Pittsburgh-Des Moines Steel Company v. NLRB

• Decision Date: 15 November 1960
• Docket Number: No. 16690.,16690.
• Citation: 284 F.2d 74
• Parties: PITTSBURGH-DES MOINES STEEL COMPANY, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

284 F.2d 74 (1960)

PITTSBURGH-DES MOINES STEEL COMPANY, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.

No. 16690.

United States Court of Appeals Ninth Circuit.

November 15, 1960.

COPYRIGHT MATERIAL OMITTED

John B. Lauritzen, James H. Wolpman, San Francisco, Cal., for petitioner.

Stuart Rothman, Gen. Counsel, Dominick L. Manoli, Assoc. Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, Frederick U. Reel, Margaret M. Farmer, Attys., N. L. R. B., Washington, D. C., for respondent.

Before STEPHENS, BONE and HAMLIN, Circuit Judges.

BONE, Circuit Judge.

Petitioner, the Pittsburgh-Des Moines Steel Company, fabricates and sells steel products in interstate commerce. It operates manufacturing plants at Pittsburgh, Pennsylvania, Des Moines and West Des Moines, Iowa, and Santa Clara and Fresno, California; it maintains warehousing facilities at Santa Clara, Fresno, Sacramento, Stockton and El Monte, California. There is no question but that petitioner must conform to the strictures of the National Labor Relations Act, as amended, 29 U.S.C.A. § 151 et seq.

Since sometime prior to 1946, petitioner has customarily made gifts of Christmas bonuses to the employees at its various plants and facilities. From 1946 through 1950 all of the Company's employees received yearly yuletide bonuses even though workers at the Pittsburgh plant had struck for 12 days in 1946, and for 12 to 14 days in 1947. In 1951 all employees were given a bonus with the exception of those in the production and maintenance unit organized by the United Steelworkers of America at the Pittsburgh plant. These men had struck for 46 working days during the year. From 1952 through 1955 all employees received bonuses except for the men at the Fresno plant in 1955; the Fresno installation had not been bought by Pittsburgh-Des Moines until August of that year. In 1956 no bonus was paid to any of the Company's employees. In 1957 all employees got a bonus except for the members of the production and maintenance unit organized by the Steelworkers at the Santa Clara plant. These workers had carried on an economic strike for a total of 57 working days during 1957. No contractual provision has ever obligated the Company to award Christmas gifts; the bonuses have always been gratuitous.¹

The Company's failure to grant a bonus to the production and maintenance workers at Santa Clara in 1957 resulted in the unfair labor practice charges presently before us on review. The National Labor Relations Board found that petitioner had violated § 8 (a) (1) and (3) of the Act, 29 U.S.C.A. § 158(a) (1) and (3) by restraining its employees from engaging in a strike protected by § 7 of the Act, 29 U.S.C.A. § 157, and by discouraging its employees from participating in such protected activity by discriminating against them in regard to a term or condition of their employment. In reaching its conclusions the Board overruled its Trial Examiner, who found that the Company had traditionally awarded bonuses pursuant to a plan called the Five Factor Formula, that this formula was used in 1957, that its use did not establish ipso facto that the Company intended to discourage economic strikes by discriminating against those who took part in them and that consequently there was no violation of the Act. The Board, on the contrary, ruled that the Company did not use the Five Factor Formula in regard to the Santa Clara production and maintenance workers in 1957, that these employees were denied bonuses solely because they had engaged in a prolonged strike and that even if the Five Factor Formula had been applied, its use alone constituted sufficient proof that the Company did intend to discourage and interfere with protected activity by discriminating against the strikers in regard to the customary bonus. The Board concluded that petitioner had violated § 8(a) (1) and (3) and issued its order accordingly.

The crux of a violation of § 8(a) (1) or (3) is the true purpose or real motive of the employer in taking the action complained of. N. L. R. B. v. Jones & Laughlin Steel Corp., 1937, 301 U.S. 1, 45-46, 57 S.Ct. 615, 81 L.Ed. 893; Associated Press v. N. L. R. B., 1937, 301 U.S. 103, 132, 57 S.Ct. 650, 81 L.Ed. 953; Radio Officers' Union, etc. v. N. L. R. B., 1954, 347 U.S. 17, 42-44, 74 S.Ct. 323, 98 L.Ed. 455. And the sole question in this case, as phrased by both parties, is whether or not the Board's finding that the motive for withholding the bonus to members of the Santa Clara production and maintenance unit was to penalize them because they engaged in a prolonged strike is supported by substantial evidence.

