'Automatic' Sprinkler Corp. of America v. N.L.R.B.

• Decision Date: 31 October 1997
• Docket Number: No. 669,96-5159,AFL-CI,Nos. 95-6599,U,I,669,s. 95-6599
• Parties: 155 L.R.R.M. (BNA) 2897 "AUTOMATIC" SPRINKLERR CORPORATION OF AMERICA and Figgie International Inc., Petitioners/Cross-Respondents, v. NATIONAL LABOR RELATIONS BOARD, Respondent/Cross-Petitioner, Road Sprinkler Fitters Local UnionA.,ntervenor.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 612

120 F.3d 612

155 L.R.R.M. (BNA) 2897

"AUTOMATIC" SPRINKLERR CORPORATION OF AMERICA and Figgie International Inc., Petitioners/Cross-Respondents, v. NATIONAL LABOR RELATIONS BOARD, Respondent/Cross-Petitioner Road Sprinkler Fitters Local Union No. 669, U.A., AFL-CIO, Intervenor.

Nos. 95-6599, 96-5159.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 5, 1996.

Decided July 29, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied Oct.

31, 1997. ^*

Donald F. Woodcock (argued and briefed), Todd F. Palmer (briefed), Calfee, Halter & Griswold, Cleveland, OH, for Petitioners/Cross-Respondents.

David Seid (argued and briefed), National Labor Relations Board, Office of the General Counsel, Aileen A. Armstrong, Deputy Associate General Counsel, Peter Winkler (briefed), National Labor Relations Board, Appellate Court Branch, Washington, DC, for Respondent/Cross-Petitioner.

William W. Osborne, Jr. (argued and briefed), Osborne Law Offices, Washington, DC, for Intervenor.

Before: WELLFORD, RYAN, and SILER, Circuit Judges.

SILER, J., delivered the opinion of the court, in which WELLFORD, J., joined. RYAN, J. (pp. 621-23), delivered a separate opinion concurring in part and dissenting in part.

OPINION

SILER, Circuit Judge.

Figgie International Inc. ("Figgie") and "Automatic" Sprinkler Corporation of America ("Automatic"), a division of Figgie (collectively, "Petitioners"), petition this court to review the Decision and Order by the National Labor Relations Board ("NLRB" or "the Board") finding that Petitioners violated section 8(a)(1), (5), and (3) of the National Labor Relations Act ("the Act"), 29 U.S.C. § 158(a)(1), (5), and (3), by subcontracting bargaining unit work and discriminatorily laying off their employees represented by the unions and by refusing to bargain with the unions that had bargaining status over the decision to subcontract unit work as well as over successor collective bargaining agreements. The NLRB filed a cross-application for enforcement of its Order, and Road Sprinkler Fitters Local Union No. 699 ("Local 699") intervened in this action on the side of the NLRB. For reasons stated herein, we will VACATE the Order of the Board and DENY its enforcement.

I.

Automatic is engaged in the design, fabrication, and installation of automatic fire protection systems. For many years it employed members of Local 669 as well as members of eleven other urban autonomous unions--namely Local 120, Local 281, Local 314, Local 483, Local 536, Local 542, Local 676, Local 692, Local 696, Local 699, and Local 709--to install these systems. ¹ Through its membership in a multi-employer association of sprinkler installation contractors, the National Fire Sprinkler Association ("NFSA"), Automatic had successive collective bargaining agreements with the unions for many years. The expiration dates of the agreements ranged from July 31, 1993 to June 30, 1995. With the exception of Automatic's agreement with Local 483, all of the collective bargaining agreements contained a provision permitting subcontracting of work to employers who were signatories to the respective local agreements.

In recent years, Automatic had been experiencing financial difficulties. Each year officers and representatives of Figgie and Automatic held meetings to review past company performances and plan for the future. The annual meetings resulted in "hardcore" plans, which are five-year budget projection plans that were modified, updated, and extended yearly. At the annual meeting held in November 1992, the officers and representatives agreed to a plan (the "Neutral Plan"), in which Automatic would become a general contractor and would subcontract out all sprinklerfitter work upon the expiration of its collective bargaining agreements with the unions by August 31, 1995.

The Neutral Plan was expected to result in various benefits, including: gaining control of labor costs; elimination of negotiations with unions and the cost of grievances; minimization of excessive labor costs on some contracts; reduction of administrative labor costs and vehicle costs; elimination of road tool costs; ability to bid both union and non-union projects; and entrance into the residential market.

Automatic withdrew its membership in NFSA by a letter dated February 10, 1993. On the following day, it sent letters to the local unions representing Automatic sprinklerfitters notifying them of the withdrawal. These letters did not mention the Neutral Plan. Automatic thereafter increased its subcontracting, but limited it to contractors that had collective bargaining agreements with the unions as required under its agreements with the unions.

