National Labor Relations Board v. American Nat Ins Co

• Citation: 343 U.S. 395,72 S.Ct. 824,96 L.Ed. 1027
• Decision Date: 26 May 1952
• Docket Number: No. 126,126
• Parties: NATIONAL LABOR RELATIONS BOARD v. AMERICAN NAT. INS. CO
• Court: United States Supreme Court

343 U.S. 395

72 S.Ct. 824

96 L.Ed. 1027

NATIONAL LABOR RELATIONS BOARD

v AMERICAN NAT. INS. CO.

No. 126.

Argued March 4, 1952.

Decided May 26, 1952.

Mr. Mozart G. Ratner, Washington, D.C., for petitioner.

Mr. Louis J. Dibrell, Galveston, Tex., for respondent.

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

This case arises out of a complaint that respondent refused to bargain collectively with the representatives of its employees as required under the National Labor Relations Act, as amended.¹

The Office Employees International Union A.F. of L., Local No. 27, certified by the National Labor Relations Board as the exclusive bargaining representative of respondent's office employees, requested a meeting with respondent for the purpose of negotiating an agreement governing employment relations. At the first meetings beginning on November 30, 1948, the Union submitted a proposed contract covering wages, hours, promotions, vacations and other provisions commonly found in collective bargaining agreements, including a clause establishing a procedure for settling grievances arising under the contract by successive appeals to management with ultimate resort to an arbitrator.

On January 10, 1949, following a recess for study of the Union's contract proposals, respondent objected to the provisions calling for unlimited arbitration. To meet this objection, respondent proposed a so-called management functions clause listing matters such as promotions, discipline and work scheduling as the responsibility of management and excluding such matters from arbitration.² The Union's representative took the position 'as soon as (he) heard (the proposed clause)' that the Union would not agree to such a clause so long as it covered matters subject to the duty to bargain collectively under the Labor Act.

Several further bargaining sessions were held without reaching agreement on the Union's proposal or respondent's counterproposal to unlimited arbitration. As a result, the management functions clause was 'by-passed' for bargaining on other terms of the Union's contract proposal. On January 17, 1949, respondent stated in writing its agreement with some of the terms proposed by the Union and, where there was disagreement, respondent offered counter-proposals, including a clause entitled 'Functions and Prerogatives of Management' along the lines suggested at the meeting of January 10th. The Union objected to the portion of the clause providing:

'The right to select and hire, to promote to a better position, to discharge, demote or discipline for cause, and to maintain discipline and efficiency of employees and to determine the schedules of work is recognized by both union and company as the proper responsibility and prerogative of management to be held and exercised by the company, and while it is agreed that an employee feeling himself to have been aggrieved by any decision of the company in respect to such matters, or the union in his behalf, shall have the right to have such decision reviewed by top management officials of the company under the grievance machinery hereinafter set forth, it is further agreed that the final decision of the company made by such top management officials shall not be further reviewable by arbitration.'

At this stage of the negotiations, the National Labor Relations Board filed a complaint against respondent based on the Union's charge that respondent had refused to bargain as required by the Labor Act and was thereby guilty of interfering with the rights of its employees guaranteed by Section 7 of the Act and of unfair labor practices under Sections 8(a)(1) and 8(a)(5) of the Act. ³ While the proceeding was pending, negotiations between the Union and respondent continued with the management functions clause remaining an obstacle to agreement. During the negotiations, respondent established new night shifts and introduced a new system of lunch hours without consulting the Union.

On May 19, 1949, a Union representative offered a second contract proposal which included a management functions clause containing much of the language found in respondent's second counterproposal, quoted above, with the vital difference that questions arising under the Union's proposed clause would be subject to arbitration as in the case of other grievances. Finally, on January 13, 1950, after the Trial Examiner had issued his report but before decision by the Board, an agreement between the Union and respondent was signed.⁴ The agreement contained a management functions clause that rendered nonarbitrable matters of discipline, work schedules and other matters covered by the clause. The subject of pro- motions and demotions was deleted from the clause and made the subject of a special clause establishing a union-management committee to pass upon promotion matters.

