Contractors' Labor Pool, Inc. v. N.L.R.B.

• Decision Date: 28 March 2003
• Docket Number: No. 01-1393.,01-1393.
• Citation: 323 F.3d 1051
• Parties: CONTRACTORS' LABOR POOL, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent. International Brotherhood of Electrical Workers, AFL-CIO, Local 46, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1051

323 F.3d 1051

CONTRACTORS' LABOR POOL, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent International Brotherhood of Electrical Workers, AFL-CIO, Local 46, et al., Intervenors.

No. 01-1393.

United States Court of Appeals, District of Columbia Circuit.

Argued February 11, 2003.

Decided March 28, 2003.

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Robert W. Tollen argued the cause and filed the briefs for petitioner.

William M. Bernstein, Senior Attorney, National Labor Relations Board, argued the cause for respondent. With him on the brief were Arthur F. Rosenfeld, General Counsel, John H. Ferguson, Associate General Counsel, Aileen A. Armstrong, Deputy Associate General Counsel, and Meredith Jason, Attorney. Deirdre C. Fitzpatrick and Julie F. Marcus, Attorneys, entered appearances.

Robert D. Kurnick argued the cause for the intervenor unions and amicus curiae International Brotherhood of Electrical Workers, AFL-CIO in support of respondent. With him on the brief was David Hannah.

Before: EDWARDS and ROGERS, Circuit Judges, and SILBERMAN, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge SILBERMAN.

SILBERMAN, Senior Circuit Judge:

Contractors' Labor Pool (CLP) challenges a Board determination that CLP's policy of refusing to hire applicants whose recent wages were 30% higher or lower than its starting wages was discriminatory within the meaning of § 8(a)(3) of the National Labor Relations Act. Also challenged is the Board's conclusion that CLP discriminated against several paid union organizers in assignment because, according to petitioner, they were not its "employees" or, alternatively, because of a "disabling conflict," they were engaged in unprotected activity. We agree with petitioner's first challenge but reject its second and therefore grant the petition in part and deny it in part.

I.

CLP, a nonunion company, supplies, on a temporary basis, several thousand construction workers a year to various contractors in Arizona, California, Oregon, Washington, Nevada, and Colorado.¹ It operates 15 offices in those states. Essentially, it employs a permanent labor pool from which contractors draw skilled and unskilled workers as needed. Its management believes that its success depends on its ability to keep a large number of reliable employees. Accordingly, it has adopted various measures to improve employee retention (and productivity) since its inception in 1987.

For instance, it sought to improve its applicant screening process in the early 1990s by examining applicants' driving records and references with greater care. And beginning in 1989, an applicant was asked to specify an acceptable hourly rate. If the figure was substantially higher than CLP was willing to pay, that person would not be hired for it was assumed that the employee would soon become dissatisfied and quit. Petitioner's CEO Thomas McCune testified that short-term employees, moreover, were prone to substandard work and accidents.

In 1993 the company conducted a worker retention study that served to further refine petitioner's hiring policy. The available data indicated that workers who had previously earned wages that were either 30% higher or lower than CLP's wages would be significantly less likely to work for the company for 100 hours or more within a 40-day period. The study predicted that adopting a 30% rule (precluding applicants whose prior wages deviated by 30% from CLP's starting salary) would eliminate some eligible workers. But it would cause CLP's important retention rate to rise 3.5%. Accordingly, in 1994 CLP adopted the 30% hiring standard. In the first full year following adoption of the 30% rule the percentage of applicants deemed ineligible for hire increased from 70 to 75%, but CLP's retention rate increased from 57.6 to 63.9%, workers compensation costs were significantly reduced, and the company's safety record showed substantial improvement.

The ALJ specifically determined that petitioner's implementation of its 30% rule was not motivated by antiunion animus; instead CLP had pursued a legitimate business objective. The Board adopted that recommended finding. Nevertheless, the ALJ and the Board concluded that petitioner's 30% rule operated to exclude workers in a number of western labor markets who previously had worked on jobs covered by a union collective bargaining agreement.² The effect was most pronounced in Southern California; CLP's top hourly rate for journeymen electricians was $18.00 in that market whereas the average union scale was $26.00. In Seattle, on the other hand, the ALJ concluded that the differential was less.

