Local 2179, United Steelworkers of America v. N.L.R.B.
| Decision Date | 29 July 1987 |
| Docket Number | No. 85-4841,85-4841 |
| Citation | 822 F.2d 559 |
| Parties | 125 L.R.R.M. (BNA) 3313, 56 USLW 2091, 107 Lab.Cas. P 10,068 LOCAL 2179, UNITED STEELWORKERS OF AMERICA, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
David M. Silberman, Washington, D.C., Carl Frankel, Pittsburgh, Pa., for petitioner.
Arthur B. Smith, Jr., Chicago, Ill., for intervenor-Inland Steel.
William Bernstein, Elliott Moore, Kenneth Hipp, N.L.R.B., Washington, D.C., Joseph G. Norton, New Orleans, La., for respondent.
Petition for Review of an Order of the National Labor Relations Board.
Before RUBIN and GARWOOD, Circuit Judges, and SHAW *, District Judge.
This case of first impression poses the question of whether the National Labor Relations Board (the NLRB or the Board) erred in characterizing an employer's decision to close a manufacturing facility and to relocate production to a new facility in a different state as not being subject to mandatory bargaining under the National Labor Relations Act (the Act). 29 U.S.C. Secs. 151-169.
Inland Steel Container Company closed its New Orleans steel container fabrication plant and opened a facility in Mississippi to produce the same line of goods. The Company made the decision to close the factory unilaterally and did not bargain with its employees about whether the plant should be closed. The Union representing the New Orleans employees filed an unfair labor practice charge against Inland Steel Container Company, claiming that the Act requires a covered employer to engage in collective bargaining before making a decision to relocate production.
The NLRB's administrative law judge (ALJ) determined that the employer's decision was not primarily motivated by and did not turn on labor-cost considerations, and recommended dismissing the complaint, which the NLRB then ordered. In so doing, the ALJ and the NLRB relied on an earlier NLRB ruling which concluded that an employer's major business conduct decision, such as a plant relocation, was not subject to mandatory collective bargaining unless the decision "turns upon labor costs." The central issue is whether this standard--the Otis II standard 1--for deciding whether such managerial decisions are subject to predecision mandatory collective bargaining is sustainable under the Supreme Court's decision in First National Maintenance Corp. v. NLRB, 452 U.S. 666, 101 S.Ct. 2573, 69 L.Ed.2d 318 (1981).
We determine that, as applied to cases of this kind, Otis II is a reasonably defensible interpretation of the Act and Supreme Court decisions construing the duty to bargain thereunder. Accordingly, we deny the Union's petition for review of the NLRB's order dismissing its unfair labor practice complaint.
At all times pertinent to this case, a subsidiary of Inland Steel Company (Inland Steel) was in the business of fabricating steel shipping containers such as pails and barrels. This division, Inland Steel Container Company (Inland Container), operated six container fabrication plants, one of which was located in central New Orleans in a building constructed in the 1920's or 1930's. 2 Inland Container employees at the New Orleans plant were represented on the national level by the United Steelworkers of America (the Union), with Local 2179 (the Local) constituting the plant's collective bargaining unit.
The ALJ's findings of fact, adequately grounded in substantial evidence, reflected the following.
Until the 1970's, the steel container market was relatively stable and was dominated by three major manufacturers, one of which was Inland Container. The New Orleans facility provided steel barrels for the southern United States, while Inland Container's Canton, Mississippi plant produced shipping pails for approximately the same area. Of Inland Container's four other plants, two--in Illinois and New Jersey--were consolidated operations, each making both barrels and pails.
During the 1970's, the shipping barrel and pail business became highly competitive. Thirty different companies operated more than a hundred factories. Substitute plastic products appeared on the market; reconditioned steel containers claimed an increasing market share; plant manufacturing capacities increased; and a business recession reduced demand. The net effect was an intense price war. Moreover, by the early 1980's, a combination of government regulations and customer preference led to a demand for double-lined barrels, those with two applications of lining material, and to heightened rejections of steel containers that were found unsatisfactory because of defects such as poor painting, rust, leakage, and other flaws.
