Before BIGGS, Chief Judge, GOODRICH and McLAUGHLIN, Circuit Judges.
McLAUGHLIN, C. J.: In 1951 because of financial difficulties Richards Motor Freight Lines, operated by John Richards in Scranton, Pennsylvania, entered Chapter XI proceedings under the Bankruptcy Act. Most, if not all, of its rolling equipment was repossessed; the receiver, however, continued to operate by leasing equipment supplied with drivers. This method of doing business, necessitated dismissing all the truck drivers then working for Richards. These men were members of Teamsters Local 229 in Scranton with whom Richards had a contract containing seniority benefits and a union security clause.
About the middle of 1952 Richards established Freightlines Equipment Company in his wife's name. He arranged for the return of some of his repossessed equipment and for the use of the I.C.C. rights held by the receiver. He hired new drivers. The operation was based in Delaware, New Jersey, about fifty miles from Scranton and outside the jurisdiction of Local 229.
By December 1953 the Chapter XI arrangement had been concluded and the I.C.C. rights formerly held by Richards Motor Freight Lines passed to Richards Freight Lines which was organized at about this time to operate from Delaware, N. J., with John Richards as sole owner. The "new" business leased its equipment and drivers from Freightlines Equipment Company.
The business prospered and operations expanded. By mid 1954 much of the equipment was being brought to Scranton for servicing and many runs were being dispatched from there as a matter of convenience. By mid 1956 more new drivers had been hired, mostly from the Scranton area, and the business functioned largely from there with Scranton drivers.
Sometime after it was apparent that Richards was performing some part of his work from Scranton, Joe McHugh, business agent for Local 229, approached Richards with a suggestion that the drivers who had been laid off when Richards Motor Freight Lines ran into financial difficulties be put to work for Freightlines Equipment Company. McHugh appears to have pressed this from time to time, but Richards insisted that his undertaking was based in New Jersey outside the Local's jurisdiction. About June, 1956, at least some of the Scranton drivers employed by Freightlines Equipment Company asked McHugh for admittance to Local 229 so that the union could represent them in negotiations with Richards.*fn1 McHugh pointed out that the union felt obliged first to insist on the claims of its members who had formerly been with Richards Motor Freight Lines and who desired to work for Freightlines Equipment Company. By August, 1956 the extent of Richards' Scranton venture made it impossible for him to claim that his business originated in New Jersey. It was about this time that a committee of his Scranton-based drivers who had been negotiating with him concerning wages and hours advised him that a meeting had been arranged with the Teamster's International in Philadelphia concerning the Local's claim to priority for the Scranton jobs; the committee seems further to have indicated that they were willing to abide by the International's determination. The determination was that the former drivers were entitled to the positions.
By means which are left to inference, the union persuaded Richards to its view; those of the new drivers who declined transfer to Delaware, New Jersey, were discharged and their places taken by former drivers for Richards Motor Freight Lines; those former drivers for whom there was still no immediate vacancy were to be given first choice thereafter of jobs as they became available.
A complaint subsequently was issued against Freightlines by the Labor Board on a charge of an unfair labor practice by one of the discharged drivers. The trial examiner after hearing found no violation of Sections 8(a)(3) and (1) of the National Labor Relations Act and recommended dismissal of the complaint. The Board declined to follow this recommendation, finding instead that there had been a violation. The Board's petition for enforcement of its order brings the case here for review.
Preliminarily it should be said that although the seniority provisions of the contract between Richards as Richards Motor Freight Lines and Local 229 might have justified the employer's actions as being a bargained-for condition of employment, the evidence supports the conclusion of both the trial examiner and the Board that the contract, despite its provisions for automatic renewal, had terminated. Richards was no longer operating Richards Motor Freight Lines which had gone out of existence at the conclusion of the Chapter XI arrangement. Technically his position with Freightlines Equipment Company was that of an employee. Additionally there was a hiatus from 1951 into 1954 when Richards had no dealings in any capacity with Scranton-employed drivers. It follows that Local 229 was not the bargaining representative for Freightlines employees even if Freightlines is regarded simply as a Richards operation. Still further, the return of operations to Scranton did not constitute a starting up again of a business which had left off some years before. Taken together the facts support the conclusion that the underlying assumptions upon which the parties had based their contract had so altered as to have prevented automatic renewal, subsequently the contract did not continue in effect. Cf. 3 Corbin, Contracts, §§ 565, 631, 632; 6 Corbin § 1353; 3 Williston, Contracts, §§ 668, 887 A (rev. ed. 1936). The Board's findings therefore are supported by substantial evidence. So much of respondent's argument as assumes the continuing validity of this contract must perforce be rejected.
Whether the facts make out an unfair labor practice by respondent as defined in Sections 8(a)(3) and (1) of the National Labor Relations Act is the question decided by both the Board and its trial examiner and to which we now come. Sections 8(a)(1) and (3), 49 Stat. 452 (1935) as amended, 29 U.S.C. § 158 (1952), read in pertinent part:
"(a) It shall be an unfair labor practice for an employer -
(1) to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title,*fn2 * * *
(3) by discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization * * *"
"The language of § 8(a)(3) is not ambiguous. The unfair labor practice is for an employer to encourage or discourage membership by means of discrimination. Thus this section does not outlaw all encouragement or discouragement of membership in labor organizations; only such as is accomplished by discrimination is prohibited. Nor does this section outlaw discrimination in employment as such; only such discrimination as encourages or ...