The Company's position is that of the Trial Examiner: the Five Factor Formula was applied in 1957 as in preceding years, bonuses were not denied to the strikers at Santa Clara merely because they struck, and the application of the formula does not constitute the type of discrimination from which, without specific evidence of motive, the Board might infer that the Company intended to discourage protected activity. See Radio Officers' Union, etc. v. N. L. R. B., supra, 347 U.S. at pages 44-48, 74 S.Ct. at pages 337-339. If, however, the basis by which petitioner claims it selects deserving employees, i. e., the Five Factor Formula, cannot be differentiated from the type of discrimination which in Radio Officers' was held to create an irrebuttable inference of intent sufficient to support findings of unfair labor practices, petitioner cannot here prevail. We look initially to the manner in which the Five Factor Formula in theory discriminates.

The five factors are: (1) overall results, (2) overall productivity, (3) results at each individual plant, (4) productivity at each individual plant, and (5) continuity of work effort at each individual plant. The first two factors are used to determine whether petitioner has had sufficient overall earnings during the year to justify granting a bonus to any of its employees. If examination of these two factors reveals that operations have been sufficiently profitable to warrant payment of a bonus, the work at each of the Company's plants is evaluated in order to determine which employees should or should not be rewarded. Factor 3, the results at individual plants, is apparently determined by profit and loss figures. These figures, however, testified Cedric A. Fegtly, a witness for the Company, do not differentiate as to efficiency among the various groups of employees working out of each plant. This is because the Company does designing and construction work in addition to fabrication, the work done in the shop, and the profit or loss realized from all three activities is apparently lumped together to form the profit or loss total for each plant. Consequently, to determine the efficiency or productivity of each of the various groups of employees working in or out of a single plant, the Company looks to the fourth factor, the productivity of the individual plant. This is determined by the balance or imbalance in what the Company refers to as the plant's administration account. Such an account is apparently kept for each of petitioner's installations, or at least for its manufacturing facilities.²

On the debit side of an administration account are placed those costs which cannot be allocated to a specific job or contract, or, in other words, what is usually referred to as overhead. These costs include taxes, fringe benefits to the working force, holiday pay, vacation pay, jury pay, social security benefits, insurance benefits, hospitalization benefits, depreciation on all items in the plant, factory maintenance, power, light and heat, and wages and salaries paid to all employees whose efforts cannot be broken down in terms of man hours worked on a particular job or contract; in sum, all those expenditures which cannot feasibly be traced to work for a particular customer. On the credit side of the account the Company places the product which results from the multiplication of the cost of direct labor, that is labor which is attributed to and charged upon a specific contract, by a percentage figure which varies according to the type of direct labor involved and which represents the percentage which the Company has ascertained through experience will, when multiplied by normal direct labor costs, result in a dollar amount which will balance or exceed the debit or cost side of the administration account. Each customer is charged not only for the cost of direct labor on the particular job but also for that part of the credit sum in the administration account which is traceable to work done for him. That is, the customer pays the product of direct labor costs on his job multiplied by the appropriate percentage figure, in addition to paying for the direct labor itself. If everything works out properly, the Company should be taking in from its customers all or almost all of that which it pays out for overhead. The Christmas bonuses to the employees covered by each administration account is part of the overhead and is listed on the debit side of the ledger.

The Company maintains, the Board assumed, and we therefore do not question that when an appreciable loss shows on the administration account, something is radically wrong with the plant's productivity and efficiency. This is true if, as the Company claims, the normal cost of direct labor multiplied by the appropriate percentage figure approximates the total expenditures for overhead or, in other words, the debit side of the administration account.³ For when direct labor falls off the costs thereof are lessened, and the multiplicand in the mathematical calculation used to determine the amount on the credit side of the account becomes smaller. The multiplier — the arbitrary percentage figure — does not become larger proportional to the decrease in direct labor costs, and therefore the product is lower than it would have been had direct labor costs remained at the higher, "norma...