N.L.R.B. v. Jarm Enterprises, Inc.

• Decision Date: 04 March 1986
• Docket Number: No. 85-1067,85-1067
• Citation: 785 F.2d 195
• Parties: 121 L.R.R.M. (BNA) 3105, 104 Lab.Cas. P 11,832 NATIONAL LABOR RELATIONS BOARD, Petitioner, v. JARM ENTERPRISES, INC., d/b/a Blu-Fountain Manor, Respondent.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 195

785 F.2d 195

121 L.R.R.M. (BNA) 3105, 104 Lab.Cas. P 11,832

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. JARM ENTERPRISES, INC., d/b/a Blu-Fountain Manor, Respondent.

No. 85-1067.

United States Court of Appeals,

Seventh Circuit.

Argued Nov. 6, 1985.

Decided March 4, 1986.

Ellen Boardman, Appellate Court Branch, N.L.R.B., Elliott Moore, N.L.R.B., Washington, D.C., for petitioner.

Elton L. French, St. Louis, Mo., for respondent.

Before FLAUM and EASTERBROOK, Circuit Judges, and WILL, Senior District Judge. ^*

FLAUM, Circuit Judge.

This appeal is before the court on an application for enforcement of a decision and order of the National Labor Relations Board ("the NLRB") and a cross-petition for review filed by Jarm Enterprises ("Jarm"). This dispute arose out of Jarm's purchase of a nursing home which was operating with replacement employees while its represented employees were striking for higher wages. By refusing to bargain with the union representing the nursing home's striking employees and by refusing to rehire the strikers, Jarm became enmeshed in an unfair labor practice proceeding before the NLRB. The Board ruled against Jarm issuing an order requiring bargaining, reinstatement, and backpay, and the present appeal was commenced. Before this court Jarm raises a number of issues concerning its status as a "successor" employer, the continued vitality of the union's role as a representative of the employees, its liability for the prior employer's replacement of striking employees and conduct of labor negotiations, and the appropriateness of the relief ordered. Finding that the administrative record adequately supports the NLRB's conclusions, we affirm.

I

This dispute arose out of Jarm's purchase of the Blu-Fountain Manor nursing home in Godfrey, Illinois from Fountainhead Development Corporation ("Fountainhead") on April 29, 1981. Since July 1, 1980 the United Food and Commercial Workers Union, Local 35, affiliated with the United Food and Commercial Workers International Union, AFL-CIO-CLC ("the Union"), had been the exclusive bargaining representative of a unit encompassing Fountainhead's employees. After certification the Union commenced collective bargaining negotiations which did not prove to be fruitful. The Union directed the employees to go on strike on October 14, 1980. This action continued until Jarm assumed control in May of 1981.

The strike began as an "economic" strike, a labor action designed to achieve an increase in benefits. However, according to the NLRB, certain activities in early 1981 transformed the strike into an unfair labor practice strike. On January 27, 1981, the Union, claiming that Fountainhead had asserted an inability to afford wage increases, demanded the right to examine the company's financial records. Approximately two weeks later Fountainhead refused to allow the Union access on the grounds that the company, in its view, never presented an inability to pay argument during any bargaining session. The Union responded by filing unfair labor practice charges against Fountainhead. These charges were dismissed by the Regional Director and subsequently appealed to the NLRB along with the Union's subsequent claims against Jarm.

Acting pursuant to its belief that the strike was economic, Fountainhead exercised its right to hire strike replacements. The record does not indicate whether the striking employees were replaced before or after the character of the strike allegedly changed on February 8, 1981. The NLRB concluded that the timing of the hiring of replacements was irrelevant since the absence of an actual discharge of the strikers prevented the replacements from being considered "permanent strike replacements."

This was the context which Jarm entered by exercising its option to purchase the Blu-Fountain Manor nursing home on May 1, 1981. Upon assumption of ownership Jarm immediately retracted the package of employee benefits provided by Fountainhead and rehired under new terms the Fountainhead employees working at the time of transfer of ownership, including the striker replacements. On May 8, 1981 the Union contacted Jarm and presented an unconditional offer to return to work and a request to commence collective bargaining. Jarm refused both submissions on the grounds that as a new employer it was not subject to the labor relationships established by Fountainhead and that the Union could not be deemed to represent the existing contingent of employees at the nursing home. The refusal to rehire any of the strikers was not attributable to an inability to find available positions since the record indicates that in the months following the takeover Jarm either filled vacancies or advertised for enough positions such that they could have, if they wished, reemployed the strikers.

