NLRB v. Adams Dairy, Inc.

Decision Date11 October 1963
Docket NumberNo. 17171.,17171.
Citation322 F.2d 553
CourtU.S. Court of Appeals — Eighth Circuit

Elliott Moore, Atty., N.L.R.B., Washington, D. C., for petitioner and Stuart Rothman, Gen. Counsel, N.L.R.B., Washington, D. C., Dominick L. Manoli, Associate Gen. Counsel, N.L.R.B., Washington, D. C., Marcel Mallet-Prevost, Asst. Gen. Counsel, N.L.R.B., Washington, D. C., and Melvin J. Welles, Atty., N.L.R.B., Washington, D. C., were with him on the brief.

J. Leonard Schermer, St. Louis, Mo., for respondent. J. Leonard Schermer and Sylvan Agatstein, of Shifrin, Treiman, Agatstein & Schermer, St. Louis, Mo., and Jack Hasburgh, of Hillix, Hall, Hasburgh, Brown & Hoffhaus, Kansas City, Mo., were on the brief.

Before VOGEL, VAN OOSTERHOUT and RIDGE, Circuit Judges.

VOGEL, Circuit Judge.

This is a petition by the National Labor Relations Board seeking enforcement of its order issued against the respondent, Adams Dairy, Inc. The order is predicated upon the Board's finding that the company violated § 8(a) (5) and (1) of the National Labor Relations Act, insofar as it discharged its driver-salesmen and replaced them with independent contractors without first notifying and consulting with the employees' certified bargaining representative.

Adams Dairy, Inc., is in the business of processing and selling milk and other dairy products. Its sales are made exclusively to retail outlets, with A & P and Kroger purchasing about 80% of its products. Prior to February of 1960 these sales were accomplished through the use of both driver-salesmen employees and independent contractors. The driver-salesmen were utilized largely in the City and County of St. Louis, Missouri, with the independent distributors servicing areas in Illinois and outstate Missouri. During this period the company used 24 driver-salesmen and 10 independent contractors in the sales and delivery phase of its business. The independent contractors bought the products from Adams for re-sale to retailers while the driver-salesmen were paid a commission on each unit they sold. Since 1954 the Independent Wholesale Dairy Products Salesmen's Association (union) represented the driver-salesmen while Teamsters Local 603 was the bargaining agent for the "inside" employees.

The union negotiated three contracts with Adams, the first two covering the period from September 1, 1954, to September 1, 1959. During negotiations for the contracts, the union attempted unsuccessfully to include a clause which would prevent Adams from selling employees' routes to independent contractors. In 1955 all driver-salesmen were given the opportunity to convert their routes into independent distributorships. None of them accepted the proposal. The union attempted at various times to include a clause in the contracts giving the driver-salesmen the right to commissions on "dockside" sales. This proposal was also rejected by Adams.

The third contract between Adams and the union became effective on September 1, 1959, and was to expire on September 1, 1962. During four meetings in July and August of 1959, held for the purpose of negotiating this contract, Adams expressed concern over the fact that rival milk companies had lower delivery costs and consequently were able to undersell them. Adams mentioned another dairy, Quality of O'Fallon, which was using independent contractors. During negotiations union again orally proposed the inclusion of a clause in the contract prohibiting further substitution of independent contractors on company routes. Such proposal was again rejected by Adams. A compromise as to commissions to be paid the driver-salesmen was reached and the contract was executed on August 24, 1959.

In November and December, 1959, Adams initiated a series of meetings to discuss the unfavorable competitive situation caused by the lower costs of other dairies. Under the 1959 contract, Adams paid its driver-salesmen one and a half cents commission per unit up to 80,000 units and one and one-quarter cents per unit over 80,000 units. The average earnings for the driver-salesmen were $14,495 a year for a work week averaging 30 to 38 hours per week. During negotiations for the 1959 contract, Adams had attempted to reduce its delivery cost to one cent per unit but was unsuccessful. Adams asked the union for recommendations it might have to alleviate the situation. The union expressed a willingness to cooperate in the lowering of delivery costs but claimed an inability to help because Adams did not make any specific requests. Adams claims that it asked the union to come up with a plan but that the latter never complied. The union did meet for the purpose of voting on a motion to reopen the contract for negotiations but the motion was unanimously defeated. It is undisputed that Adams at no time during these meetings or during the contract negotiations intimated that it planned to completely change over to independent contractors, although on February 13, 1960, the sales manager of Adams voluntarily informed one of the driver-salesmen that Adams was planning to negotiate a system of independent distributors on all routes but the transformation had been temporarily postponed.

