 333 N.L.R.B. 66 (2001), enf’d
301 F.3d 83 (3d Cir. 2002). On March 21, 2001, however, the ALJ issued a supplemental
decision reaffirming the findings, conclusions, and recommended order in the original decision.
Houston Stafford Elec., 2001 WL 1603849. IEC again filed exceptions to the decision.

                                                8
        Case: 10-60822    Document: 00512276147          Page: 9     Date Filed: 06/17/2013

                                       No. 10-60822

whether IEC, “which was not itself an employer of electricians, also violated
Sec. 8(a)(3), or whether individual components of the application referral system
were inherently discriminatory or independently unlawful.” Id. at *5 n.15.
         Instead, a majority of the NLRB panel found an independent § 8(a)(1)
violation because the application referral program “interfered with the right of
job applicants who were union members and ‘salts’ to be hired on an equal basis
with other nonunion applicants.” Id. at *1.10 In reaching this conclusion, the
majority found the two articles in IEC newsletters to be admissions of violations
of rights to organize protected in NLRA § 7. Id. at *4–5. Next, the majority
found that elements of the referral system “considered as a whole, tend[] to
interfere with Section 7 activity by disadvantaging salts and union applicants.”
Id. at *5. In particular, the failure to keep records, the policy of not revealing to
applicants which IEC-Houston members received their applications, the policy
of not permitting applicants to review filed applications, the selectively-imposed
$50 fee for additional applications, and members’ practice of reviewing only
recently filed applications all worked together to disadvantage union applicants.
Id.11
         Third, the majority found that the shared man program, while not
unlawful in itself, tended, in tandem with the application referral service, to
ensure that union applicants would not be hired by IEC members. Id. at *6.

         10
         Section 8(a)(1) makes it unlawful for an employer to “interfere with, restrain, or
coerce employees in the exercise” of their § 7 rights.
         11
          Despite the majority’s belief that the referral service was opaque to applicants, the
union members identified and charged nearly a dozen IEC-Houston members with
discriminatory hiring practices because, they had found out, their own applications had been
rejected by those companies. None of those violation findings is challenged on appeal, and all
were unanimously upheld in KenMor and Independent Electrical Contractors.

                                              9
    Case: 10-60822        Document: 00512276147          Page: 10      Date Filed: 06/17/2013

                                       No. 10-60822

Finally, the majority found that the referral service as a whole had a “coercive
impact” because not one of the named union applicants was hired, while less
qualified electricians were hired. Id. Based on these findings, the majority ruled
that the IEC’s programs violated § 8(a)(1) of the NLRA. Id. at *7.
       A strong dissent was filed. The dissenting Board member charged that the
majority’s finding of a § 8(a)(1) violation was based upon a strict liability
disparate impact theory that was impermissible under the NLRA and case law
and drastically departed from any previously recognized theory of liability. Id.
at *21, 24, 27 (Schaumber, Member, dissenting in part). The dissent also
demonstrated that the majority’s ruling went “well beyond” anything alleged in
the complaint or argued by the General Counsel and, therefore, denied
IEC-Houston due process of law. Id. at *24–25. The dissent would have upheld
the program except for the reapplication fee.12 Id. at *27–28.
The Independent Electrical Contractors Decision
       The second NLRB opinion that the petitioner asks this court to review is
Independent Electrical Contractors of Houston, Inc., 2010 WL 3864537.13 The

       12
         The $50 fee, the dissent concluded, was commenced after the Union’s salting
campaign and had been proven discriminatory in violation of “§ 8(a)(3) and (1)” of the Act.
KenMor, 2010 WL 3463868, at *29 (Schaumber, Member, dissenting in part).
       13
           The dissent here argues that we lack jurisdiction to review the Independent
Electrical Contractors decision because the NLRB dismissed the allegations concerning the
referral system. The unusual procedural posture of this case leads us to reject that contention.
        Deaton Truck Line, Inc. v. NLRB, 337 F.2d 697, 698 (5th Cir. 1964) supports the
proposition that Section 10(f)—29 U.S.C. § 160(f)—limits the right to review to parties
aggrieved by a final Board order and that an employer is not aggrieved if he objected only to
findings and conclusions underlying a Board order dismissing a complaint, not to the order
itself. Even so, this case is distinct from Deaton Truck Line. Here, the findings of liability in
the Independent Electrical Contractors Order are germane to and a necessary part of the
factual picture underlying the Board’s one-month-earlier KenMor order. This fact was
acknowledged by the NLRB when it stated that the two cases share the same operative facts

                                               10
    Case: 10-60822        Document: 00512276147           Page: 11      Date Filed: 06/17/2013

                                        No. 10-60822

ALJ issued her opinion in the case on October 5, 2001 and the Board took nearly
eight years to issue its decision.
          The Board found that the issues of law “in the two cases [(KenMor
Electric Co. and Independent Electrical Contractors)] are virtually identical, as
was much of the material evidence.” Id. at *1. The single noteworthy change in
the referral service program was that IEC-Houston had stopped, after only six
months, charging the $50 fee for additional applications within 30 days. Id. at
*2. IEC-Houston had also begun to post applications online in addition to
collecting hard copies for its members. Id. at *2 n.4. The majority noted that the
IEC’s services had already been held to violate § 8(a)(1) in KenMor and that an
appropriate remedy had been ordered. Id. at *2. The majority dismissed the
charges against IEC-Houston because any further remedy would be redundant.
       Again, a strong dissent took issue with the Board majority’s reasoning.
The dissent agreed that the complaint against IEC-Houston should be dismissed,
but on the ground that these programs did not violate § 8(a)(1). Id. at *5 (Hayes,
Member, concurring in part and dissenting in part). The dissent argued that the

and involve the same actors. As the Board concluded, the Independent Electrical Contractors
decision is simply a continuation of the KenMor decision (which order aggrieves IEC), rather
than an independent decision. No statutory purpose would have been served in re-ordering
the same violation. Indep. Elec. Contractors of Houston, Inc., 355 N.L.R.B. No. 225,
2010 WL 3864537, at *2 (Sept. 30, 2010) (“A second finding combined with a second remedy
would be entirely redundant.”). We therefore consider them together.
        This conclusion is strengthened by the fact that the NLRB performed no independent
legal analysis in Independent Electrical Contractors, but merely incorporated the KenMor
discussion. Additionally, it was the NLRB’s Regional Director who consolidated for trial
IEC-Houston and six independent contractors in what became the KenMor case and then
consolidated IEC and several more contractor members for a second trial. The NLRB, having
put IEC to the expense of two trials—with one result—should not escape now the
consequences of that decision by a declaration that the evidence in the second trial is off-limits
for review by this court.