The Union filed unfair labor practice charges against Jarm. These charges were consolidated with the preexisting claims against Fountainhead, which had been revived on appeal from the Regional Director's decision, and presented before an administrative law judge. The ALJ found for the Union with regard to all issues and the NLRB sustained that decision.

The NLRB's decision as it relates to Jarm (Fountainhead did not seek review or refuse to comply with the order) relies on three related conclusions. First, the Board concluded that Jarm was a "successor" to Fountainhead. Jarm's contention that it was "radically different" enterprise was rejected. Second, as a successor Jarm was held to be subject to a duty to bargain with the exclusive bargaining representative of its predecessor. Since the Union was still within the one-year certification bar to challenges to its majority support at the time of the takeover, Jarm violated sections 8(a)(5) and derivatively 8(a)(1) of the NLRA. Third, the NLRB found that Jarm committed an unfair labor practice by failing to rehire the striking employees for the dual reasons that (1) Jarm refused reinstatement on the basis of anti-union animus and (2) Jarm, as a successor with knowledge, acquired Fountainhead's obligation to reinstate unfair labor practice strikers. Implicit in this final reason is that Fountainhead transformed the nature of the strike by committing an unfair labor practice through its refusal to reveal financial information.

In crafting a remedy with respect to Jarm it was held that Jarm purchased the nursing home with knowledge of the unfair labor practices alleged against Fountainhead. Under these circumstances Jarm was deemed to be in a position in which it could be held responsible for the violations attributable to its predecessor. Therefore the NLRB required Jarm to reinstate all striking employees with backpay starting from May 8, 1981, the date the Union unequivocally offered to end the walkout, and ordered the company to commence collective bargaining with the Union. Jarm refused to comply and the NLRB brought an enforcement action in this court. Jarm cross appealed for purposes of challenging the Board's determination.

II

This appeal hinges on the resolution of two interrelated issues. The first centers on Jarm's status as a successor under NLRB v. Burns International Securities Services, 406 U.S. 272, 275, 92 S.Ct. 1571, 1576, 32 L.Ed.2d 61 (1972), and its progeny. If there is a substantial continuity between Jarm and Fountainhead there is the potential for Jarm to be deemed to have acquired certain labor obligations of its predecessor. The second issue, which is contingent on affirming the NLRB on the first, relates primarily, but not entirely, to activities that occurred prior to the sale of Blu-Fountain Manor. Jarm's argument against rehiring the striking employees is based on establishing that Fountainhead's refusal to provide financial records did not convert the strike into an unfair labor practice strike where reinstatement would be required. Furthermore, the argument that the strikers were legally terminated is central to Jarm's claim that the lack of represented employees at the time of the takeover constituted unique circumstances that prevent application of the NLRB's one-year certification bar rule.

Appellate review of the labor board's actions is limited. "Factual findings supported by substantial evidence in the record as a whole are conclusive." International Union of Operating Engineers v. NLRB, 755 F.2d 78, 81 (7th Cir.1985) (citing Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 464, 95 L.Ed. 456 (1951)). In Operating Engineers substantial evidence was held to exist where "the record contains 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.' " 755 F.2d at 81 (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938)). See also Bloomer Shippers Assoc. v. ICC, 679 F.2d 668, 672 (7th Cir.1982). On the record before this court the NLRB did not commit reversible error in finding that Jarm had a duty to bargain with the Union and the obligation to reinstate the striking employees.

A. Jarm's Obligations Under the Successorship Doctrine

The threshold issue in this appeal is Jarm's status as a successor. From this status stems any possible obligation for its predecessor's duty to bargain and unfair labor practices. As a successor an employer is deemed to be operating, from the employees' perspective, the same entity as the previous employer, thus justifying an assumption that the change in ownership has not affected employee attitudes towards union representation. See NLRB v. Burns International Securities Services, 406 U.S. 272, 275, 278-80, 92 S.Ct. 1571, 1576, 1577-78, 32 L.Ed.2d 61 (1972); Dynamic Machine Co. v. NLRB, 552 F.2d 1195, 1201-03 (7th Cir.), cert. denied, 434 U.S. 827, 98 S.Ct. 103, 54 L.Ed.2d 85 (1977); NLRB v. Jeffries Lithograph Co., 752 F.2d 459, 463-64 (9th Cir.1985). Therefore the successorship inquiry revolves around the question of "whether there has been an essential change in...