Fibreboard Paper Products Corporation v. National Labor Relations Board, 14

Decision Date14 December 1964
Docket NumberNo. 14,14
Citation85 S.Ct. 398,6 A.L.R.3d 1130,379 U.S. 203,13 L.Ed.2d 233
CourtU.S. Supreme Court

Marion B. Plant, San Francisco, Cal., for petitioner.

Archibald Cox, Sol. Gen., and David E. Feller, Washington, D.C., for respondents.

Mr. Chief Justice WARREN delivered the opinion of the Court.

This case involves the obligation of an employer and the representative of his employees under §§ 8(a)(5), 8(d) and 9(a) of the National Labor Relations Act to 'confer in good faith with respect to wages, hours, and other terms and conditions of employment.'1 The primary issue is whether the 'contracting out' of work being performed by employees in the bargaining unit is a statutory subject of collective bargaining under those sections.

Petitioner, Fibreboard Paper Products Corporation (the Company), has a manufacturing plant in Emeryville, California. Since 1937 the East Bay Union Machinists, Local 1304, United Steelworkers of America, AFL-CIO (the Union) has been the exclusive bargaining representative for a unit of the Company's maintenance employees. In September 1958, the Union and the Company entered the latest of a series of collective bargaining agreements which was to expire on July 31, 1959. The agreement provided for automatic renewal for another year unless one of the contracting parties gave 60 days' notice of a desire to modify or terminate the contract. On May 26, 1959, the Union gave timely notice of its desire to modify the contract and sought to arrange a bargaining session with Company representatives. On June 2, the Company acknowledged receipt of the Union's notice and stated: 'We will contact you at a later date regarding a meeting for this purpose.' As required by the contract, the Union sent a list of proposed modifications on June 15. Efforts by the Union to schedule a bargaining session met with no success until July 27 four days before the expiration of the contract, when the Company notified the Union of its desire to meet.

The Company, concerned with the high cost of its maintenance operation, had undertaken a study of the possibility of effecting cost savings by engaging an independent contractor to do the maintenance work. At the July 27, meeting, the Company informed the Union that it had determined that substantial savings could be effected by contracting out the work upon expiration of its collective bargaining agreements with the various labor organizations representing its maintenance employees. The Company delivered to the Union representatives a letter which stated in pertinent part:

'For some time we have been seriously considering the question of letting out our Emeryville maintenance work to an independent contractor, and have now reached a definite decision to do so effective August 1, 1959.

'In these circumstances, we are sure you will realize that negotiation of a new contract would be pointless. However, if you have any questions, we will be glad to discuss them with you.'

After some discussion of the Company's right to enter a contract with a third party to do the work then being performed by employees in the bargaining unit, the meeting concluded with the understanding that the parties would meet again on July 30.

By July 30, the Company had selected Fluor Maintenance, Inc., to do the maintenance work. Fluor had assured the Company that maintenance costs could be curtailed by reducing the work force, decreasing fringe benefits and overtime payments, and by preplanning and scheduling the services to be performed. The contract provided that Fluor would:

'furnish all labor, supervision and office help required for the performance of maintenance work * * * at the Emeryville plant of Owner as Owner shall from time to time assign to Contractor during the period of this contract; and shall also furnish such tools, supplies and equipment in connection therewith as Owner shall order from Contractor, it being understood however that Owner shall ordinarily do its own purchasing of tools, supplies and equipment.'

The contract further provided that the Company would pay Fluor the costs of the operation plus a fixed fee of $2,250 per month.

At the July 30 meeting, the Company's representative, in explaining the decision to contract out the maintenance work, remarked that during bargaining negotiations in previous years the Company had endeavored to point out through the use of charts and statistical information 'just how expensive and costly our maintenance work was and how it was creating quite a terrific burden upon the Emeryville plant.' He further stated that unions representing other Company employees 'had joined hands with management in an effort to bring about an economical and efficient operation,' but 'we had not been able to attain that in our discussions with this particular Local.' The Company also distributed a letter stating that 'since we will have no employees in the bargaining unit covered by our present Agreement, negotiation of a new or renewed Agreement would appear to us to be pointless.' On July 31, the employment of the maintenance employees represented by the Union was terminated and Fluor employees took over. That evening the Union established a picket line at the Company's plant.