                                               11
    Case: 10-60822     Document: 00512276147      Page: 12    Date Filed: 06/17/2013

                                   No. 10-60822

KenMor majority created a new theory of liability in “an apparent attempt to
circumvent both the lack of evidence of discriminatory motivation in the
operation of the system and the legal barrier to disparate impact litigation under
our Act.” Id. The dissent pointed out that this theory was neither pled in the
complaint, nor fully litigated. Id. Moreover, all the elements of the system,
except the $50 fee, were clearly legal. Id. Finally, under the proper doctrinal
test for finding a violation of § 8(a)(1), the majority expressly and erroneously
refused to give any weight to IEC-Houston’s business justifications for its
policies. Id.
                                  DISCUSSION
      The majority of this panel concludes that NLRB’s stated rationale violates
standards of due process. Before reaching the issue, however, it is necessary to
respond to the dissent’s view that we lack “jurisdiction” pursuant to § 10(e) of the
NLRA.
      1. Appellate Jurisdiction
      The Union, as Intervenor, asserts that we lack jurisdiction to consider
IEC-Houston’s due process challenge because respondent failed to raise this
issue before the Board. Section 10(e) states that “[n]o objection that has not
been urged before the Board . . . shall be considered by the court, unless the
failure or neglect to urge such objection shall be excused because of
extraordinary circumstances.” 29 U.S.C. § 160(e). See NLRB v. Houston Bldg.
Servs., Inc., 128 F.3d 860, 863 (5th Cir. 1997). The dissent subscribes to the
Union’s argument. There are several reasons to reject this argument.
      First, it would be difficult to hold this requirement as “jurisdictional” in
this court because the statute itself creates an exception. See, e.g., Reed Elsevier,

                                         12
    Case: 10-60822    Document: 00512276147       Page: 13   Date Filed: 06/17/2013

                                  No. 10-60822

Inc. v. Muchnick, 559 U.S. 154, 159–66, 130 S. Ct. 1237, 1243–47 (2010)
(discussing difference between jurisdictional and non-jurisdictional rules).
Following a recent Supreme Court precedent, § 10(e) is essentially an exhaustion
of remedies provision and as such is properly raised as an affirmative defense.
Cf. Jones v. Bock, 549 U.S. 199, 212–16, 127 S. Ct. 910, 919–21 (2007). It should
follow that this court does not lack “jurisdiction” to consider the merits of an
NLRB order if the Board itself chooses not to raise a § 10(e) exhaustion defense.
This aspect of § 10(e) is for the benefit of the Board, not a sword for intervenors.
Although we have previously held that § 10(e) is “mandatory, not discretionary,”
Houston Bldg. Servs., 128 F.3d at 863, it was the Board in that case, not an
intervenor, that raised the statute.
      Second, while the case law generally supports the idea that a party must
raise any issues to the Board before appealing them, this requirement can be
measured in context. The purpose of § 10(e) is to give the Board notice and an
opportunity to confront objections to its rulings before it defends them in court.
See, e.g., Marshall Field & Co. v. NLRB, 318 U.S. 253, 256, 63 S. Ct. 585, 586
(1943). In some cases, though, courts construing § 10(e) have concluded that
“when the policies underlying the rule are not implicated,” issues not directly
raised to the Board may be considered on appeal. Facet Enters., Inc. v. NLRB,
907 F.2d 963, 970–74 (10th Cir. 1990). Addressing a due process challenge,
Facet explicitly distinguished the two primary cases—Woelke & Romero
Framing, Inc. v. NLRB, 456 U.S. 645, 665–66 (1982), and International Ladies’
Garment Workers’ Union v. Quality Manufacturing Co., 420 U.S. 276, 281 n.3
(1975) (quoting 29 U.S.C. § 160(e))—where failure to petition the Board for
reconsideration was fatal to an appeal.        The request for reconsideration,

                                        13
   Case: 10-60822     Document: 00512276147     Page: 14    Date Filed: 06/17/2013

                                 No. 10-60822

29 C.F.R. § 102.48(d)(1), was actually only necessary in those cases because the
petitioners’ objections had never been voiced to the Board at all. Id. at 971–72.
Absent notice, it would have been inappropriate for the appellate court to review
the issue. See also Bath Marine Draftsmen’s Ass’n v. NLRB, 475 F.3d 14, 24 (1st
Cir. 2007) (because the Board had adequate notice that the General Counsel
(through an unclear brief) and the Unions believed they had posed an issue to
the Board, it was preserved for appeal; lack of a motion for reconsideration was
not fatal since the Board already understood the issue). Here, the Board’s full
consideration of the due process claim provides a context in which review is
warranted.
      Ultimately, because the statute carries its own qualification, courts have
frequently, but carefully, applied the “extraordinary circumstances” exception.
One case that articulates some of the grounds for not applying § 10(e) strictly,
or for finding the exception, is Local 900, Int’l. Union of Elec., Radio and
Machine Workers v. NLRB, 727 F.2d 1184 (DC Cir. 1984) (“Local 900”). In
particular Local 900 notes a futility exception where it would be an empty
formality to require filing a motion to reconsider before the Board. Id. at 1191.
The court there allowed the complainant to raise a retroactivity challenge to the
Board’s decision because the issue had been implicit in its briefing to the Board.
Id. at 1194 (taking into account the combination of conditions present when
considering the adequacy of the objection). And under a different set of facts,
this court has also applied the extraordinary circumstances exception when
futility was involved. NLRB v. Robin Am., 667 F.2d 1170, 1171 (5th Cir. 1982).
      In this case, it is appropriate to examine the due process issue based on
the “extraordinary circumstances” before us. First, NLRB did not raise the