While these negotiations were in progress, the Board's Trial Examiner conducted hearings on the Union's complaint. The Examiner held that respondent had a right to bargain for inclusion of a management functions clause in a contract. However, upon review of the entire negotiations, including respondent's unilateral action in changing working conditions during the bargaining, the Examiner found that from and after November 30, 1948, respondent had refused to bargain in a good faith effort to reach agreement. The Examiner recommended that respondent be ordered in general terms to bargain collectively with the Union.

The Board agreed with the Trial Examiner that respondent had not bargained in a good faith effort to reach an agreement with the Union. But the Board rejected the Examiner's views on an employer's right to bargain for a management functions clause and held that respondent's action in bargaining for inclusion of any such clause 'constituted, quite (apart from) Respondent's demonstrated bad faith, per se violations of Section 8(a)(5) and (1).' Accordingly, the Board not only ordered respondent in general terms to bargain collectively with the Union (par. 2(a)), but also included in its order a paragraph designed to prohibit bargaining for any management functions clause covering a condition of employment. (Par. 1(a)).⁵ 89 N.L.R.B. 185.

On respondent's petition for review and the Board's cross-petition for enforcement, the Court of Appeals for the Fifth Circuit agreed with the Trial Examiner's view that the Act does not preclude an employer from bargaining for inclusion of any management functions clause in a labor agreement. The Court of Appeals further found that the evidence does not support the view that respondent failed to bargain collectively in good faith by reason of its bargaining for a management functions clause. As a result, enforcement of the portion of the Board's order directed to the management functions clause (par. 1(a)) was denied. Other portions of the Board's order (pars. 1(b) and 2(a)) were enforced because respondent's unilateral action in changing working conditions during bargaining does support a finding that respondent had not bargained collectively in good faith as required by the Act. 5 Cir., 187 F.2d 307. We granted certiorari on petition of the Board for review of the denial of enforcement as to paragraph 1(a) of the Board's order. 342 U.S. 809, 72 S.Ct. 40.

First. The National Labor Relations Act is designed to promote industrial peace by encouraging the making of voluntary agreements governing relations between unions and employers.⁶ The Act does not compel any agreement whatsoever between employees and employers.⁷ Nor does the Act regulate the substantive terms governing wages, hours and working conditions which are incorporated in an agreement.⁸ The theory of the Act is that the making of voluntary labor agreements is encouraged by protecting employees' rights to organize for collective bargaining and by imposing on labor and management the mutual obligation to bargain collectively.

Enforcement of the obligation to bargain collectively is crucial to the statutory scheme. And, as has long been recognized, performance of the duty to bargain requires more than a willingness to enter upon a sterile discussion of union-management differences. Before the enactment of the National Labor Relations Act, it was held that the duty of an employer to bargain collectively required the employer 'to negotiate in good faith with his employees' representatives; to match their proposals, if unacceptable, with counter-proposals; and to make every reasonable effort to reach an agreement.'⁹ The duty to bargain collectively, implicit in the Wagner Act as introduced in Congress, was made express by the insertion of the fifth employer unfair labor practice accompanied by an explanation of the purpose and meaning of the phrase 'bargain collectively in a good faith effort to reach an agreement.'¹⁰ This understanding of the duty to bargain collectively has been accepted and applied throughout the administration of the Wagner Act by the National Labor Relations Board and the Courts of Appeal.¹¹

In 1947, the fear was expressed in Congress that the Board 'has gone very far, in the guise of determining whether or not employers had bargained in good faith, in setting itself up as the judge of what concessions an employer must make and of the proposals and counter-proposals that he may or may not make.' ¹² Accordingly, the Hartley Bill, passed by the House, eliminated the good faith test and expressly provided that the duty to bargain collectively did not require submission of counter-proposals.¹³ As amended in the Senate and passed as the Taft-Hartley Act, the good faith test of bargaining was retained and written into Section 8(d) of the National Labor Relations Act. That Section contains the express provision that the obligation to bargain collectively does not compel either party to agree to a proposal or require the making of a concession.¹⁴

Thus it is now apparent from the statute itself that the Act does not encourage...