Petitioner contends that union rates are not 30% higher than CLP's in Idaho, parts of Washington state and Denver, Colorado. It cites an ALJ determination to that effect—at least respecting Denver—in a companion case against it, in which the judge recommended against a finding of an § 8(a)(3) violation. See CONTRACTORS LABOR POOL, INC. (IBEW LOCAL UNION 68), 1999 WL 33453678, at *11. However, it does not appear that it produced clear evidence as to its rates in Idaho and central and western Washington. The Board's brief is virtually silent on the matter and its decision, without referring to the Denver case, only said that "it is no defense that a few union members may have passed CLP's 30% rule." In re W.D.D.W. Commercial Sys., 2001 WL 1011927, at *5 n. 17.

The ALJ concluded, and three of the four Board members agreed, relying upon the Supreme Court's decision in N.L.R.B. v. Great Dane Trailers, Inc., 388 U.S. 26, 87 S.Ct. 1792, 18 L.Ed.2d 1027 (1967), that CLP violated § 8(a)(3) because the 30% rule excluded previously organized workers and therefore had "inherently destructive" effects on employees' § 7 rights. Chairman Hurtgen dissented from the Board's order because, in his view, there was no showing of discrimination or unlawful motive.

B.

The second issue in the case — the Board's finding of petitioner's discriminatory assignment of two union organizers — also has its genesis in the early 1990s when Local 441 began targeting CLP as part of the broader campaign against nonunion employers on the West Coast. The Local employed what is called "salts," paid organizers sent to job sites ostensibly to obtain employment but with the objective of inducing union organization. The ALJ determined that some of these salts were instructed not only to uncover unfair labor practices but to provoke them. As one organizer put it, their presence on a job-site was not necessarily "to build their damn job," but if organizing tactics were unsuccessful to "bankrupt the contractors." In re W.D.D.W. Commercial Sys., 2001 WL 1011927, at *13. Local 441 issued several newsletters boasting of successful efforts in getting some of the larger nonunion contractors to close their businesses. CLP claims to have learned about the full extent of Local 441's salting activities only at the unfair labor practice hearing in this case.³

As part of this salting campaign Local 441 President Vaughn Hedges applied for employment with CLP in 1992 without making the company aware of his union affiliation. After successfully passing the screening test he was referred to CLP customer Aztech Electric in California and reported to its construction site in November 1992. Four days later he was released from work at Aztech by foreman Adamik. Aztech claimed that Hedges had completed a particular project and it wanted to give additional work to some regular employees. After being told that he was being laid off, Hedges started talking about the union and how it would be best for the employees if Aztech Electric unionized. He then signed his timecard, left the site, and went to his truck, where he picked up some union literature and began to distribute it to other electricians. Adamik then told Hedges to leave the jobsite and Hedges complied.

Hedges did not talk to CLP about the incident until the next day. The staff manager Margo Nezrab accused Hedges of distributing literature on CLP's time after he had been laid off. Hedges admitted this was true. Nezrab then added that CLP gets contracts from companies like Aztech precisely because it is a nonunion employer. She made it clear that union literature was not welcome on the job, but did suggest that Hedges would continue to get work if available. Hedges received his paycheck later that week. CLP never contacted him regarding work again, and testimony revealed that a "DNU (Do Not Use) until we talk" was entered into Hedges' CLP computer file after the episode. In re W.D.D.W. Commercial Sys., 2001 WL 1011927, at *61.

Shawn Smith was also a Local 441 member at the time these events occurred. In September 1992, Local 441 Business Manager Doug Saunders told him to apply with CLP. He applied and was accepted for employment. Smith was let go from his second assignment with Aztech Electric on November 25, 1992, the day after Hedges was released, also because his job had been completed. The ALJ noted that Aztech foreman Adamik was aware of his union affiliation and intent to distribute union literature. Smith, like Hedges, received a "DNU" code and was not referred another job.

Based on this record, the ALJ determined that CLP's actions against these employees would be violative of § 8(a)(1) and (3) of the Act, but decided that because Local 441 paid union organizers purposed to engage in activities inimical to the employers' operations, a "disabling conflict" had been created. Accordingly, the salts were no longer "employees" within the meaning of § 2(3) of the Act. The Board majority disagreed, holding that even if a disabling conflict had existed between Local 441 and CLP, which would mean their activity was "unprotected," the salts nevertheless had statutory employee status under N.L.R.B. v. Town & Country Elec., Inc., 516 U.S. 85, 116 S.Ct. 450, 133 L.Ed.2d 371 (1995). The Board did not actually decide whether a disabling conflict had been...