NLRB v. ROYAL OAK TOOL & MACHINE COMPANY

• Citation: 320 F.2d 77
• Decision Date: 01 July 1963
• Docket Number: No. 14789.,14789.
• Parties: NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ROYAL OAK TOOL & MACHINE COMPANY, R O Manufacturing Company, Wendell G. Mouw, Garrett H. Mouw and Robert J. Walls, Respondents.
• Court: U.S. Court of Appeals — Sixth Circuit

320 F.2d 77 (1963)

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ROYAL OAK TOOL & MACHINE COMPANY, R O Manufacturing Company, Wendell G. Mouw, Garrett H. Mouw and Robert J. Walls, Respondents.

No. 14789.

United States Court of Appeals Sixth Circuit.

July 1, 1963.

Gerald Brissman, N. L. R. B., Washington, D. C. (Stuart Rothman, Gen. Counsel, Dominick L. Manoli, Associate Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, Rosanna A. Blake, Peter M. Giesey, Attys. N. L. R. B., Washington, D. C., on the brief), for petitioner.

James D. Tracy, Detroit, Mich. (Paul H. Townsend, Jr., Dykema, Wheat, Spencer, Goodnow & Trigg, Detroit, Mich., on the brief), for respondents R O Manufacturing Company, Wendell G. Mouw, Garrett H. Mouw and Robert J. Walls.

James S. Thorburn, Royal Oak, Mich. (Davis & Thorburn, Royal Oak, Mich., on the brief), for respondent Royal Oak Tool & Machine Co.

Before MILLER, Circuit Judge, and McNAMEE and BOYD, District Judges.

McNAMEE, District Judge.

This case is before the Court on the petition of the National Labor Relations Board pursuant to Section 10(e) of the National Labor Relations Act, as amended, 29 U.S.C., §§ 151 et seq., for the enforcement of its order issued on August 29, 1961 against Royal Oak Tool & Machine Company, (hereinafter Royal Oak), RO Manufacturing Company, (hereinafter RO), Wendell and Garrett Mouw and Robert J. Walls. The Board found that respondents violated Section 8(a) (5) and (1) of the Act by refusing to bargain collectively with the Union¹ as the representative of their production employees included in the bargaining unit set forth in the existing bargaining agreement.

The findings, decision and order of the Board rest upon the following facts as determined by it.

Royal Oak, which has been in existence since the mid-1920's, is primarily a manufacturer of tools and dies for the automotive industry. For this work it employs between 80 and 90 skilled craftsmen known as tool and diemakers. In the early 1940's Royal Oak began producing the R-O grinder, which requires a less skilled labor force, and a grinder division was established in 1946. It was allotted separate space in the plant, had its own accounting system and its own sales manager, William Johnson. For a considerable period prior to 1960, eight men worked in the Grinder Division under Ellwood C. Hemlin. Royal Oak's Grinder Division was a production division in which a standard product was manufactured in quantity as distinguished from tool and diemaking, which is done on an individual basis. The officers and stockholders of Royal Oak during 1950, and for an undisclosed period previous thereto, were Wendell Mouw, president, Garrett Mouw, vice president, Robert Walls, vice-president, John W. Barnowski, secretary-treasurer. Since 1930 Royal Oak has been a member of the Automotive Tool & Diemakers Association and for years has recognized the Union as the exclusive bargaining representative of all its factory production and maintenance employees. The most recent contract between the parties contained a union security clause and a check-off of dues provision applicable to all employees. The general provisions, such as those establishing pensions and vacation benefits, also applied to all employees but the wage and seniority provisions were limited to tool and diemakers. The contract specifically provided for company by company negotiations with the Union relative to wage rates and seniority rules applicable to employees performing production work such as those working in Royal Oak's Grinder Division. The express provisions of the contract relating to production employees are as follows:

"(1) Production employees shall have their own separate seniority list and classifications which shall cover the various occupations in production work;

"(2) Production employees shall be covered by the main body of this Agreement, except as amended by this Exhibit;

"(3) Production wage rates shall be determined by negotiations between the Management and the Union in the shop involved."

