NLRB v. Zayre Corp.

• Decision Date: 27 April 1970
• Docket Number: No. 27809.,27809.
• Parties: NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ZAYRE CORP., Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

424 F.2d 1159 (1970)

NATIONAL LABOR RELATIONS BOARD, Petitioner, v. ZAYRE CORP., Respondent.

No. 27809.

United States Court of Appeals, Fifth Circuit.

April 27, 1970.

Marcel Mallet-Prevost, Asst. Gen. Counsel, N.L.R.B., Washington, D. C., Harold A. Boire, Dir., Region 12, N.L. R.B., Tampa, Fla., Morton Namrow, Atty., N.L.R.B., Washington, D. C., for petitioner.

Stuart Linnick, Sidney S. Wolchok, New York City, John W. Boult, Tampa, Fla., for respondent.

Before JOHN R. BROWN, Chief Judge, COLEMAN and CLARK, Circuit Judges.

JOHN R. BROWN, Chief Judge:

In this case for enforcement of the Board's order against Zayre Corp., the only important and difficult questions presented relate to a finding of a § 8(a) (5) violation — refusal to bargain.¹ The central issue raised here is the extent to which the purchaser of the assets (Zayre) of a retail discount store is bound by the bargaining obligations of its predecessor in interest (Masters). More particularly, the question is raised whether (i) this particular asset purchaser is a "successor", (ii) whether the Board was justified in its finding that the bargaining unit of the original owner of the assets was initially appropriate, and (iii) whether the original unit became inappropriate because of changes instituted by the buyer.

In this particular case we believe that the Board's conclusion that the buyer was obligated to bargain was justified. Zayre was a successor and the unit was appropriate. The § 8(a) (5) order, as was that for § 8(a) (1) and (3), was supportable and is enforced.

I.

A. Masters Operations

This case involves a discount department store located on 7th Street, Miami, Florida. This particular store was originally owned by Masters, Inc. and was one of three such stores operated by Masters in the greater Miami area. Like many discount stores, Masters leased certain product lines to others. For example, Rockover Brothers operated a men's department, Lady Rose, Inc., operated a women's wear department, and American Snack Bar operated the snack bar. These operations were, however, all carried on in the name of Masters, and the customers were unaware whether they were dealing with Masters or a lessee department operator.

This appearance of oneness was maintained basically through Masters' contractually reserved right to control the operations of its licensees. Of particular relevance here is Masters' expressed right to control the personnel policies and the personnel themselves of the licensees. Such power was given to Masters through its contracts with these licensees, but the occasions for the exercise of the power were few.

In October, 1962 Masters had a collective bargaining agreement with the Teamsters. This agreement covered the 7th Street store but included only the employees of Masters and excluded the employees of the licensees. Neither Masters nor the Teamsters thought the agreement covered more than the direect employees of Masters. Moreover, there was no evidence that the Teamsters ever attempted to have the employees of the licensees included under the agreement.

In 1966 the Union² petitioned for an election to determine whether it would be certified as the exclusive bargaining representative for Masters' direct employees. Masters objected to the limitation of the unit to its direct employees and contended that the only appropriate unit was the whole store — direct employees and employees of licensees. The Regional Director found, however, that because of the prior bargaining history with the Teamsters and the failure of Masters to exercise its contract rights over the personnel policy of the licensees, the more appropriate unit was Masters' direct employees. The Board affirmed this decision. The election was held. And the Union was certified as the exclusive bargaining agent for the direct employees of Masters in this store.

There was no collective bargaining agreement entered into — the Union failed to request a bargaining meeting until June 24, 1966 — and in the summer of 1966 Masters, which was being operated by a creditors' committee under a Chapter XI bankruptcy, sold its operating assets at this particular store to Zayre Corp.

B. Zayre's Operations

Zayre continued to maintain the discount store operation at the site. It employed 95% of the persons employed by Masters and retained the practice of leasing out the operations of certain departments. There were, however, significant changes in the operation of the store upon Zayre's takeover.