                                       14
    Case: 10-60822      Document: 00512276147        Page: 15     Date Filed: 06/17/2013

                                     No. 10-60822

question of exhaustion. Second, eight and nine years elapsed between the ALJs’
respective decisions and those of the Board. Surely, it was unnecessary for an
aggrieved party to extend a process that had already gone on intolerably long;
IEC had no reason to think that the Board would rule more expeditiously on a
motion for rehearing than it had on the appeals in the first place. Third,
questions of due process were raised, albeit not in this precise context, in IEC’s
objections to the ALJ findings, and the General Counsel acknowledged those
questions. Fourth, five Board members participated in the two decisions and
both panels discussed due process. Not only did the Board deny due process by
relying here on a novel theory, it preemptively denied that it had denied due
process. Any attempt by the IEC to add to the debate already undertaken by the
Board would have been futile.
      2. Due Process
      Administrative due process, reflecting constitutional standards, requires
that “[p]ersons entitled to notice of an agency hearing shall be timely informed
of . . . (3) the matters of fact and law asserted.” 5 U.S.C. § 554(b)(3). The NLRB
is well acquainted with this requirement. IEC-Houston contends, however, and
we agree, that it was deprived of due process of law14 because it was charged and
tried under § 8(a)(3), while each Board panel rejected the ALJs’ finding of
liability under § 8(a)(3), and instead found violations of § 8(a)(1) under a novel
theory of liability. At trial in KenMor, the General Counsel described the theory
of the case by stating that she would show that IEC’s “hiring system is

      14
         The dissents in KenMor and Independent Electrical Contractors agree that the NLRB
deprived IEC of due process. KenMor, 2010 WL 3463868, at *24–25 (Schaumber, Member,
dissenting in part); Indep. Elect. Contractors, 2010 WL 3864537, at *5 (Hayes, Member,
concurring in part and dissenting in part).

                                           15
   Case: 10-60822     Document: 00512276147     Page: 16    Date Filed: 06/17/2013

                                 No. 10-60822

discriminatory, and that it violates the Act, because it discriminates against
Union organizers.” There were no independent allegations of interference with
employee rights under § 7. In his “Conclusions of Law,” the ALJ in KenMor
found IEC-Houston violated “§ 8(a)(3) and (1)” because its programs
discriminated against union members.         Houston Stafford Elec., 1998 WL
1985190, at *19. The same procedures occurred in Independent Electrical
Contractors. In both cases, IEC-Houston restricted its defense to the accused
§ 8(a)(3) violations. The Board’s change of liability theories on appeal was error
and it was not harmless error.
      In In re Champion International Corp., 339 N.L.R.B. 672, 673 (2003), the
Board stated that “[i]t is axiomatic that a respondent cannot fully and fairly
litigate a matter unless it knows what the accusation is.” Moreover, the Board
knows that it cannot “change theories in midstream without giving respondents
reasonable notice of the change.” Lamar Cent. Outdoor d/b/a Lamar Adver. of
Hartford, 343 N.L.R.B. 261, 265 (2004) (quoting Bendix Corp. v. FTC,
450 F.2d 534, 542 (6th Cir. 1971)). Importantly, the Board has recognized that
when the General Counsel has chosen to litigate against a respondent on a
narrow theory of liability, and the respondent was reasonably led to believe that
it would not have to defend on a broader theory, an ALJ is not free to resolve the
case on a broader theory. In re Sierra Bullets, LLC, 340 N.L.R.B. 242, 243 (2003)
(citing Paul Mueller, Co., 332 N.L.R.B. 1350 (2000)). In such a case, the proper
response, according to Sierra Bullets, is to reverse the ALJ, reject the theory on
a broader analysis, and dismiss the charge. Id. The First and Sixth Circuits
have held likewise. NLRB v. Fletcher Co., 298 F.2d 594, 600 (1st Cir. 1962);
NLRB v. Johnson, 322 F.2d 216, 219–20 (6th Cir. 1963).

                                       16
    Case: 10-60822        Document: 00512276147         Page: 17     Date Filed: 06/17/2013

                                       No. 10-60822

       The Board responds by pointing to Pergament United Sales, Inc.,
296 N.L.R.B. 333, 334 (1989), enf’d 920 F.2d 130 (2d Cir. 1990), where the Board
decided it could find an unalleged unfair labor practice that (1) is “closely
connected to the subject matter of the complaint,” and (2) “has been fully
litigated.” The problem with Pergament, and the related cases cited by the
NLRB,15 is that they extended the same operative facts of the charge to other,
well-defined theories of violation. In Pergament, for instance, the common issue
between the § 8(a)(3) violation charged and the § 8(a)(4) violation found was
whether the employer refused to hire women because they belonged to a union.
Here, in contrast, the Board applied a new and previously unrecognized theory16
against which the accused party had no notice or opportunity to defend.
Pergament and the other cases cited by the Board are distinguishable.
       The adverse consequences of the Board’s finding of a § 8(a)(1) violation
arise as follows. First, applicants who are individually denied employment
ordinarily proceed under § 8(a)(3), which covers “discrimination in regard to hire
or tenure of employment.” 29 U.S.C. § 158(a)(3). Section 8(a)(1), on the other
hand, concerns interference with the rights of employees to organize pursuant
to Section 7. 29 U.S.C. § 158(a)(1). As in this case, the General Counsel often
charges employers with violating §§ 8(a)(3) and (1), which amounts to a primary
violation of § 8(a)(3) and a derivative violation of § 8(a)(1). Violations of § 8(a)(3)

       15
          Casino Ready Mix, Inc. v. NLRB, 321 F.3d 1190, 1200 (D.C. Cir. 2003) (quoting
Pergament United Sales, Inc., 296 N.L.R.B. 333, 334 (1989), enf’d 920 F.2d 130 (2d Cir. 1990));
In re Cardinal Home Prods., Inc., 338 N.L.R.B. 1004, 1007 (2003) (same); Williams Pipeline
Co., 315 N.L.R.B. 630, 630 (1994) (same).
       16
          KenMor is a new category of violation under § 8(a)(1) as evidenced by its own section
in a leading labor law treatise. See, e.g., 1 N. PETER LAREAU, LABOR AND EMPLOYMENT LAW
§ 5.07[8] (2012).