On May 26, 1993, Automatic gave Local 483 and Local 709 notice of termination of the collective bargaining agreements effective August 1, 1993 and September 1, 1993, respectively, pursuant to the terms of the agreements. On January 28, 1994, Automatic notified the remaining unions of its intent not to renew the collective bargaining agreements and of its decision to fundamentally change the nature of its business by becoming a general contractor, whereby it would no longer employ persons represented by the unions in the installation, alteration, maintenance, repair and service of fire control systems. In each of the January 28 letters, Automatic assured the unions that it would negotiate with them in good faith concerning its business decision. The ensuing exchanges between Automatic and the unions varied. The Board found that Automatic refused to negotiate successor bargaining agreements with any of the unions.

Between August 17, 1993 and May 12, 1994, Automatic met with many of the unions to discuss its subcontracting decision. By April 1, 1994, Automatic laid off all of its sprinklerfitter employees, and by June 30, 1994, it liquidated substantially all of its construction vehicles, tools, and equipment formerly used to perform labor work on its sprinkler installation operations. Since that time, Automatic has subcontracted virtually all of its labor work to entities that have signed current collective bargaining agreements with the unions.

Between August 1993 and May 1994, the unions filed unfair labor charges with the NLRB against Petitioners. After conducting a hearing on this matter, an Administrative Law Judge ("ALJ") found against Petitioners. On October 25, 1995, the Board affirmed the rulings, findings, and conclusions of the ALJ.

II.

We accept the Board's factual findings if supported by substantial evidence on the record as a whole. 29 U.S.C. § 160(f); YHA, Inc. v. NLRB, 2 F.3d 168, 172 (6th Cir.1993). We also review the Board's application of law to particular facts under the substantial evidence standard, but review the Board's conclusions of law de novo. NLRB v. Pentre Elec., Inc., 998 F.2d 363, 368 (6th Cir.1993). If the Board erred in determining the proper legal standard, we may refuse enforcement of the Board's order on the ground that it has no "reasonable basis in law." Id.; NLRB v. Brown, 380 U.S. 278, 291-92, 85 S.Ct. 980, 988-89, 13 L.Ed.2d 839 (1965) (requiring reviewing courts to set aside interpretations of the Act by the Board that are inconsistent with statutory mandate, frustrate congressional policy or rest on an erroneous legal foundation). We review de novo the Board's interpretation of contract terms. Gratiot Community Hosp. v. NLRB, 51 F.3d 1255, 1261 (6th Cir.1995).

In reviewing the Board's interpretation of the NLRA, we adhere to the standard of review established by Holly Farms Corp. v. NLRB, 517 U.S. 392, 116 S.Ct. 1396, 134 L.Ed.2d 593 (1996). NLRB v. Webcor Packaging, Inc., 118 F.3d 1115, 1119-20 (6th Cir.1997).

Under this standard, our first task is to determine "whether Congress has directly spoken to the precise question at issue." [Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984).] If Congress has done so, we must give effect to its expression. Id. at 842-43, 104 S.Ct. at 2781-82. If not, however, "the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843, 104 S.Ct. at 2781. Accord Holly Farms, 517 U.S. at ----, 116 S.Ct. at 1406.

Webcor, 118 F.3d at 1119-20 (footnote omitted.)

III.

Under section 8(a)(5) of the Act, an employer commits an unfair labor practice by refusing to bargain collectively with its employees' representatives in good faith concerning "wages, hours, and other terms or conditions of employment." 29 U.S.C. § 158(a)(5). An employer violates section 8(a)(1) and (5) of the Act if it takes unilateral action regarding a mandatory subject of bargaining without first bargaining to impasse. Taylor Warehouse Corp. v. NLRB, 98 F.3d 892, 901 (6th Cir.1996).

An employer's decision to subcontract work is considered a statutory subject of collective bargaining when it involves "the replacement of employees in the existing bargaining unit with those of an independent contractor to do the same work under similar conditions of employment." See Fibreboard Paper Prods. v. NLRB, 379 U.S. 203, 215, 85 S.Ct. 398, 405, 13 L.Ed.2d 233 (1964). The Board found that Petitioners' subcontracting decision was a mandatory subject of bargaining because they in effect substituted the subcontractors' employees for their own. Petitioners contend, however, that because subcontracting was already a subject covered by the collective bargaining agreement, further bargaining on that subject was foreclosed. We find, contrary to the arguments of the Board and the union intervenor, that Petitioners raised the issue of their contractual right to subcontract in their submission to the Board and that this important issue is before us on appeal. It is not subsumed by claims of anti-union motivation.

When an employer and union bargain about a subject and memorialize that bargain in a collective bargaining agreement, they create a set...