NLRB v. E & B BREWING COMPANY

• Decision Date: 05 April 1960
• Docket Number: No. 13936.,13936.
• Parties: NATIONAL LABOR RELATIONS BOARD, Petitioner, v. E & B BREWING COMPANY, Inc., and Drivers and Helpers Local No. 38, International Union of United Brewery, Flour, Cereal, Soft Drink & Distillery Workers of America, AFL-CIO, Respondents.
• Court: U.S. Court of Appeals — Sixth Circuit

276 F.2d 594 (1960)

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. E & B BREWING COMPANY, Inc., and Drivers and Helpers Local No. 38, International Union of United Brewery, Flour, Cereal, Soft Drink & Distillery Workers of America, AFL-CIO, Respondents.

No. 13936.

United States Court of Appeals Sixth Circuit.

April 5, 1960.

Rosanna A. Blake, Washington, D. C. Thomas Roumell, Detroit, Mich. (Stuart Rothman, Thomas J. McDermott, Marcel Mallet-Prevost and Betty Jane Southard, Washington, D. C., on the brief), for petitioner.

James C. Paradise, Cincinnati, Ohio (Winn Newman, Cincinnati, Ohio, on the brief, Hicks G. Griffiths, Detroit, Mich., on docket), Cincinnati, Ohio, for respondents.

Before SIMONS and POPE, Circuit Judges, and KENT, District Judge.

POPE, Circuit Judge.

The petitioning Board seeks enforcement of its order finding that in the discharge of one Pfeifle, an employee, both the respondent Company and the respondent Union had been guilty of unfair labor practices,¹ and ordering Pfeifle's reinstatement with compensation for loss of certain back pay.

The examiner refused to credit testimony of Pfeifle that he had been discharged at the instance of the Union because of non-union membership. He found that the sole reason for the discharge was the Union's insistence "upon compliance by the Company with the hiring hall clause of its contract,"² that Pfeifle had attempted "to secure preferential treatment" and "sought to circumvent the legal and regularly required employment procedures" under which new employees must be engaged through the hiring hall; that the hiring hall "was being run in a nondiscriminatory manner," and he recommended that the complaint be dismissed as to both respondents.

The Board reviewed the rulings made by the examiner at the hearing, and affirmed them. On consideration of the Intermediate Report and the entire record the Board decided that it "hereby adopts the findings of the Trial Examiner but not his conclusions or recommendations." It then concluded that the Company and the Union had violated the sections of the Act previously referred to in maintaining their hiring hall agreement, holding that "an exclusive hiring hall contract was unlawful unless it explicitly provided for three safeguards" of the sort prescribed in the Board's opinion in Mountain Pacific Chapter of the Associated General Contractors, Inc., et al., 119 N.L.R.B. No. 126A, handed down subsequent to the Intermediate Report in this case.

The first infirmity in the Board's conclusion is that the decision in Mountain Pacific, on which it relies, was held erroneous in N. L. R. B. v. Mountain Pacific Chapter of Assoc. Gen. Con., 9 Cir., 270 F.2d 425, where the Board's petition for enforcement of that order was denied. The decision of that case that such a hiring-hall agreement, either with or without the so-called "safeguards" or "protective clauses", is not per se illegal, has been further restated and reemphasized by that court in Morrison-Knudsen Co. v. National Labor Relations Board, 9 Cir., 276 F.2d 63. This court, in National Labor Relations Board v. F. H. McGraw & Co., 6 Cir., 206 F.2d 635, 640, 641, recognized the same rule, citing with approval two of the cases which the Ninth Circuit decisions followed.³ Such is the general rule stated by the courts. Other decisions, in accord, are cited in Morrison-Knudsen, supra. The only case indicating a contrary rule is that of a divided court in Local 357, International Brotherhood of Teamsters, etc. v. National Labor Relations Board, D.C.Cir., 275 F.2d 646. The majority opinion, which neither states the facts nor discusses the law, does not appeal to us.

The Board acknowledges that its practice and rulings heretofore, at least prior to its Mountain Pacific ruling, have proceeded upon the theory that "we have not found a provision that personnel be secured through the offices of a union violative of the Act absent evidence that the union unlawfully discriminated in supplying the Company with personnel." (The quotation is from The Humkinconkey Construction Company, 95 N.L. R.B. 433, 435.)⁴ As the Board puts it, its prior practice "was to correct hiring hall abuses as they arose in individual cases rather than to treat the hiring hall itself." Now, however, the Board tells us it finds its prior rulings to be unsatisfactory. It says that the legality of exclusive hiring halls "had not been comprehensively treated by the Board in its decisions prior to Mountain Pacific."