                                              17
    Case: 10-60822    Document: 00512276147      Page: 18    Date Filed: 06/17/2013

                                  No. 10-60822

may separately violate § 8(a)(1) when “the employer’s acts served to discourage
union membership or activity.”       Indiana & Michigan Elec. Co. v. NLRB,
599 F.2d 227, 229 n.2 (7th Cir. 1979) (cited with approval in Metro. Edison Co.
v. NLRB, 460 U.S. 693, 103 S. Ct. 1467 (1983)). The two provisions, however,
“are not coterminous.” Metro. Edison, 460 U.S. at 698 n.4, 103 S. Ct. at 1472 n.4.
Moreover, a derivative violation of § 8(a)(1) stemming from a § 8(a)(3) charge will
not be reviewed independently; only the §8(a)(3) charge will be considered. Id.
For a § 8(a)(1) violation to be considered on its own merit, it must be
independently charged.     Id.   The Board was not at liberty to ignore the
distinction between § 8(a)(1) and (3).
      Second, the nature of the violations requires different proof. Anti-union
animus or discriminatory motive are essential proof for § 8(a)(3). FES, a Div. of
Thermo Power, 331 N.L.R.B. 9, 12 (2000). For a violation of § 8(a)(1), however,
an employer’s motive is irrelevant. KenMor, 2010 WL 3463868, at *4. The
totality of circumstances must be considered in determining whether employees’
§ 7 rights have been interfered with in violation of § 8(a)(1), but the Board must
also allow an employer to demonstrate a legitimate and substantial business
justification for its conduct. Under well settled precedent, the Board’s duty is
then to balance the asserted business justifications and the invasion of
employees’ rights in light of the Act and its policy. California Newspapers
P’ship, d/b/a ANG Newspapers, 343 N.L.R.B. 564, 565 (2004) (citing In re Desert
Palace d/b/a Caesar’s Palace, 336 N.L.R.B. 271, 272 n.6 (2001); Jeannette Corp.,
532 F.2d 916, 918 (3rd Cir. 1976)). Whether IEC-Houston could have offered
additional justifications for its practices, or disproved the alleged systemic
disadvantage imposed on union applicants through its programs, is unknown

                                         18
   Case: 10-60822     Document: 00512276147     Page: 19    Date Filed: 06/17/2013

                                 No. 10-60822

because respondent had no notice that this was necessary. Equally unfortunate,
the Board, having deviated from the charges that had been pled and tried, then
refused to expressly balance IEC-Houston’s business justifications as required
by ANG.
      Further proof of the no-win situation in which the Board placed
respondent is the Board’s ambiguous approach to motive in finding a § 8(a)(1)
violation. On one hand, the Board acknowledged the irrelevance of an adverse
motive. On the other hand, it stacked the elements of the shared man program
and application referral service, each of which has been upheld as legal by the
Board or courts, and found them collectively unlawful when viewed in light of the
allegedly anti-union newsletters. Even if this internally inconsistent theory had
been timely asserted, the Respondent could not have known what kind of
defense to pursue.
      Finally, the novelty of the Board’s theory of liability supports our
conclusion that IEC-Houston lacked notice of the basis for § 8(a)(1) liability. We
need not determine whether the Board’s finding of a violation amounts to an
impermissible disparate impact theory. See Contractors’ Labor Pool, Inc. v.
NLRB, 323 F.3d 1051, 1059 (D.C. Cir. 2003). For one thing, there was no
evidence that IEC-Houston’s processes applied differently to union and non-
union applicants. But apart from that, the Board’s opinion and briefs to this
court are markedly short of citing any factually or legally related § 8(a)(1)
precedents. We do not question the Board’s authority to fashion novel remedies
where novel facts show violations. Here, however, IEC-Houston’s referral
service predated the union’s COMET program by several years and therefore
must have lacked an anti-“salting” animus, while the shared man program is

                                       19
    Case: 10-60822       Document: 00512276147         Page: 20     Date Filed: 06/17/2013

                                      No. 10-60822

longstanding and has been upheld by NLRB. The IEC-Houston services were
neither the exclusive hiring resource of its member contractors nor their first
resort, and the actual impact or utilization of the shared man program, during
a period characterized by substantial demand, was not explored. If the General
Counsel had chosen to pursue a novel § 8(a)(1) violation premised on these facts,
it should have been done in the regular adjudicative process, and not as an after-
thought imposed by the Board on review. Cf. Zurn/N.E.P.C.O., 345 N.L.R.B. 12,
15 (2005), pet. for review denied, 243 F. App’x 898 (6th Cir. 2007) (where the
Board found a program not discriminatory, despite a disparate impact on union-
affiliated employees, because it was facially neutral and, crucial to the lack of
discriminatory purpose, because the program was created before the union
activity that led to charges).
       Because this decision is predicated on due process grounds, we do not
reach the merits of the Board’s novel § 8(a)(1) theory of liability.
                                    CONCLUSION
       The foregoing discussion renders unenforceable the Board’s findings of an
independent § 8(a)(1) violation against IEC-Houston.17 Accordingly, the petition
for review is GRANTED and the Board’s cross-petition for enforcement is
DENIED.

