Free-Flow Packaging Corp. v. N.L.R.B.

• Decision Date: 04 January 1978
• Docket Number: FREE-FLOW,No. 75-2772,75-2772
• Citation: 566 F.2d 1124
• Parties: 97 L.R.R.M. (BNA) 2750, 83 Lab.Cas. P 10,344 PACKAGING CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1124

566 F.2d 1124

97 L.R.R.M. (BNA) 2750, 83 Lab.Cas. P 10,344

FREE-FLOW PACKAGING CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.

No. 75-2772.

United States Court of Appeals, Ninth Circuit.

Jan. 4, 1978.

John C. Cook (argued), of Cook & Voltz, San Francisco, Cal., for petitioner.

Anne Liblun (argued), San Francisco, Cal., for respondent.

Before MERRILL and GOODWIN, Circuit Judges, and HOFFMAN, ^* District Judge.

MERRILL, Circuit Judge:

Petitioner seeks to have an adverse order of the National Labor Relations Board set aside. The Board cross-petitions for enforcement of its order.

In August, 1973, employees at petitioner's South San Francisco manufacturing plant evinced interest in union representation by the Leather, Plastics and Novelty Workers Union, Local No. 31, and eleven out of fourteen employees signed authorization cards. On union petition a representation hearing was held in September, and an election was set for November 2, 1973. The Board's order deals with occurrences during the period before this election.

The Board held that Free-Flow Packaging Corporation (the company) had committed the following unfair labor practices:

1. It had violated § 8(a)(3) and (1) of the Act, 29 U.S.C. § 158(a)(3) and (1), by discharging five employees prior to the election.

2. It had violated § 8(a)(1) of the Act, 29 U.S.C. § 158(a)(1), by denying the employees, prior to the election, a wage increase that past practice and assurances had caused them to expect.

3. It had violated § 8(a)(1) of the act by coercively interrogating the employees about their union sympathies and anticipated vote by promising benefits if the union were rejected and threatening job loss if the union came in.

The order requires the company to cease and desist from the unfair labor practices found and to offer reinstatement and back pay to the discharged employees.

1. The Discharges

The facts, as found by the Administrative Law Judge, were as follows:

The company manufactures an extruded polystyrene cushioning material. This material is extremely light and bulky and is used as a packaging material to cushion fragile items in shipment.

In July of 1972, the company was under a requirements contract to supply this material to the federal government. The contract estimated that 8,750 cases would be ordered during its twelve-month term. The company's management understood that, despite the estimated quantity specification, the contractor would be obligated to fill all orders submitted within the twelve-month period. In fact, during the contract's term, orders for 31,390 cases were placed. Under the contract these orders had to be filled within a specified period or default penalties could be imposed.

Since the company's production facility was a relatively small one, employing only three men per shift on a three-shift, five-day basis, it was overwhelmed by receiving orders for 31,390 cases when only 8,750 had been anticipated. As a result, deliveries fell significantly behind schedule.

On June 22, 1973, the General Services Administration wrote to the company enclosing a "preliminary Notice of Default," and called attention to "the penalties which may be invoked in the event the decision is made to terminate your right to proceed." It stated further that, unless a satisfactory explanation was furnished, "we will have no alternative but to terminate your right to proceed with the performance of the above-mentioned orders."

The Administrative Law Judge found that under the threat of termination of the contract and the onerous penalties which would result from termination the company's president, Arthur Graham, decided to increase production by hiring more employees and going to a seven-day operation. The judge stated:

"President Graham testified without challenge or contradiction that despite certain foreseeable financial burdens, Respondent wished to forestall default: 'because of two things: first, it might well have disqualified us from continuing to bid on future orders or requirements of the GSA and, secondly, the penalty for default is quite severe. And it might well have involved a more serious economic loss to us, to have been found in default, than was involved in continuing to fill the orders.' "

In the early part of September, 1973, after the union filed its petition but before the hearing directing the election, the employer commenced operating on a seven-day per week, four-shift basis for the sole purpose of avoiding default penalties.

