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National Labor Relations Board v. Hudson Transit Lines Inc.


decided: July 20, 1970.


Seitz and Aldisert, Circuit Judges and Latchum, District Judge.

Author: Latchum


The National Labor Relations Board, pursuant to § 10(e) of the National Labor Relations Act,*fn1 petitions for enforcement of its order*fn2 against Hudson Transit Lines, Inc. ("Hudson"). The Board found that Hudson had committed an unfair labor practice, in violation of § 8(a)(1) of the Act,*fn3 by imposing without adequate business justification a reduction in the salary and fringe benefit payments of all company employees after the holding of a representation election by the company's bus operators and maintenance employees but before the certification of a bargaining representative.

Hudson is a common carrier primarily serving summer resort areas in New Jersey. Since 1950 the company's bus operators have been represented by the Transport Workers of America, Local 225 ("TWU").*fn4 Since 1955 there have been six successive labor contracts between the company and TWU. Each of the contracts expired in mid-January. The last labor contract in effect prior to the events forming the subject of this application expired on January 15, 1967.

By an exchange of letters dated October 24 and 26, 1966, TWU and Hudson each signified its wish to open negotiations for a new contract. On October 27, 1966, the Independent Bus Transit Union ("IBTU") wrote the company, claiming to represent employees in the bargaining unit covered by the TWU contract and asked to negotiate. On October 28, 1966, IBTU filed a representation petition with the National Labor Relations Board pursuant to § 9 of the Act.*fn5 After consultation and negotiation among representatives of Hudson, the Labor Board, and the two contesting unions, a representation election was held on January 9, 1967. Nine votes cast at the election were challenged. Because this challenge had the effect of delaying the certification of a bargaining representative, there was no certified bargaining agent for the employees of the company when the then existing collective bargaining agreement expired on January 15, 1967.

During the preliminary conferences in regard to the election, the company several times averted to the economic uncertainties which plagued the company, its very tight economic situation during the winter months and its desire that no delay occur in holding the election and determining the certified bargaining agent. For example, at the "informal conference" in the Board's regional office on November 10, 1966, John F. X. O'Brien, attorney for the respondent, offered to consent to an election, stating that the company "has serious economic problems" for it "counted on the summer revenues to offset [the] losses" incurred during the remainder of the year. Because of the seasonal nature of the company's business, it has operated at a profit only during June, July and August, and at a loss the remaining months of the year.*fn6 Under its certificate of convenience from the Interstate Commerce Commission, Hudson was obligated to furnish reasonably adequate service to the public during the year, and also keep itself in sound economic condition to render this service.

At the formal hearing on November 15, 1967, Attorney O'Brien, during off-the-record discussions, repeated that the company was most anxious that the representation issue be brought to a head as soon as possible because the labor contract with TWU would expire January 15 and the company needed assurance for its summer operations. On January 9, after the election was held, and it was apparent that challenges to certain ballots and the anticipated filing of objections to the election by IBTU would delay final resolution of the election for at least a month, President Flateman of Hudson, as he later testified "was just besides [himself]." "I told [the parties] that unless somethings (sic) were done, unless the company had the assurance that we were going to be operating in the summer that we would have to make certain economic adjustments."

On January 13, 1967, two days prior to the expiration of the contract with TWU, Hudson circulated a letter to its employees referring to the "uncertainties of the present situation" and the resultant need for economies. The company said that it would postpone decision on the necessary economies until February 5, 1967 in the hope that the "uncertainties" would be resolved, "and a new contract mutually agreed upon." With IBTU's objections to the election still unresolved, the company announced in a letter of February 2, 1967 that because of continuing uncertainities the company planned to institute on February 5, 1967 certain economies applicable to all officers and employees. The economies consisted generally of a 10% wage reduction for all employees whose gross weekly wages exceeded $100 and the elimination of company contributions to Blue Shield, Major Medical and life insurance premiums, and the elimination of all accruals for vacations and paid holidays. These economies were put into effect on February 5, 1967.

On March 31, 1967, IBTU's objections to the conduct of the election were overruled and the challenges to the ballots resolved. TWU, found to have won the election by a vote of 106 to 100, was formally certified as the bargaining agent for unit employees. Negotiations between TWU and the company for a new contract commenced on April 7, 1967. The union initially demanded restoration in full of the economies and the company refused. The company later offered to restore the economies provided (1) all terms and conditions of a renewal contract were agreed upon by May 1st and (2) the renewal contract would itself expire in January. The union refused, stating that the men had waited "too long" for a later starting date and that the union would prefer to make the contract effective as of the date negotiations would be completed. Subsequently, on April 22, 1967, the parties executed a renewal contract covering the period May 31, 1967 to March 31, 1969. The new contract restored the vacation and paid holidays in full; the other reductions -- the 10% cut in pay and the elimination of contribution to medical and life insurance -- were restored only as of March 31, the effective date of the new contract and not as of February 5, the date these cuts had been made effective. The increases guaranteed to the union in the new contract were the most favorable in any contract up to that time. In accepting the new contract, however, TWU clearly indicated that it was not waiving its right to assert that the reductions were illegal from their inception.

Unfair labor practice charges were filed by IBTU on February 6, 1967 and by TWU on April 11, 1967. Both complaints charged that Hudson's imposition of the reduction in salary and benefits before the final resolution of the representation proceeding violated § 8(a)(1) and § 8(a)(3). After the filing of a complaint by the General Counsel, a hearing was held on September 21 and 22, 1967 before Trial Examiner Arthur Christopher. On December 9, 1967, Mr. Christopher died before completing his decision. The parties waived a hearing de novo and agreed that a decision should be made by a newly designated Trial Examiner on the basis of the record made before the original Trial Examiner. The new Trial Examiner, A. Norman Somers, designated according to this agreement, thereafter rendered a decision finding that Hudson had violated § 8(a)(1) and § 8(a)(3).*fn7 The Board, in approving the Trial Examiner's decision and order, relied only on § 8(a)(1) and did not deem it necessary to determine whether the conduct in question also violated § 8(a)(3).