       17
          Although the dissenters in both cases would have upheld the finding of a § 8(a)(3)
violation concerning the $50 re-application fee, the Board majority specifically rejected the
ALJs’ findings of discriminatory animus in the imposition of the fee. We may not affirm an
administrative agency action on a rationale that the agency refused to adopt. SEC v. Chenery
Corp., 318 U.S. 80, 93–94, 63 S. Ct. 454 (1943).

                                             20
    Case: 10-60822      Document: 00512276147        Page: 21    Date Filed: 06/17/2013

                                    No. 10-60822

JAMES E. GRAVES, JR., Circuit Judge, dissenting:
      I dissent from the majority’s opinion and would deny the petition for
review and grant the cross-petition for enforcement.
      In enacting the National Labor Relations Act (“NLRA” or “Act”), Congress
expressed an unequivocal intent:
             It is hereby declared to be the policy of the United States to
      eliminate the causes of certain substantial obstructions to the free
      flow of commerce and to mitigate and eliminate these obstructions
      when they have occurred by encouraging the practice and procedure
      of collective bargaining and by protecting the exercise by workers of
      full freedom of association, self-organization, and designation of
      representatives of their own choosing, for the purpose of negotiating
      the terms and conditions of their employment or other mutual aid
      or protection.
29 U.S.C. § 151 (emphasis added).
      It is through this lens that we must view the case before us. Though it
may seem, at first glance, counterintuitive that an employer is prohibited from
discriminating against a union salt1 who applies for a job with the express
intention of organizing the workplace, Congress was clear that this activity is
protected. Id.; see also NLRB v. Town & Country Elec., 516 U.S. 85, 87, 90-92
(1995) (ruling that union salts are protected as “employees” under the NLRA).
This is especially the case when, as here, the employers are organized into their
own associations:
            The inequality of bargaining power between employees who
      do not possess full freedom of association or actual liberty of
      contract, and employers who are organized in the corporate or other
      forms of ownership association substantially burdens and affects the

      1
       “Salts” are union organizers that apply for work with the intention of encouraging
coworkers to form a union.

                                           21
     Case: 10-60822     Document: 00512276147         Page: 22    Date Filed: 06/17/2013

                                     No. 10-60822

       flow of commerce, and tends to aggravate recurrent business
       depressions, by depressing wage rates and the purchasing power of
       wage earners in industry and by preventing the stabilization of
       competitive wage rates and working conditions within and between
       industries.
29 U.S.C. § 151.
       It is my opinion that we lack jurisdiction to consider the National Labor
Relations Board’s (“NLRB” or “Board”) order in Indep. Elec. Contractors of
Houston, Inc., 355 N.L.R.B. No. 225, 2010 WL 3864537 (Sept. 30, 2010)
(“September Order”), as well as the merits of certain of IEC-Houston’s
arguments. Moreover, even if we could consider all of IEC-Houston’s arguments,
they fail on the merits. The NLRB’s orders rest on substantial evidence and I
would thus affirm.
A.     Jurisdictional Issues & IEC-Houston’s First Two Arguments
       1.     We Lack Jurisdiction to Consider the September Order.
       Under 29 U.S.C. § 160(f), “[a]ny person aggrieved by a final order of the
Board granting or denying in whole or in part the relief sought may obtain a
review of such order in any United States court of appeals[.]” The NLRB
General Counsel contends that the September Order has no “adverse effect”2 on
IEC-Houston because it orders no relief with respect to IEC-Houston. Rather,
in the September Order, the Board stated that in light of the relief ordered in
KenMor Elec. Co., Inc., 355 N.L.R.B. No. 173, 2010 WL 3463868 (“August
Order”), it would not grant any further relief “even were we to proceed and find
that [IEC-Houston’s referral service’s] continued operation continued to violate

       2
          Liquor Salesmen’s Union Local 2 v. NLRB, 664 F.2d 1200, 1206 n.8 (D.C. Cir. 1981)
(citation omitted) (ruling that an “adverse effect in fact” is required for a party to have
standing under 29 U.S.C. § 160(f)).

                                            22
   Case: 10-60822     Document: 00512276147      Page: 23   Date Filed: 06/17/2013

                                 No. 10-60822

the Act.” The Board concluded: “A second finding combined with a second
remedy would be entirely redundant . . . . [and] we dismiss the allegations
concerning the operation of the referral service on the grounds that their
adjudication would not further the remedial purposes of the Act.”
      The General Counsel is correct that IEC-Houston was not “aggrieved” by
the September Order, and as such, has no standing to appeal that order. IEC-
Houston argues that the September Order adopts the August Order and thus
operates against it, but that is incorrect. Rather, the Board determined in the
September Order that making findings and ordering relief against IEC-Houston
would be redundant, so it did not do so; instead, it dismissed the allegations,
which in no way adversely affected IEC-Houston.
      Our lack of jurisdiction over the September Order has only a limited effect
on the scope of our review. The General Counsel correctly notes that, without
such jurisdiction, we cannot consider evidence that was presented as part of the
second case. See Fed. R. App. P. 16(a) (“The record on review or enforcement of
an agency order consists of: (1) the order involved; (2) any findings or report on
which it is based; and (3) the pleadings, evidence, and other parts of the
proceedings before the agency.”). If the evidence supporting the August Order
is otherwise sufficient, the additional evidence presented in the second case
cannot render the August Order erroneous.
      The majority’s opinion relegates this jurisdictional issue to a footnote, and
dismisses it without referencing any supportive authority. In fact, the majority
cites Deaton Truck Line, Inc. v. NLRB, 337 F.2d 697, 698 (5th Cir. 1964),
which—according to the majority’s own words—“supports the proposition that
Section 10(f)—29 U.S.C. § 160(f)—limits the right to review to parties aggrieved

