Naperville Ready Mix v. Nat'l Labor Relations BD

• Decision Date: 06 March 2001
• Docket Number: Nos. 99-3634,99-3994,s. 99-3634
• Parties: (7th Cir. 2001) Naperville Ready Mix, Inc., et al., Petitioners/Cross-Respondents, v. National Labor Relations Board, Respondent/Cross-Petitioner, and Teamsters Local 673, Intervening Respondent/Cross-Petitioner
• Court: U.S. Court of Appeals — Seventh Circuit

Page 744

242 F.3d 744 (7th Cir. 2001)

Naperville Ready Mix, Inc., et al., Petitioners/Cross-Respondents, v. National Labor Relations Board, Respondent/Cross-Petitioner, and Teamsters Local 673, Intervening Respondent/Cross-Petitioner.

Nos. 99-3634, 99-3994

In the United States Court of Appeals For the Seventh Circuit

Argued September 28, 2000

Decided March 6, 2001

On Petition for Review and Cross-Application for Enforcement of an Order of the National Labor Relations Board Nos. 13-CA-31031, et al [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Manion, Rovner, and Diane P. Wood, Circuit Judges.

Diane P. Wood, Circuit Judge.

Richard Wehrli owned several companies in Naperville, Illinois, which were involved in the concrete and trucking businesses. This case arose when one of the companies, Naperville Ready Mix, Inc. (NRM), decided to change the way that it would deliver concrete. The National Labor Relations Board (the Board) concluded that NRM and several other of Wehrli's companies were a single employer for purposes of the labor laws, and it further found that the company had violated various sections of the National Labor Relations Act (the Act) through its efforts to transfer bargaining unit delivery work from employees to alleged independent owner-drivers. NRM and its affiliates, T&W Trucking, Inc. (T&W), and Wehrli Equipment Co. (WEC), have asked us to set aside the Board's order requiring reinstatement of certain drivers and restoration of the bargaining unit work; the Board requests enforcement of its order. We conclude that the Board's order is supported by substantial evidence and the law, and we thus conclude that it is entitled to enforcement.

I

Wehrli incorporated NRM in 1960, with himself and his wife Judith Wehrli as the only stockholders. Wehrli served as NRM's president, and as of 1992 the company's board consisted of Richard and Judith Wehrli, Richard's brother-in- law Jerome Doll and the Wehrlis' son Robert. In 1978, Wehrli incorporated WEC to provide repair services for NRM dump trucks and other trucks at NRM's facility on High Grove Street in Naperville. Wehrli is the sole shareholder of WEC; he served on its board of directors through 1992, when he was replaced by his son Scott. In 1987, Wehrli and a supervisor at NRM, Robert Tilly, added T&W trucking to the family of companies. Through 1992, they were T&W's sole directors and shareholders. At the time of the events relevant to this case, T&W was providing hauling services for only two companies: NRM and one other.

Ready-mix truck drivers at NRM were covered by a collective bargaining agreement that Wehrli had originally negotiated with Teamsters Local 673 (the Union) in 1986. On April 21, 1992, NRM and the Union began negotiating a successor agreement for the one that was due to expire nine days later, on April 30. The Union's principal representative was its Secretary-Treasurer, Tom Custer, while Wehrli spoke for NRM. At the initial meeting, the Union presented a comprehensive written proposal seeking increased wages and pension benefits as well as improved job protection standards for the drivers. NRM rejected the proposal and countered with a one- year roll-over offer, with a few revisions to the health and pension plan provisions. Wehrli argued that concessions from the Union were necessary because of increased competition and declining profit margins in the ready-mix business. In the absence of concessions, he warned, he would either have to suspend trucking operations until the market improved or get out of the hauling business altogether.

When the parties met again on May 7, the Union tried to take the contract items one-by-one. NRM was not receptive to this tactic; Wehrli saw it as a ploy by the Union to win benefits comparable to those it had secured with the Northern Illinois Ready Mix Association (NIRMA), a local multi-employer bargaining group. Wehrli claimed that NRM was losing money on the delivery portion of its business, and he announced that he wanted to sell NRM's trucks and operate with owner- operator subcontractors. Custer responded by saying that if NRM were to make such a move it would have to become a party to the NIRMA agreement (as other similarly situated companies had done), which gave owner-operators the protections of union membership. Custer also commented that the Union was there to negotiate a contract, not to help NRM sell its trucks.