First, Zayre changed the relationship between the local store and the rest of the Zayre chain from what the relationship had been between the store and the Masters chain. Under Masters the store had been operated basically as an independent unit. The store manager had virtual autonomy over many personnel and pricing decisions. The Miami stores maintained their own purchasing departments, and they also operated their own credit or revolving charge program for customers. Under Zayre the store was a fully integrated part of a national chain. All purchasing was done through central offices. All personnel policy was set, including wages and other working conditions, by the national office. All bookkeeping and accounting records and operations were maintained in a central office, and the pricing system was also modified. In addition, product lines were changed somewhat and all delivery services were discontinued.

Secondly, the takeover by Zayre modified significantly the relationship between Zayre, as an entity, and the employees of the licensees. Zayre operated under a policy of full control of the personnel operations of the licensees. Unlike Masters, Zayre operated a central hiring system for its own direct employees as well as employees of its licensees. It had complete control over hiring and firing of employees. All employees, both direct employees and employees of the licensees, were paid directly from its central office with its own payroll checks. A uniform policy applicable to both kinds of employees was maintained for vacation, sick leave and health and other insurance programs.

II. The § 8(a) (1) and (3) Matter

In addition to these general changes, which are relevant to the questions of "succession" and appropriateness of bargaining units, Zayre made one very the § 8(a) (3) violation. It discharged Albert Drangle, who had been a salesman for Masters in the major appliance department for approximately 10 years and was the Union organizer and shop steward.

On the day following Zayre's takeover of the store Drangle questioned Zayre's personnel director concerning the continuation of a 40-hour work week in the store. During the conversation he identified himself as a spokesman for the Union and was promptly told that Zayre "had no union" and that employees would be given their work schedules by the manager. He soon became aware that some changes had indeed been made. Upon Drangle's return to work he found his card was not in the rack and went to the personnel office. He was there told that Zayre was discharging him because his earning rate under Masters was higher than Zayre's policy would afford. He was told that it was Zayre's policy to discharge any employee that would have to take a substantial cut in wages due to the takeover. Zayre's personnel manager was adamant in his refusal to continue Drangle's employment even though Drangle offered to work at any lower salary rate.³ In addition, during this conversation, Drangle was told that "we don't have anything to do with unions around here."

On the basis of this record it is clear that there was substantial evidence to support the Board's findings. The inferences drawn and credibility choices made by the Board were for it and not for this Court. NLRB v. Curtis Manufacturing Co., 5 Cir., 1970, 421 F.2d 1335, 1337; NLRB v. The Great Atlantic & Pacific Tea Co., 5 Cir., 1969, 406 F.2d 1173. Thus, the Board's order concerning the findings of § 8(a) (1) and 8(a) (3) violations must be enforced.

III. Zayre As Successor

The premier question in determining Zayre's § 8(a) (5) obligation to bargain is the effect of the sale of assets on the employees' rights under the certification. The answer is largely found in the doctrine of "succession of employers", which implements the policy of the statute by preventing a change in employers, whether by merger or asset acquisition, from in itself affecting employee rights.⁴ John Wiley & Sons, Inc. v. Livingston, 1964, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898; United States Gypsum Co. v. United Steelworkers, 5 Cir., 1967, 384 F.2d 38, cert. denied, 1968, 389 U.S. 1042, 88 S.Ct. 783, 19 L.Ed.2d 832. The acquiring employer is the successor to the obligations of his predecessor if there is continuity in the business operation. "The crucial question in determining if the certification is binding on the successor employer is whether the employing industry remains essentially the same after the transfer of ownership." NLRB v. Auto Ventshade, Inc., 5 Cir., 1960, 276 F.2d 303, 304; NLRB v. Valleydale Packers, Inc., 5 Cir., 1968, 402 F.2d 768.

Here the Board found that Zayre was a successor and was hence bound by the certification. In reaching this conclusion the Board relied to a great part on Zayre's continued operation of a discount department store on the very premises of the Masters store. To the purchasing, shopping public it was essentially the same as before except for a new name. Additionally, the Board relied on the showing that there was a continuation of the same types of product lines, departmental organization,⁵ employee identity and job functions.⁶

Despite this continuity in the business and continuity of employment, Zayre argues that it should not be bound by the certifications because of the changes in the organizational management of the store. It argues that there is no continuity because of the change from a localized organization to an integrated national organization. This...