                                        23
    Case: 10-60822    Document: 00512276147       Page: 24   Date Filed: 06/17/2013

                                  No. 10-60822

by a final Board order and that an employer is not aggrieved if he objected only
to findings and conclusions underlying a Board order dismissing a complaint, not
to the order itself.” This is improper, and I dissent from the majority on this
limited but important jurisdictional issue.
      2.    IEC-Houston has Waived its Due Process and Improper “Hybrid
            Disparate Impact Theory of Liability” Arguments, and, Regardless,
            the Arguments Fail.
      We also lack jurisdiction to consider the first two of IEC-Houston’s merit-
based arguments because IEC-Houston did not previously object to the Board’s
orders through a motion for reconsideration or otherwise. Even if we could
consider those arguments, though, they fail on the merits. IEC-Houston’s three
arguments on appeal are: (1) the Board denied IEC-Houston due process of law
by finding a violation of § 8(a)(1) that was neither pleaded nor litigated; (2)
adoption of a “hybrid disparate impact theory of liability” by the Board is error
because it is not permitted by the NLRA or supported by substantial evidence
in the record as a whole; and (3) the Board’s finding of a violation of § 8(a)(1) is
not supported by substantial evidence or the NLRA.
      The Supreme Court has held that, since the Board’s regulations provide
“that any material error in the Board’s decision may be asserted through a
motion for ‘reconsideration, rehearing, or reopening of the record’, [a]
[r]espondent therefore cannot assert its objection on appeal ‘unless the failure
or neglect to urge such objection shall be excused because of extraordinary
circumstances.’” Int’l Ladies’ Garment Workers’ Union v. Quality Mfg. Co., 420
U.S. 276, 281 n.3 (1975) (quoting 29 U.S.C. § 160(e)); accord Woelke & Romero
Framing, Inc. v. NLRB, 456 U.S. 645, 665-66 (1982).
            a.     Due Process Argument

                                        24
    Case: 10-60822    Document: 00512276147      Page: 25   Date Filed: 06/17/2013

                                  No. 10-60822

      IEC-Houston contends it was denied due process because the Board found
that IEC-Houston committed an independent violation of § 8(a)(1), even though
the Union’s charges and the General Counsel’s complaint alleged only hiring
discrimination under § 8(a)(3) and a subsidiary violation of § 8(a)(1). Indeed, the
administrative law judge’s (“ALJ”) decision rested on § 8(a)(3), but the Board’s
decision did not.
      The Union correctly argues that IEC-Houston has waived this due process
argument. Section 10(e) of the NLRA states that a court may not consider an
objection not raised before the Board “unless the failure or neglect to urge such
objection shall be excused because of extraordinary circumstances.” 29 U.S.C.
§ 160(e). Logically, IEC-Houston could not have raised its due process argument
regarding the Board’s “novel theory of liability” before the Board issued its
decision, but it could have raised the argument on a motion for reconsideration
under 29 C.F.R. § 102.48(d)(1).
      The Supreme Court has specifically held that when an employer neglects
to file a motion for reconsideration before the Board, the employer waives its
argument that it was denied due process because the Board based its ruling on
an uncharged theory of liability under § 8(a)(1). Int’l Ladies’ Garment Workers’
Union, 420 U.S. at 281 n.3 (holding that because the employer “failed to file a
petition for reconsideration as permitted by Board Rules and Regulations,” the
employer could not assert its objection on appeal).
      That is precisely the situation here. It makes no difference that the due
process issue was discussed in the Board’s majority opinion and dissent. Woelke
& Romero, 456 U.S. at 665-66 (issue waived when party did not file motion for
reconsideration, even though Board addressed issue); NLRB v. Ferguson Elec.

                                        25
    Case: 10-60822    Document: 00512276147      Page: 26    Date Filed: 06/17/2013

                                  No. 10-60822

Co., Inc., 242 F.3d 426, 435 (2d Cir. 2001) (“Even when the Board itself raises
and decides an issue sua sponte, an objection must be filed with the Board to
preserve the issue for a reviewing court.”). Because IEC-Houston had the ability
to file a motion for reconsideration, there are no extraordinary circumstances
that would justify it raising this issue without having brought its objection
before the Board. See Gulf States Mfg. Inc. v. NLRB, 704 F.2d 1390, 1396-97
(5th Cir. 1983) (finding no jurisdiction to hear an argument not raised before the
Board because extraordinary circumstances did not exist—the party could have
raised the issue in supplement to its objections or in a motion for reconsideration
of the Board’s decision).
      IEC-Houston asserts that it did raise a due process objection in its
exceptions to the ALJ’s decision. In those exceptions, IEC-Houston stated that
it was denied due process of law because issues concerning the $50 fee, the
shared man program, and its failure to give applicants information were not
fully and fairly litigated. These objections, however, in no way informed the
Board that IEC-Houston was objecting to the Board’s finding of an independent
violation under § 8(a)(1) when the complaint alleged discrimination under §
8(a)(3).
      IEC-Houston also argues that, given the 15-year duration of these cases,
“the last thing the Board needs is more time to reconsider its decision,” and that
any motion for reconsideration would have been futile. This unsupported legal
conclusion, however, does not demonstrate that a motion for reconsideration
would have been futile. Cf. NLRB v. Robin Am. Corp., 667 F.2d 1170, 1171 (5th
Cir. 1982) (holding a party’s argument was not waived when an objection to the
Board would have been futile because the decision changing the applicable legal