On September 17, 1973, a pre-election hearing was held at the San Francisco offices of the National Labor Relations Board. At that hearing respondent objected to the timing of the election, noting that as soon as the backlog of government orders had been met the unit would return to its historic size and five or six employees would be terminated. The Regional Director noted the employer's objection as follows: "The Employer contends that the present complement of 18 unit employees is not representative, the unit having been temporarily expanded in order to meet an unexpectedly large number of orders placed just prior to the recent termination of a GSA contract." The Regional Director did not question the employer's motive for expansion but overruled objection and directed an election for November 2, 1973.

After but a few weeks on the seven-day operation, it became evident to the company that the risk of default penalties was not sufficient to justify the costly and inefficient seven-day operation. First, it is undisputed that the seven-day operation had proven impractical and the Administrative Law Judge so found. It did not provide any opportunity for regular maintenance of equipment and, as a result, costly down time was experienced. Further, with the additional five employees it had significantly increased payroll and overtime costs to the employer without a proportional increase in productivity. The Administrative Law Judge credited the testimony of Warren McCandless, the company vice-president, who stated that but for the fear of default penalties they would never have shifted from a five-day to a seven-day week.

On or about October 1, 1973, President Graham learned of a decision of the United States Comptroller General holding that where the government had grossly exceeded its estimated quantities on a requirements contract, and where economic conditions were such that demanding delivery of all quantities ordered would impose a hardship on the contractor, penalties for default were not to be imposed. Upon confirmation of the existence of this decision, Graham decided to terminate the seven-day operation. The company thereupon terminated the employment of five persons on the basis of seniority. These discharges form the basis for the violation charged by the Board.

The Administrative Law Judge found that there was no evidence from which to conclude that the employer had violated the Act by resuming its normal five-day operation. The Board, however, overruled the judge and found, instead, that the company had returned to its normal five-day week pursuant to a plan to secure a company victory in the election by eliminating five employees who, presumably, would vote for the union, and adding four management employees who, would, presumably, vote against the union. This had been the theory argued by General Counsel before the Administrative Law Judge and had been rejected by the judge. In his opinion he had stated:

"General Counsel's suggestion that Respondent's October layoffs were effectuated consistently with some 'plan to gerrymander' whereby the prospective representation vote's 'numerical dynamics' would be favorably modified, derives from his deductive inference merely; neither direct testimony, nor documentary proof, can be found within the present record, sufficient to warrant a factual determination that Respondent's management specifically considered; formulated or consummated such a plan."

We agree with the judge's assessment of the record and conclude that as a whole it does not provide substantial support for the Board's decision. The Board order as to this violation is not entitled to enforcement.

2. Withholding of Wage Increases

The Board contends that by past practice and assurances the company employees at the South San Francisco plant had been led to expect an annual across-the-board increase on October 1 of each year; that in 1973 the wage increase was canceled for the purpose of affecting the outcome of the election.

The company's main office was located in Redwood City, California, in a building that it shared with another company, Safe-T Pacific. Arthur Graham, president of the petitioner company and the company's sole shareholder, was also the president and major shareholder of Safe-T Pacific. That company had a collective bargaining agreement with the International Longshoremen's and Warehousemen's Union which represented certain employees at Safe-T Pacific's Redwood City location. That collective bargaining agreement provided for annual October 1 across-the-board wage increases. There was testimony from an employee of petitioner company that in 1971, at an employee meeting, Vice-President McCandless assured those present that the company would grant them the same annual wage increases as were provided by contract to the employees of Safe-T Pacific. McCandless categorically denied having made such a statement.

The Board contends that in 1971 and 1972 across-the-board wage increases were granted by the company consistent with the assurances attributed to McCandless. The company disputes this. It contends that while in 1971 and 1972 some employees received wage increases they were not general or across the board, or identical in amount as to all employees, or fixed to correspond to increases granted by Safe-T Pacific. The record indicates that while 1972 raises were granted as of October 1, raises in 1971 were granted as...