New England Health Care Union v. N.L.R.B.

• Decision Date: 19 April 2006
• Docket Number: Docket No. 05-0181-AG.
• Citation: 448 F.3d 189
• Parties: NEW ENGLAND HEALTH CARE EMPLOYEES UNION, District 1199, SEIU, AFL-CIO, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, CHURCH HOMES, INC., d/b/a AVERY HEIGHTS, Intervenor.
• Court: U.S. Court of Appeals — Second Circuit

Page 189

448 F.3d 189

NEW ENGLAND HEALTH CARE EMPLOYEES UNION, District 1199, SEIU, AFL-CIO, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent CHURCH HOMES, INC., d/b/a AVERY HEIGHTS, Intervenor.

Docket No. 05-0181-AG.

United States Court of Appeals, Second Circuit.

Argued: December 21, 2005.

Decided: April 19, 2006.

John M. Creane, Law Firm of John M. Creane, Milford, CT, for Petitioner.

Aileen A. Armstrong, Deputy Associate General Counsel (Robert J. Englehart, Supervisory Attorney, Steven B. Goldstein, Attorney, Arthur F. Rosenfeld, Acting General Counsel, John E. Higgins, Jr., Deputy General Counsel, Margery E. Lieber, Acting Associate General Counsel, on the brief), National Labor Relations Board, Washington, DC, for Respondent.

Michael C. Harrington, Murtha Cullina LLP, Hartford, CT, for Intervenor.

Before: JACOBS, LEVAL, STRAUB, Circuit Judges.

JACOBS, Circuit Judge.

The New England Health Care Employees Union ("Union") petitions for review of so much of the decision of the National Labor Relations Board ("Board") as dismissed the complaint alleging that Church Homes, Inc., d/b/a Avery Heights ("Avery"), violated §§ 8(a)(1) and (3) of the National Labor Relations Act ("Act"), 29 U.S.C. §§ 158(a)(1) and (3), when it failed to reinstate all strikers upon their unconditional offer to return to work. Avery refused to reinstate the strikers on the ground that it had hired permanent replacements — a measure that an employer is free to take in order to withstand or end a strike. The Administrative Law Judge ("ALJ") found, however, that Avery had an independent unlawful motive for hiring permanent replacements for the striking workers — to break the Union — and that its refusal to reinstate therefore violated the Act. The Board reversed on the ground that the Board General Counsel ("General Counsel"), who represented the Union (the Charging Party) before the ALJ, see 29 U.S.C. § 153(d), had failed to demonstrate that Avery had an independent unlawful motive for hiring the permanent replacements. We conclude that the Board's determination was based on arbitrary and capricious reasoning, and therefore grant the Union's petition.

Background

Avery is a combined nursing home/assisted living facility for approximately 500 adults. The Union has been the certified bargaining representative for all service and maintenance employees at Avery since the early 1970s. Approximately 180 to 185 of the Union's members began an economic strike on November 17, 1999, after Avery and the Union were unable to agree on a new contract. Initially, Avery carried on operations by relying on nonstriking employees, managers, temporary employees, and volunteers. The evidence shows that Avery officials were satisfied at first with the continuity and quality of patient care and with worker morale, but became concerned about their ability to sustain patient care as long hours and stressful conditions continued. On December 2, the Union President warned Avery's chief negotiator that, unless compromises were made, the strike was going to be a long one.

On or about December 15, 1999, Avery began hiring permanent replacements, both directly and through outside agencies charging substantial fees. Avery paid the permanent replacements an hourly wage that was higher than it was offering the strikers, but less than it was paying its temporary workers and less than what the Union was demanding at the bargaining table.

Avery made a conscious decision to tell the Union nothing about the hiring of permanent replacements, and took active measures to keep the replacement campaign a secret while hiring as many permanent workers as it could before the Union caught on. By the end of December, however, the Union received reports from workers and discovered other clues, and arranged for a meeting with Avery and a federal mediator on January 3, 2000; at that meeting, Avery disclosed that "over 100" permanent replacements had been hired.

On January 5, 2000, the Union offered on behalf of the strikers to return to work immediately. Avery noted that the offer was not unconditional. On January 20, 2000, the Union renewed the offer to return, this time unconditionally. Avery began recalling strikers to positions that had not been occupied by permanent replacements, ultimately reinstating 78 or 79.