                                        26
    Case: 10-60822    Document: 00512276147       Page: 27   Date Filed: 06/17/2013

                                  No. 10-60822

standard and providing the basis for the objection did not come until the case
was already before the court of appeals). IEC-Houston does not satisfactorily
argue any retroactive changed legal standard that would justify its failure to
object to the Board’s orders. IEC-Houston has thus waived its due process
argument.
       Again, the majority’s opinion improperly dismisses this jurisdictional
issue. In fact, the majority cites a decision from our circuit holding that, “absent
extraordinary circumstances, the failure to raise an argument before the Board
renders us without jurisdiction to consider that argument . . . . This rule is
mandatory, not discretionary.” Houston Bldg. Servs., 128 F.3d 860, 863 (5th Cir.
1997) (internal quotation marks and citation omitted). Therefore, I dissent from
the majority regarding its consideration of the merits of IEC-Houston’s due
process.
       Even if IEC-Houston had not waived this argument, however, the Board’s
reliance on § 8(a)(1) does not violate IEC-Houston’s due process rights. The
Board may find an unalleged violation if (1) “the issue is closely connected to the
subject matter of the complaint” and (2) “has been fully litigated.” Pergament
United Sales, Inc., 296 NLRB 333, 334 (1989), enf’d, 920 F.2d 130 (2d Cir. 1990).
Under the “closely connected” standard, the employer must be informed of “the
acts forming the basis of the complaint,” but not necessarily “the legal theory
upon which the General Counsel intends to proceed.” Pergament, 920 F.2d at
135.
       The NLRB has held that a finding of a § 8(a)(1) violation when the
complaint alleged only a § 8(a)(3) violation does not violate due process when
both allegations “plainly focus on the same set of facts . . . .” Cardinal Home

                                        27
    Case: 10-60822      Document: 00512276147        Page: 28     Date Filed: 06/17/2013

                                     No. 10-60822

Prods., Inc., 338 NLRB 1004, 1007 (2003). That is clearly the case here. This
is not a case, as the majority writes, in which the legal violation found by the
Board raises entirely different issues from the legal violation charged. See
Champion Int’l Corp., 339 NLRB 672, 673 (2003) (distinguishing Pergament and
Cardinal, and finding a due process violation where the alleged and actual
violations differed substantially).        To the contrary, the issue of hiring
discrimination has been fully and fairly litigated; indeed, most of the parties’
arguments go to that issue. Moreover, to the extent that the Board’s decision is
based on admissions in the IEC-Houston newsletter, any risk of unfair surprise
to IEC-Houston is mitigated. See Pergament, 920 F.2d at 136 (finding no due
process violation when a shift in the legal theory was based on the employer’s
own testimonial admission).
      The majority’s attempt at distinguishing Pergament is unavailing. It
asserts “[t]he problem with Pergament, and the related cases cited by the
NLRB,3 is that they extended the same operative facts of the charge to other,
well-defined theories of violation.” Nevertheless, as further discussed below in
part B, a § 8(a)(1) violation is a well-defined theory of violation. Thus, in
addition to having been waived, IEC-Houston’s due process argument is
meritless.
      b.     “Hybrid Disparate Impact Theory of Liability” Argument
      IEC-Houston argues that “extraordinary circumstances” exist giving this
court jurisdiction to adjudicate this second argument despite IEC-Houston’s
failure to object to the Board’s orders because “the Board was outside the orbit

      3
        Casino Ready Mix, Inc. v. NLRB, 321 F.3d 1190, 1200 (D.C. Cir. 2003) (quoting
Pergament, 296 NLRB at 334); Cardinal, 338 NLRB at 1007 (same); Williams Pipeline Co., 315
NLRB 630, 630 (1994) (same).

                                           28
    Case: 10-60822     Document: 00512276147       Page: 29    Date Filed: 06/17/2013

                                   No. 10-60822

of its authority when it decided to import Title VII disparate impact theory to
the NLRA.”
      Circuit courts may exercise jurisdiction over objections where the Board
has “patently travelled outside the orbit of its authority.” NLRB v. Blake Constr.
Co., 663 F.2d 272, 284 n.34 (D.C. Cir. 1981) (citing, e.g., NLRB v. Cheney Cal.
Lumber Co., 327 U.S. 385, 388 (1946). Here, however, the Board did not
patently travel outside its orbit of authority. The fact that the Board changed
the basis for the violation and declared a § 8(a)(1) violation does not justify an
exception to § 10(e) requirements. See Int’l Ladies’ Garment Workers Union, 420
U.S. at 281 n.3.
      Furthermore, IEC-Houston’s assertion that the NLRA, unlike Title VII,
“does not allow disparate impact as a theory of liability” is immaterial to our
review. The Board explicitly stated it was not relying on a disparate impact
theory to support its unfair labor practice finding. The Board simply found that
the referral system had an inherent tendency to interfere with union-affiliated
and salt applicants, and did not discuss any effect on non-union applicants. The
General Counsel is correct that “it is no defense for IEC-Houston to . . . insist
that the consequences of the system fell to some extent on both [union and non-
union] categories of applicants.” The majority’s finding that there could not have
been any anti-union animus because the referral system predated the Union’s
COMET campaign is likewise immaterial because the Board’s ruling was not
dependent on animus.
      For these reasons, IEC-Houston’s argument that the Board has patently
travelled outside the orbit of its authority in declaring a § 8(a)(1) violation fails.
Therefore, there were no “exceptional circumstances” justifying IEC-Houston’s

                                         29
     Case: 10-60822   Document: 00512276147      Page: 30   Date Filed: 06/17/2013

                                  No. 10-60822

failure to object to the Board’s order through a motion for reconsideration or
otherwise, and we are without jurisdiction to consider IEC-Houston’s “hybrid
disparate impact theory of liability” argument.
B.     The Board’s finding of a violation of § 8(a)(1) is supported by substantial
       evidence.
       I also dissent from the majority and maintain that substantial evidence
supports the Board’s finding of a § 8(a)(1) violation. We affirm the Board’s
factual determinations if they are supported by substantial evidence. Universal
Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951). Substantial evidence is “such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Brown & Root, Inc. v. NLRB, 333 F.3d 628, 633 (5th Cir. 2003)
(quoting Universal Camera, 340 U.S. at 477). Pursuant to this standard, “the
ALJ’s decision must be upheld if a reasonable person could have found what the
ALJ found, even if the appellate court might have reached a different conclusion
. . . .” Valmont Indus. v. NLRB, 244 F.3d 454, 463 (5th Cir. 2001) (internal
quotation marks and citation omitted). We must also consider evidence in the
record that detracts from the Board’s findings. Asarco, Inc. v. NLRB, 86 F.3d
1401, 1406 (5th Cir. 1996).
       The standard of review for questions of law decided by the Board is de
novo, and we affirm if the NLRB provides a “reasonably defensible”
interpretation of the Act. Standard Fittings Co. v. NLRB, 845 F.2d 1311, 1314
(5th Cir. 1988) (citing, e.g., Pattern Makers’ League v. NLRB, 473 U.S. 95
(1985)). Therefore, we defer to the legal conclusions of the Board if reasonably
grounded in the law and not inconsistent with the NLRA. Tellepsen Pipeline
Servs. Co., v. NLRB, 320 F.3d 554, 559 (5th Cir. 2003) (citing Valmont, 244 F.3d
at 464). “With respect to mixed questions of law and fact, this court must

