Aaron Bros. Co., a Div. of Chromalloy American Corp. v. N.L.R.B.

• Decision Date: 16 November 1981
• Docket Number: 80-7056,Nos. 79-7592,s. 79-7592
• Parties: 108 L.R.R.M. (BNA) 3062, 92 Lab.Cas. P 13,122 AARON BROTHERS COMPANY, A DIVISION OF CHROMALLOY AMERICAN CORP., Petitioner-Cross Respondent, v. NATIONAL LABOR RELATIONS BOARD, Respondent-Cross Petitioner.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 750

661 F.2d 750

108 L.R.R.M. (BNA) 3062, 92 Lab.Cas. P 13,122

AARON BROTHERS COMPANY, A DIVISION OF CHROMALLOY AMERICAN CORP., Petitioner-Cross Respondent, v. NATIONAL LABOR RELATIONS BOARD, Respondent-Cross Petitioner.

Nos. 79-7592, 80-7056.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 3, 1980.

Decided Nov. 16, 1981.

David L. Cohen, Marina Del Rey, Cal., for petitioner-cross respondent.

Steven Fetter, Washington, D. C., for respondent-cross petitioner.

Petitions to Review a Decision of the National Labor Relations Board Petition to Enforce an Order of the National Labor Relations Board.

Before TANG and NORRIS, Circuit Judges and WHELAN ^*, District Judge.

TANG, Circuit Judge.

Aaron Brothers Company seeks review of a National Labor Relations Board decision and the Board seeks to enforce its order. Two issues are raised: (1) whether Aaron Brothers violated sections 8(a)(1) and (5) of the National Labor Relations Act, 29 U.S.C. § 158(a)(1) and (5) (1976), when it instituted a wage increase without first consulting or bargaining with the union representing the company's employees; and (2) whether Aaron Brothers violated sections 8(a)(1) and (5) by refusing to entertain wage proposals beyond the amount granted by the company's unilateral wage increase.

I FACTS

Aaron Brothers is engaged in retail art sales. As part of its business, the company operates a warehouse in California. In 1975, the Teamsters Automotive Workers Union, Local No. 495 (the Union), was certified as the bargaining representative for the warehouse employees. To challenge the certification's validity, Aaron Brothers refused to bargain with the union; the National Labor Relations Board (the Board) ordered Aaron Brothers to bargain, and this court enforced the order. See Aaron Brothers Corp., 223 N.L.R.B. 1179 (1976), enf'd, 563 F.2d 409 (9th Cir. 1977).

Aaron Brothers and the Union met to negotiate a contract on March 30, 1978. Negotiations were conducted by the company representative, John Fretwell, and Union representative John Krasnick. ¹ Krasnick and Fretwell held four bargaining sessions between the first meeting and June 15, 1978. They discussed various contract items, including wages, during the meetings, but they reached tentative agreement only with respect to a union security clause. At the completion of the June 15 session, the parties scheduled their next session for September 15, 1978. The session was later postponed to November 9, 1978.

On September 22, 1978, Aaron Brothers sent a notice to all of its employees, including those in the bargaining unit, that it was instituting a 19 cents an hour wage increase, effective October 5, 1978. Aaron Brothers considered notifying the Union, but decided against such action. The increase went into effect as scheduled.

The Union first learned of the increase at the November 9 bargaining session. Fretwell apologized for not notifying Krasnick earlier. Krasnick stated that the wage increase was an unfair labor practice and Fretwell agreed that it would be so interpreted. Krasnick then suggested that they use the wage increase as a base for further negotiations. Fretwell replied that he had no authority to grant anything further. Krasnick then stated that there was no sense in negotiating further and indicated that he was going to file an unfair labor practice charge. Fretwell agreed with Krasnick's assessment, and the session adjourned.

The Union filed an unfair labor practice charge on November 28, 1978. A hearing was held on April 17, 1979 before an Administrative Law Judge (ALJ). The ALJ found that Aaron Brothers had violated sections 8(a)(1) and 8(a)(5) of the National Labor Relations Act (NLRA) by instituting the October 5 wage increase and refusing on November 9 to negotiate further on wages. The ALJ entered an order requiring, inter alia, Aaron Brothers to refrain from unilaterally implementing wage increases and to cease refusing to negotiate wage changes beyond the increase granted on October 5, 1978. The National Labor Relations Board (the Board) adopted the ALJ decision without modification.

Aaron Brothers now petitions the Court of Appeals for review of the Board decision and the Board cross-applies to enforce the order.

II Wage Increase

It is settled that an employer violates sections 8(a)(1) and (5) of the NLRA, 29 U.S.C. §§ 158(a)(1) & (5) (1976), ² if he or she institutes a wage change without first consulting and bargaining with the union representing the employees. NLRB v. Katz, 369 U.S. 736, 745-47, 82 S.Ct. 1107, 1112-14, 8 L.Ed.2d 230 (1962). Aaron Brothers concedes that it implemented the October 5 wage increase without first alerting or consulting the Union. It argues, however, that the wage increase did not violate sections 8(a)(1) and 8(a)(5) because the increase was part of a continuing company policy annually to adjust wages and was therefore not a change in working conditions subject to the Katz rule.