The Board Decision

The Board ruled that Avery "properly exercised its right to hire permanent replacements for its striking employees and that it did not violate Section 8(a)(3) [of the Act] when it refused to reinstate the strikers upon their January 20, 2000 unconditional offer to return to work." Bd. Decision at 8. The Board cited the rule that an employer has a right to hire permanent replacement workers — a valuable tool for "fight[ing] back" in an economic battle — absent a showing that the employer had an independent unlawful motive for the hiring, id. at 6, and found that no such unlawful motive was shown here. Effectively, the Board ruled that no inference of unlawful motive could be drawn from Avery's secrecy because an employer is not "under a duty to disclose to a union its intention to hire permanent replacements." Id. at 6.

The Board reasoned that an employer has no duty to notify a union that replacement workers are being hired, and may legitimately hire in secret, because at least one valid objective of such hiring — an enhanced ability to withstand the strike — does not depend on making the striking workers aware that they are being replaced. Even assuming that Avery was required to inform the Union, the Board concluded that Avery complied with that requirement at the January 3 meeting. See id. at 6. The Board emphasized the "sharp distinction between seeking to prevail over the Union," which is a lawful goal, "and seeking to oust the Union as a bargaining representative," which is not. Id. at 7. According to the Board, there was no evidence that Avery was seeking to oust the Union and ample evidence that Avery's goal was to exert economic pressure on the Union to induce it to reach an agreement on terms favorable to Avery. Id. We refer to the goal of exerting economic pressure on the Union as the "bargaining leverage rationale" for Avery's conduct.

The dissenting board member concluded that the General Counsel had discharged his burden of showing that Avery had an independent unlawful motive —" to undermine the Union by engendering striker dissatisfaction with the Union" — for the decision to hire permanent replacements, Bd. Decision at 13, 15 (Walsh, M., dissenting in part), that the burden therefore shifted to Avery to demonstrate that it would have hired the permanent replacements even in the absence of that unlawful motive, id. at 14, and that the rationales proffered by Avery had been "exposed as shams," id. at 15.

For several reasons, the dissenter rejected the majority's rationale that the hiring of replacements was motivated by Avery's desire for bargaining leverage: (i) Avery's principals explicitly disavowed that rationale; (ii) the Board never explained "how [Avery's] secrecy [was] consistent with a motive to gain economic leverage," when in fact "such leverage could only have been exerted through disclosure," id. at 15; and (iii) "undisclosed, the hiring of replacements exerted no economic leverage," id. at 15-16 (emphasis in original).

Discussion

A. Applicable Law

Section 7 of the Act, 29 U.S.C. § 157, grants employees the "right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection." See also 29 U.S.C. § 163 ("Nothing in this Act ... shall be construed so as either to interfere with or impede or diminish in any way the right to strike ...."). To implement this right, § 8(a)(1) of the Act, 29 U.S.C. § 158(a)(1), makes it an unfair labor practice for an employer "to interfere with, restrain, or coerce employees in the exercise" of their § 7 rights. And § 8(a)(3) of the Act, 29 U.S.C. § 158(a)(3), makes it an unfair labor practice for an employer to "discourage membership in any labor organization."

Under Supreme Court precedent, an employer that refuses to reinstate economic strikers violates § 8(a)(3) unless it can demonstrate that it acted to advance a "`legitimate and substantial business justification[].'" See NLRB v. Fleetwood Trailer Co., 389 U.S. 375, 378, 88 S.Ct. 543, 19 L.Ed.2d 614 (1967) (quoting NLRB v. Great Dane Trailers, 388 U.S. 26, 34, 87 S.Ct. 1792, 18 L.Ed.2d 1027 (1967)). The hiring of permanent replacement workers amounts to one such legitimate and substantial business justification. See NLRB v. Int'l Van Lines, 409 U.S. 48, 50, 93 S.Ct. 74, 34 L.Ed.2d 201 (1972) ("[A]n employer may refuse to reinstate economic strikers if in the interim he has taken on permanent replacements."); Belknap, Inc. v. Hale, 463 U.S. 491, 504 n. 8, 103 S.Ct. 3172, 77 L.Ed.2d 798 (1983) ("The refusal to fire permanent replacements because of commitments made to them in the course of an economic strike satisfies the requirement of [Fleetwood Trailer] that the employer have a legitimate and substantial justification for its refusal to reinstate strikers.") (internal quotation marks omitted). Consequently, "[w]here employees have engaged in an economic strike, the employer may hire permanent replacements whom it need not discharge even if the strikers offer to return to work unconditionally." Belknap, 463 U.S. at 493, 103 S.Ct. 3172.

At the same time (as the Board recognized), the Act is violated if "an independent unlawful purpose" motivated the hiring of permanent replacements.¹ Bd. Decision at 5; see also Hot Shoppes Inc., 146 NLRB 802, 805 (1964). As with other elements of an unfair labor practice, the General Counsel cannot prevail without a finding that the employer had an independent unlawful purpose. See ...