                                        30
    Case: 10-60822    Document: 00512276147       Page: 31   Date Filed: 06/17/2013

                                  No. 10-60822

sustain the Board’s application of its legal interpretations to the facts of the
particular case when supported by substantial evidence based upon the record
considered as a whole.” Tellepsen, 320 F.3d at 559 (citing Beth Israel Hosp. v.
NLRB, 437 U.S. 483, 501 (1978)).
      Section 8(a)(1) of the NLRA (29 U.S.C. § 158(a)(1)) penalizes an employer
that attempts “to interfere with, restrain, or coerce employees in the exercise”
of their § 7 rights. Section 7 of the NLRA (29 U.S.C. § 157) gives employees “the
right to self-organization, to form, join, or assist labor organizations, to bargain
collectively through representatives of their own choosing, and to engage in
other concerted activities . . . .” Again, the Supreme Court has held that this
right to self-organization includes the right to seek work as a union member,
organizer, or salt without penalty. NLRB v. Town & Country, 516 U.S. at 87,
90-92 (holding paid salts are protected as “employees” under the NLRA).
      A ruling that an employer violated § 8(a)(1) “does not depend on the
[employer’s] motive or the success or failure of the coercion, but depends instead
on whether the [employer] engaged in conduct that may reasonably tend to
interfere with the free exercise of rights under the Act.” Naomi Knitting Plant,
328 NLRB 1279, 1280 (1999) (emphasis added); see also Mobil Exploration &
Producing U.S., Inc. v. NLRB, 200 F.3d 230, 239 (5th Cir. 1999) (quoting Crown
Cent. Petroleum Corp. v. NLRB, 430 F.2d 724, 729 (5th Cir.1970)) (“[I]t is the
tendency of an employer’s conduct to interfere with the rights of his employees
protected by Section 8(a)(1), rather than his motives, that is controlling.”).
      The employer’s conduct need only reasonably tend to interfere with § 7
rights, and if such a tendency is found, “the burden is on the employer to
demonstrate a legitimate and substantial business justification for its conduct.”

                                        31
    Case: 10-60822    Document: 00512276147      Page: 32    Date Filed: 06/17/2013

                                  No. 10-60822

ANG Newspapers, 343 NLRB 564, 565 (2004). “Initially, the responsibility to
draw the line between these conflicting rights rests with the Board, and its
determination, unless illogical or arbitrary, ought not be disturbed.” Crown, 430
F.2d at 730 (emphasis added) (internal quotation marks and citation omitted).
      IEC-Houston argues that its referral operation as a whole cannot violate
§ 8(a)(1) if the individual components of the operation are lawful. In his dissent
from the August Order, Board Member Schaumber refers to the Board majority’s
reasoning in this regard as “reverse alchemy, through which lawful policies,
when combined, are transmuted into a violation of the Act.” Both IEC-Houston
and Member Schaumber are wrong. We have specifically ruled that separate
incidents, though lawful when viewed in isolation, must be considered
collectively to determine whether a violation of § 8(a)(1) has occurred. NLRB v.
Builders Supply Co. of Houston, 410 F.2d 606, 608 (5th Cir. 1969) (internal
quotation marks and citation omitted) (“Certainly, if we isolate each incident
and examine it separately, there is little to suggest any unlawful activity on the
part of the respondent. But viewing these incidents collectively, as we must, .
. . , we are constrained to hold that they amounted at the very least to an
uncoordinated pattern of coercion.”); see also Progressive Elec., Inc. v. NLRB, 453
F.3d 538, 548 (D.C. Cir. 2006) (internal quotation marks and citation omitted)
(“While we doubt any of these actions . . . would be independently sufficient, the
Board reasonably found they were collectively part and parcel of [the employer’s]
overall scheme to refuse to consider and hire the Union Applicants.”).
      The Board thus properly ruled that, viewed in its totality, IEC-Houston’s
“closed and opaque” system was harmful to union salts. The referral system and
shared man program, standing alone, had a reasonable tendency to interfere

                                        32
    Case: 10-60822       Document: 00512276147          Page: 33     Date Filed: 06/17/2013

                                      No. 10-60822

with the salts’ § 7 rights. The anti-union explanation for these programs
contained in the IEC-Houston newsletters, and the fact that Lockwood, Rath,
and Gafford were not hired despite the great demand for skilled electricians in
the Houston area during this period, only further buttress the Board’s ruling.
Therefore, we ought not disturb the Board’s conclusion that IEC-Houston’s
referral operation, as a whole, “interfered with the right of job applicants who
were union members and ‘salts’ to be hired on an equal basis with other
nonunion applicants.”4
       The majority’s opinion runs counter to the Act’s express policy of
“encouraging practices fundamental to the friendly adjustment of industrial
disputes arising out of differences as to wages, hours, or other working
conditions [] by restoring equality of bargaining power between employers and
employees.” 29 U.S.C. § 151. Substantial evidence supports the Board’s well-
reasoned August Order, and I therefore dissent from my colleagues and would
deny the petition for review and grant the cross-petition for enforcement.

       4
          IEC-Houston’s argument that, by using the phrase “equal basis,” the Board was
implying that an employer must hire union and non-union employees on a 50-50 basis is
incorrect. Rather, the Board is referring to the unlawfulness of discriminating against union-
affiliated applicants.

                                             33