As Royal Oak's business in both divisions expanded, space became a problem. To solve this problem and for other business reasons, the company, in 1959, decided to sever its Grinder Division from its Tool and Die Division by selling the grinder business, including its machinery and other assets, to a separate corporation. If this could be accomplished under the "spin-off" provision of the Internal Revenue Code a tax saving would result. Accordingly an application to "spin-off" the Grinder Division and a statement of the business reasons for the transaction was submitted to the Commissioner of Internal Revenue, Washington, D. C., which read in part:

"Due to the dissimilarity of the two businesses conducted, it is desirable from a business standpoint to separate them. A primary objective of the separation is to separate the employees of the two divisions into separate bargaining units. This is desirable because the skilled workers in the Tool Division are represented by the Tool and Die Workers Association, and the high wage rates applicable to these workers are inappropriate to the semi-skilled and unskilled workers employed by the Grinder Division. While it is contemplated that the Grinder Division employees will be organized after the transfer of its operations to a separate corporation, it is assumed that they will not fall within the jurisdiction of the Tool and Die Workers Association, and that consequently the wage rates of this division will be able to be kept at a level commensurate with the work being performed, thereby permitting the company to meet competition.

"A second purpose sought to be achieved by the division is the more effective advertising of the Grinder Division products under a separate corporate name which would reflect the nature of, and be more clearly identifiable with, the product."

The Union received no notice of the proposed "spin-off."

Royal Oak received a favorable advance ruling from the Revenue Service on the proposed "spin-off" and on December 22, 1959, the board of directors authorized the filing of papers necessary to obtain a charter for the new corporation which would be known as RO Manufacturing Company. Later the new company's stock was distributed among the four holders of Royal Oak's common stock, each receiving shares in proportion to those he held in the older corporation. In documents previously submitted to the Revenue Service each of the proposed stockholders stated that should he leave the employ of Royal Oak he expected to sell his stock in both corporations either to the corporation in question or to the remaining stockholders, or some of them. On December 23, 1959, the proposed stockholders of the new company, which were the same as the stockholders of Royal Oak, met and elected themselves as the board of directors of RO Manufacturing Company. Immediately thereafter the new board held its first meeting and elected the following officers of RO: President, William A. Johnson; Vice President, Ellwood C. Hemlin; Secretary, Robert J. Walls; Treasurer, Wendell G. Mouw.

Johnson had been Sales Manager for Royal Oak's Grinder Division for a number of years. He testified that he learned of his election at RO approximately one month after it occurred. He stated that an advertising man "called me up and let the cat out of the bag," and that the news came as a complete surprise. Thereafter Garrett Mouw (who was not an officer of RO) notified Johnson of his election. Johnson stated his consternation on that occasion was such that he couldn't say whether Mouw told him the identity of the other officers of the new company. Hemlin, who was in charge of the production employees in the Grinder Division of Royal Oak, had a similar job with RO, together with the title and duties of Vice President of the latter corporation. Apparently he learned of his election at about the same time as Johnson. The other two officers of RO, Secretary Walls and Treasurer Wendell Mouw, were majority stockholders in Royal Oak and its Vice President and President, respectively. By bill of sale dated February 16, 1960, retroactive to January 5, 1960, Royal Oak transferred to RO all of its Grinder Division assets, including machinery, office equipment, accounts receivable and the Division's accounts payable. The actual transfer of the machinery occurred over the weekend of February 6-7, 1960. A few days before the transfer the employees in the Grinder Division were called together and told about the move. Johnson was not present on that occasion, being out of town on business for Royal Oak. Nor does it appear that Hemlin was present. Vice President Mouw announced that the jobs at the plants would carry the same classifications and the same rates of pay. The employees were told they would receive credit for their service with Royal Oak in determining eligibility under RO's pension plan; that there would be no break in hospital benefits and no loss of vacation time earned while working for Royal Oak. When the employees inquired whether they would have a union, they were told in substance that they would have to determine that question for themselves. The product manufactured by RO after the transfer was the same as the one manufactured in the Grinder Division of Royal Oak. The same trade name was used, purchases were made for the most part from the same supplier and the same advertising agency was used. The pattern of sales remained unchanged. John W. Barnowski, Treasurer of Royal Oak, made periodic checks of RO's books. The foreman under whom the men worked was Hemlin, which was the situation that obtained in the Grinder Division of Royal Oak. It was conceded at the hearing by Vice President Mouw of Royal Oak that after the transfer of machinery and employees, RO did not recognize the union as the bargaining representative of its employees. On February 15th, the union shop steward filed a grievance with Royal Oak,...