On May 12, Wehrli sent Custer the following letter:

I have decided to go out of the trucking business and am offering to sell my trucks to my present drivers first, and then any leftover trucks will be offered to outsiders. I intend to use individual contractors for all my trucking needs. If you want any discussion with me in this regard feel free to call.

Custer saw this letter as a part of the overall bargaining give-and-take, as it reflected the position Wehrli had taken at the two previous bargaining sessions. He therefore saw no need to, and did not, specifically reply to the letter.

The parties held another bargaining meeting on May 14, at which they made some progress. The Union agreed to remove certain demands, and NRM agreed to modify the language in several contract clauses. Wehrli continued to assert that he intended to sell the trucks. To this end, he introduced a proposal to delete Article 24 from the contract. Article 24 provided that certain owner-operator subcontractors would be treated like bargaining unit employees for purposes of wages, union security, and benefits. Wehrli wanted it deleted because it would have defeated much of the point of his plan to sell NRM's ready-mix trucks and to rely on subcontract haulers. He made it clear that under his proposal, the new subcontract haulers would not be members of the NRM employee bargaining unit. On May 15, he reduced his proposal to writing.

Without waiting for the Union's response, Wehrli proceeded to hold meetings with NRM's drivers on May 20 and May 27. The Union had no notice of these meetings and did not approve them. At the meetings, Wehrli discussed the financial difficulties he faced and informed the drivers of his intention to sell the trucks. He promised that he would make the trucks available for purchase by current drivers and that he would assist them with the logistics of becoming owner operators and with financing the purchase of the trucks. Wehrli also stated as a fait accompli that if the drivers became subcontractors they would no longer be covered under the Union's contract with NRM. Finally, he informed the drivers that as trucks were sold to current NRM and outside drivers, current drivers who had not purchased trucks would be laid off in reverse order of seniority.

After Wehrli's May 20 meeting, Custer met with the drivers to discuss the status of the negotiations. The union members voted to reject NRM's May 15 proposal, and they authorized the Union to call a strike. Custer explained that a strike was premature, because the parties were still negotiating.

In the meantime, Wehrli was proceeding unilaterally with his sales plans. By June 1, 1992, he had found two buyers for the trucks--his son Robert and a current driver, Richard Downs. He also placed advertisements in local trade papers, which yielded the names of ten prospective outside buyers. By the last week in June, Wehrli had handshake agreements with five individuals to sell nine trucks. Between June 28 and 30, he transferred title in those trucks to the new owners.

The financial terms that Wehrli set for the truck sales were favorable for the purchasers, but in return they gave up almost all control over the use of the trucks. No down payment was necessary, and Wehrli supplied the necessary financing. Each new owner-operator was to be paid $14 per cubic yard hauled, out of which $1 would go to pay principal on the debt. Wehrli retained a security interest in the trucks, under which he was entitled to find a buyer in default if NRM had a good faith belief that the driver was failing to perform the terms of the sales contract. Most importantly, there was a "first priority" provision that required the buyers to give first priority to the hauling needs of NRM so long as NRM provided reasonable notice of its intent to use the subcontractor; this requirement continued until the principal on the truck was paid off. The sales contract forbade the buyers from working for NRM's competitors within a fifteen mile radius of NRM's plant. The new owner-operators were also entitled to purchase subsidized fuel at the NRM facility and to call on NRM and WEC mechanics to perform all truck repairs. Finally, owner-operators were encouraged to store their vehicles at the NRM facility free of charge.

On July 1, five owner-operator subcontractors began hauling for NRM under these terms. Except for the nominal change in ownership of the trucks and the fact that the new drivers were not part of the bargaining unit, there were no meaningful changes in the day-to-day business of hauling at NRM. The owner-operators all hauled exclusively for NRM; they received their hauling assignments from the same individuals and according to essentially the same procedures as the unit employee drivers had; they attended the same monthly safety meetings that NRM had always held; and they refueled, repaired, and stored their trucks at the High Grove Street facility.

Meanwhile, throughout June and July, the collective bargaining negotiations with the Union continued. There was at least one meeting in early June, and on June 15 the parties met with a federal mediator. The Union modified its offer at that meeting, as did NRM. Wehrli continued to insist on a one-year roll-over and the deletion of Article 24, but he proposed wage and benefit adjustments modeled after the Union's recently ratified contract with NIRMA. Union members rejected NRM's offer and two days later they went on strike. NRM and the Union held brief meetings June...