The Union filed unfair labor practice charges against the Company, alleging violations of §§ 8(a)(1), 8(a)(3) and 8(a)(5). After hearings were held upon a complaint issued by the National Labor Relations Board's Regional Director, the Trial Examiner filed an Inter- mediate Report recommending dismissal of the complaint. The Board accepted the recommendation and dismissed the complaint. 130 N.L.R.B. 1558.

Petitions for reconsideration, filed by the General Counsel and the Union, were granted. Upon reconsideration, the Board adhered to the Trial Examiner's finding that the Company's motive in contracting out its maintenance work was economic rather than antiunion but found nonetheless that the Company's 'failure to negotiate with * * * (the Union) concerning its decision to subcontract its maintenance work constituted a violation of Section 8(a)(5) of the Act.'2 This ruling was based upon the doctrine established in Town & Country Mfg. Co., 136 N.L.R.B. 1022, 1027, enforcement granted, 316 F.2d 846 (C.A.5th Cir. 1963), that contracting out work, 'albeit for economic reasons, is a matter within the statutory phrase 'other terms and conditions of employment' and is a mandatory subject of collective bargaining within the meaning of Section 8(a)(5) of the Act.'

The Board ordered the Company to reinstitute the maintenance operation previously performed by the employees represented by the Union, to reinstate the employees to their former or substantially equivalent positions with back pay computed from the date of the Board's supplemental decision, and to fulfill its statutory obligation to bargain.

On appeal, the Court of Appeals for the District of Columbia Circuit granted the Board's petition for enforcement. 116 U.S.App.D.C. 198, 322 F.2d 411. Because of the importance of the issues and because of an alleged conflict among the courts of appeals,3 we granted certiorari limited to a consideration of the following questions:

'1. Was petitioner required by the National Labor Relations Act to bargain with a union representing some of its employees about whether to let to an independent contractor for legitimate business reasons the performance of certain operations in which those employees had been engaged?

'3. Was the Board, in a case involving only a refusal to bargain, empowered to order the resumption of operations which had been discontinued for legitimate business reasons and reinstatement with back pay of the individuals formerly employed therein?'

We agree with the Court of Appeals that, on the facts of this case, the 'contracting out' of the work previously performed by members of an existing bargaining unit is a subject about which the National Labor Relations Act requires employers and the representatives of their employees to bargain collectively. We also agree with the Court of Appeals that the Board did not exceed its remedial powers in directing the Company to resume its maintenance operations, reinstate the employees with back pay, and bargain with the Union.


Section 8(a)(5) of the National Labor Relations Act provides that it shall be an unfair labor practice for an employer 'to refuse to bargain collectively with the representatives of his employees.' Collective bargaining is defined in § 8(d) as

'the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment.'

'Read together, these provisions establish the obligation of the employer and the representative of its employees to bargain with each other in good faith with respect to 'wages, hours, and other terms and conditions of employment * * *.' The duty is limited to those subjects, and within that area neither party is legally obligated to yield. National Labor Relations Board v. American (Nat.) Ins. Co., 343 U.S. 395, 72 S.Ct. 824, 96 L.Ed. 1027. As to other matters, however, each party is free to bargain or not to bargain * * *.' National Labor Relations Board v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, 349, 78 S.Ct. 718, 722, 2 L.Ed.2d 823. Because of the limited grant of certiorari, we are concerned here only with whether the subject upon which the employer allegedly refused to bargain—contracting out of plant maintenance work previously performed by employees in the bargaining unit, which the employees were capable of continuing to perform—is covered by the phrase 'terms and conditions of employment' within the meaning of § 8(d).

The subject matter of the present dispute is well within the literal meaning of the phrase 'terms and...

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