The Board and the ALJ did not rule on whether the wage increase was instituted pursuant to a longstanding company policy. The ALJ concluded that even if it was, Aaron Brothers was required to notify the Union of the impending increase, citing the Board's decision in Allis-Chalmers Corp., 237 N.L.R.B. 290, 291 (1978), enf'd on other grounds, 601 F.2d 870, 875 (5th Cir. 1979) (wage increases not automatic), enf'mt stayed pending review, 608 F.2d 1018 (5th Cir. 1979) (sole issue whether union properly certified). The Board affirmed this position without comment.

The Board's position is contrary to this circuit's established rule. Wage changes that merely reflect continuations of past company policy are not considered changes in existing work conditions, and thus fall outside the Katz rule. See Queen Mary Restaurants Corp. v. NLRB, 560 F.2d 403, 408 (9th Cir. 1977); NLRB v. Nello Pistoresi & Son, Inc. (S & D Trucking Co., Inc.), 500 F.2d 399, 400 (9th Cir. 1974). Moreover, no other circuit has accepted the Board's position. See, e. g., NLRB v. Phil-Modes, Inc., 406 F.2d 556, 557 n.3 (5th Cir. 1969) (Board position "simply begs the question of whether there was a change in wages").

The Board suggests on appeal that an enforcement order can be granted on the alternative ground that this wage increase does not fit within the "longstanding practice" exception to Katz. The burden of proving that a wage increase falls within the longstanding practice exception is upon the employer. See NLRB v. Allis-Chalmers Corp., 601 F.2d 870, 875 (5th Cir. 1979), modified, 608 F.2d 1018 (5th Cir. 1979) (sole issue whether union properly certified). While the Board's argument may have merit, it is not clear upon this record whether Aaron Brothers has met its burden.

In determining whether a benefit change fits within the Katz exception, the Supreme Court has counseled lower courts to examine the degree to which an employer has discretion to award a benefit or determine its size. See Katz, 369 U.S. at 746-47, 82 S.Ct. at 1113-14. The greater the discretion, the Court has reasoned, the greater the danger unilateral action will destabilize industrial relations by undermining a union's institutional credibility.

In applying this standard, we have focused principally upon how long an employer's practice has been in effect. By itself this standard does not give a clear indication whether here the wage increase was a change in working conditions or whether it was merely a continuation of established company policy. The policy was four years old. This time period falls between the periods we have deemed insufficient to qualify as a longstanding practice and periods we have declared sufficient. Compare Queen Mary Restaurants Corp., 560 F.2d at 408 (wage increase to employees not part of a longstanding practice when wages increased only once under policy) and Nello Pistoresi & Son, Inc., 500 F.2d at 400 (when Christmas bonus paid for only two years and followed no formula, discontinuance of bonus not unilateral change in terms of employment) with NLRB v. Progress Bulletin Publishing Co., 443 F.2d 1369 (9th Cir. 1971) (when Christmas bonus paid regularly for 20 of previous 21 years and amount varied with seniority of employees, discontinuance of bonus was unilateral change in working conditions).

We also have indicated that a court should consider whether the benefit change was fixed by an established formula containing variables beyond the employer's immediate influence. Nello Pistoresi & Son, Inc., 500 F.2d at 401 (holding that Christmas bonus was not established policy partly because employer used no formula to compute bonus; distinguishing earlier case partly on ground that bonus program there was tied to employees' seniority). Three circuits follow this approach and inquire whether benefit changes result from fixed guidelines or formulae based on sales, employee tenure, or other factors beyond an employer's immediate control. ³

Aaron Brothers urges the adoption of the Second Circuit rule that unilateral wage increases of any amount are permissible under section 8(a)(5) so long as the employer has had a history periodically of increasing employee benefits. See NLRB v. Hendel Manufacturing Co., Inc., 523 F.2d 133, 135 (2d Cir. 1975); NLRB v. Patent Trader, Inc., 415 F.2d 190, 199-200 (2d Cir. 1969), modified in part on other grounds, 426 F.2d 791 (2d Cir. 1970). We reject this approach. So long as an employer has made wage changes on a regular basis, the Second Circuit rule appears to give an employer unfettered discretion to implement a wage change of any amount without first consulting or bargaining with the union representing the employees. This standard allows an employer routinely to circumvent the collective bargaining process, a result the Katz Court sought to avoid by creating a per se rule. ⁴

Nothing in this record suggests that Aaron Brothers relies upon pre-established guidelines or formulae in deciding whether to grant a wage...