On February 22, 1960, Adams completed negotiations for changing from driver-salesmen to independent contractors. Adams informed the union of the change-over and that all positions of driver-salesmen were terminated. Such discharge covered all of Adams' employees represented by the union. Adams paid the driver-salesmen so discharged one week's pay in lieu of "notice" plus all accumulated vacation pay.

The union thereafter filed a complaint with the National Labor Relations Board. A Trial Examiner heard the case on May 30 and June 1, 1960, and in his intermediate report of December 14, 1960, held that before subcontracting the delivery services to independent contractors, thereby terminating the driver-salesmen employees, it was the duty of the employer to negotiate concerning such decision. He found Adams in violation of § § 8(a) (5) and (1), 8(d) and 8(a) (3) and (1) of the National Labor Relations Act.

An appeal was taken to the National Labor Relations Board and on June 25, 1962, (almost two and a half years after the termination of employment) the Board rendered its decision and issued the order for which it here seeks enforcement. The Board approved the Trial Examiner's findings except that it did not pass upon the § 8(d) and § 8(a) (3) and (1) violations since the scope of the order did not necessitate it. The order included in its provisions that Adams offer to reinstate all driver-salesmen and make them whole for earnings lost as a result of their replacement.

Both the Trial Examiner and the Board in the instant case have exonerated Adams of any anti-union motivation in its decision to convert from an employee to a subcontracting method of selling and distributing its products. The Examiner's report as adopted by the Board states:

"* * * The record is devoid of anti-union statements or attitudes usually present where there is a strong opposition to unions by an employer. Nor is there any pattern of conduct which would support a finding that Respondent was hostile to labor organizations generally or to the Union in particular.
"Moreover, there is also evidence in support of Respondent\'s claim that the changeover from delivery by its own driver-salesmen to delivery by independent distributors had an economic motivation. It is undisputed that during the entire course of negotiations here relevant Respondent consistently complained of its delivery costs in relation to its competitors. * * *"

The Board insists, however, that the decision to terminate distribution through driver-salesmen was the subject of mandatory bargaining under the provisions of the National Labor Relations Act and that inasmuch as Adams did not negotiate, it was guilty of unfair labor practices despite its purely financial motivation.

The employer's contention is that the decision to eliminate its driver-salesmen and to contract out that phase of its business was purely managerial prerogative and not the subject of bargaining with the union. Thus the primary issue is presented.

The principle that the element of intent is a crucial factor in the determination of whether or not certain acts can be labeled as unfair labor practices under § 8(a) of the Act has recently been discussed by the Supreme Court in N.L. R.B. v. Erie Resistor Corp., 1963, 373 U.S. 221, at pages 227 through 230, 83 S. Ct. 1139, at pages 1144 through 1146, 10 L.Ed.2d 308:

"We think the Court of Appeals erred in holding that, in the absence of a finding of specific illegal intent, a legitimate business purpose is always a defense to an unfair labor practice charge. Cases in this Court dealing with unfair labor practices have recognized the relevance and importance of showing the employer\'s intent or motive to discriminate or to interfere with union rights. But specific evidence of such subjective intent is `not an indispensable element of proof of violation.\' Radio Officers v. Labor Board, 347 U.S. 17, 44 74 S.Ct. 323, 98 L.Ed. 455. `Some conduct may by its very nature contain the implications of the required intent; the natural foreseeable consequences of certain action may warrant the inference. * * * The existence of discrimination may at times be inferred by the Board, for "it is permissible to draw on experience in factual inquiries."\' Local 357 Teamsters Local v. Labor Board, 365 U.S. 667, 675 81 S.Ct. 835, 6 L.Ed.2d 11.
"Though the intent necessary for an unfair labor practice may be shown in different ways, proving it in one manner may have far different weight and far different consequences than proving it in another. When specific evidence of a subjective intent to discriminate or to encourage or discourage union membership is shown, and

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