These changed market conditions were especially significant for the New Orleans plant. The production line there had been assembled and altered over the years on an ad hoc basis as customer requirements and technology changed. Newer steel container facilities incorporated numerous design changes which improved both productivity and the quality of finished products. The New Orleans factory was ill-suited to making double-lined containers because its production line had been designed to accommodate only single-lined barrels; a second layer of lining could be applied only by running the drums through the production line a second time, which increased operating costs. Much of the facility's equipment was obsolete or deteriorating. The plant occupied one entire city block, bounded on every side by public streets, floor space within the plant was "limited or cramped," and the lack of empty lot space made expansion to improve the production line impractical. Inland Container could have restructured the inefficient production line within the existing building only by shutting down the plant for four months to install new equipment, but even drastic and costly remodeling would not have resolved all the plant's problems.
The plant also had a shipping-and-receiving bottleneck, caused in part by the interior design of the plant and in part by the facility's urban location. Unloading raw steel from railroad boxcars and loading finished containers onto trains and trucks had to occur "in the same compressed shipping and receiving area." Traffic congestion on narrow city streets impeded efficient materials handling.
In addition, regular heavy rains and an inadequate city storm sewerage system combined to cause periodic flooding of the steel storage area of the facility. The city's high humidity was another cause of rust, a problem Inland Container attempted to combat by providing special steel. The ALJ stated that "the New Orleans plant is the only plant in the container division using the less efficient 'oiled-steel' rather than 'dry steel' to help protect against rust." Before oiled steel could be fabricated, however, the oil had to be removed chemically, a process that occasionally damaged the metal's exterior coating. If all the oil was not removed, as also occurred at times, problems arose in making lining or paint adhere to the steel.
By 1982, the plant was operating at a net loss. The New Orleans plant had the capacity to produce some 800,000 barrels a year but was often shut down because of weather or equipment failures. In the first eight and a half months of 1982, the ALJ found that more than 228,500 barrels manufactured in the plant, approximately forty percent of production, "were rejected because of poor quality." By the end of 1982, Inland Container decided to permanently close the New Orleans plant and to exercise an option to purchase property located adjacent to its existing pail plant in Canton, Mississippi. The New Orleans plant was finally closed in October 1983.
The Union and the Local began representing Inland Container's New Orleans employees in the 1940's. Under a national collective bargaining agreement effective from October 1, 1980 to October 1, 1983, Inland Container was obligated to give written notification of its intention to close a plant before finally deciding to do so and at least ninety days before the proposed closure date. Although the employer was required to meet with employees to discuss a "proposed closure or partial closure" after announcing its intention to close a plant, the agreement stated that "[t]he final closure decision shall be the exclusive function of the Company."
The national bargaining agreement also provided that employees in certain of Inland Container's steel fabricating plants--identified in the agreement as "List III" plants--were to receive the same basic wage and benefit package as unionized employees working in Inland Steel's steel manufacturing plants, which were classified as "List I" facilities. 3 The Canton, Mississippi plant was apparently not a "List III" (nor a "List I") facility.
The ALJ noted that "it is undisputed" that Inland Container repeatedly attempted to have its container plants removed from List III coverage in order to obtain more competitive wage and benefit rates. During the autumn of 1981, a letter from Inland Container to Union officials expressed concern about Inland's competitive disadvantage caused by "high labor rates." Noting that wages at, inter alia, the New Orleans plant exceeded what competitors paid by as much as $3.00 to $4.00 per hour, Inland Container's letter warned that List III "plants cannot survive if they are not allowed to become more cost competitive." In January 1982, Company officials met with Union officials to propose wage and benefit reductions for employees at Inland Container plants in New Orleans, Chicago, and Cleveland. The proposal was accepted by the Cleveland Local, but rejected by the Chicago and New Orleans Locals.
In April 1982, the ALJ found, Union officials wrote Inland Container president Martin Detmer to inform him that they "were 'not prepared to meet...
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