The Board explains at great length why it believes a new approach and a new rule is necessary. It says its old "case-to-case method" where the Board always "predicated its decision upon the existence of discriminatory practices apart from the effect of the contract" was "no longer sufficient", it had proven ineffective so that now it was necessary to "deal with the legality of hiring halls on a comprehensive basis."⁵ This comprehensive basis involves the Board's determination here, in the words of its brief, that "the undeniably discriminatory result of the exclusive hiring hall flows as much from the agreement itself as from the illegal operation of the halls of some unions," and that "illegal discrimination against nonmembers is inherent in the hiring provision itself."⁶

As we understand the Board's position, it is that its experience proves that its effort to pick off the sour fruit frequently appearing on the hiring hall tree has been ineffective and altogether frustrating, so now it proposes to chop down the whole tree whenever it is not propped up by the Board's three "protective clauses."⁷

That the rule here contended for is a new one is noted by the Board's statement in its brief: "The case at bar is the first case in which the Board has explicated to this Court its reasons for finding that an exclusive hiring agreement violates the Act even though it may not on its face give preference in employment to members."

There is no doubt that the Board has power, in appropriate cases, and in furtherance of its delegated function of making the National Labor Relations Act work, to establish new rules. What may be called new rules may stem from two sources or theories of power. One is the broad grant of power in § 6 of the Act (29 U.S.C.A. § 156) authorizing the Board "to make * * * in the manner prescribed by the Administrative Procedure Act, such rules and regulations as may be necessary to carry out the provisions of this subchapter." The manner prescribed by the Administrative Procedure Act is stated in §§ 3 and 4 of that Act (5 U.S.C.A. §§ 1002, 1003), and calls for appropriate publications in the Federal Register, and in some cases for notice and an opportunity to be heard. Perhaps the Board might have saved itself a lot of trouble by utilizing this method of making a rule. At any rate, plainly it did not call on this source of power.

A second mode by which new rules sometimes come into being is through the process of administrative adjudication. Just as courts generally do not hesitate to announce new rules to govern novel or changed conditions, so administrative boards often lay down new so-called "interpretative" rules. What the Board is authorized to interpret is the provision of § 8(a)(3) condemning discrimination in regard to hire which, in the language of Radio Officers v. National Labor Relations Board, 347 U.S. 17, 48, 74 S.Ct. 323, 340, 98 L.Ed. 455, has "a tendency to encourage" membership in a union.

We disclaim any suggestion that because, in past years, the Board has never held that an exclusive hiring-hall agreement, on the face of it, has such a tendency, it may not now, through a proper adjudicatory process, rule that it does indeed have such a tendency. "One of the purposes which lead to the creation of such boards is to have decisions based upon evidential facts under the particular statute made by experienced officials with an adequate appreciation of the complexities of the subject which is entrusted to their administration." Republic Aviation Corp. v. National Labor Relations Board, 324 U.S. 793, 800, 65 S.Ct. 982, 986, 89 L.Ed. 1372. And the Board's first interpretative decision does not have to be the final one.⁸

But while we have no occasion here to doubt that an administrative board, may, as the courts have always done, declare new rules through a process of case to case adjudications, yet we think this Board has not properly done so in this particular case, and that for two separate and distinct reasons.

First, without considering whether such is a requirement of due process, we note that § 5 of the Administrative Procedure Act (5 U.S.C.A. § 1004) provides that "In every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing * * * (a) Persons entitled to notice of an agency hearing shall be timely informed of * * * (3) the matters of fact and law asserted." Here there was not only no complaint charging that the hiring hall agreement was illegal, or that, in the words of the Board's belated position, "illegal discrimination against nonmembers is inherent in the hiring provision itself", but it was ruled, both by the examiner and the Board itself, that the validity of the hiring hall was not in issue.⁹

We hold that the Board cannot establish its attempted rule by an adjudication of a matter not in issue before it. In the absence of the statutory notice of "the matters of fact and law asserted" the Board lacked power to pass upon any such issue as that now tardily argued in its briefs.¹⁰

There is a second reason why we think the Board cannot apply its newly conceived rule in this case. This becomes apparent when it is noted what the Board is trying to do here. In an effort to minimize the effect of the Board's order its brief contains some statements which are not quite consistent with its main argument. Thus it says: "The only substantial affirmative action the order imposes upon either party is...