The basic standards for judicial review of an unfair labor practice finding by the Board under § 8(a)(1) have been stated in National Labor Relations Board v. Burnup & Sims, Inc., 379 U.S. 21, 13 L. Ed. 2d 1, 85 S. Ct. 171 (1964) and Republic Aviation Corp. v. National Labor Relations Board, 324 U.S. 793, 89 L. Ed. 1372, 65 S. Ct. 982 (1945). In Burnup & Sims, the Court held that "the tendency" of the employer's conduct "to weaken or destroy" rights protected by § 7 is the controlling standard for determining a violation of § 8(a)(1). 379 U.S. at 23-24. The Court further determined that finding an interference with § 7 rights, in violation of § 8(a) (1), "does not necessarily depend on the existence of an anti-union bias." 379 U.S. at 23.*fn8 In Republic Aviation Corp. v. National Labor Relations Board, 324 U.S. 793, 89 L. Ed. 1372, 65 S. Ct. 982 (1945), the Court affirmed a finding by the Board that the nondiscriminatory discharge of an employee who had solicited union membership while on company premises, for violation of a company rule against solicitation in the factory or offices of the company, constituted a violation of § 8(a)(1). The Court characterized this determination by the Board as the result of "working out an adjustment between the undisputed right of self-organization assured to employees under the Wagner Act and the equally undisputed right of employers to maintain discipline in their establishments." 324 U.S. at 797-798. The Court further observed that the Wagner Act "did not undertake the impossible task of specifying in precise and unmistakable language each incident which would constitute an unfair labor practice" but left to the Board the primary responsibility for applying the Act's general prohibitory language "in the light of the infinite combinations of events which might be charged as violative of its terms." (324 U.S. at 798.)

Also relevant here are National Labor Relations Board v. Great Dane Trailers, 388 U.S. 26, 18 L. Ed. 2d 1027, 87 S. Ct. 1792 (1967) and National Labor Relations Board v. Fleetwood Trailer Co., 389 U.S. 375, 19 L. Ed. 2d 614, 88 S. Ct. 543 (1967), which identified two categories of unfair labor practices where proof of improper motive apparently is not necessary to establish a violation of § 8(a)(3). These categories were summarized by Chief Justice Warren in his opinion for seven members of the Court in Great Dane Trailers. First, if an employer's conduct is "inherently destructive" of important employee rights, no proof of anti-union motivation is needed and the Board can find an unfair labor practice even if the employer introduces evidence that his conduct was motivated by business considerations. 388 U.S. at 34. Second, if the employer's conduct could have adversely affected employee rights to some extent the employer must establish that he was motivated by legitimate objectives. 388 U.S. at 34. If the employer does not establish the required "legitimate and substantial business justifications" for his action, the conduct constitutes an unfair labor practice "without reference to intent." 389 U.S. at 380.

The articulation of these two categories of § 8(a)(3) violations in Great Dane Trailers and Fleetwood Trailer seem to reflect and to particularize principles which the Court has recognized in evaluating violations under § 8(a)(1), where proof of motive generally has not been necessary.*fn9 The clearest statement of the basic inquiry required under both § 8(a)(1) and § 8(a)(3) is Justice White's opinion in National Labor Relations Board v. Erie Resistor Corp., 373 U.S. 221, 10 L. Ed. 2d 308, 83 S. Ct. 1139. In attempting to correlate the inquiry into motive under § 8(a)(3) with the weighing of "conflicting legitimate interests," without regard to motive, under § 8(a)(1), Justice White stated that "preferring one motive to another is in reality the far more delicate task, reflected in part in decisions of this Court, of weighing the interests of employees in concerted activity against the interest of the employer in operating his business in a particular manner and of balancing in the light of the Act and its policy the intended consequences upon employee rights against the business ends to be served by the employer's conduct." 373 U.S. at 228, 229 (emphasis added). In so describing the basic reality of the inquiry in both § 8(a)(1) and § 8(a)(3) in Erie Resistor, Justice White relied on certain decisions of the Supreme Court which had recognized the necessity of the evaluation of conflicting legitimate interests without regard to motive.*fn10

It is this basic insight of Justice White in Erie Resistor concerning the actual nature of the inquiry under both § 8(a)(1) and § 8(a)(3) which is reflected in the articulation in Great Dane Trailers and Fleetwood Trailer of the two categories of § 8(a)(3) violations which do not require proof of motive. Because Erie Resistor, Great Dane Trailers and Fleetwood Trailer reflect a substantial integration of approach in the evaluation of unfair labor practices under § 8(a) (1) and § 8(a)(3), these § 8(a)(3) decisions should be looked to as providing standards relevant to evaluating the finding of an unfair labor practice under § 8(a)(1) in the present case.*fn11

In light of the above standards, the first inquiry for the Court is to determine whether the Board's findings concerning the impact of the challenged employer conduct is supported by substantial evidence. At the outset, it must be noted that the Board's finding concerning the extent of the impact of that employer's conduct is not fully clear. At one point, the Trial Examiner adopted the position of the General Counsel that the "loss in earnings and benefits because of representation proceeding that was still pending 'could effectively inhibit any change by employees of their bargaining representative.'" The Trial Examiner further stated: "Unexplained, the conduct as of the time it occurred offended the employees' rights, protected by the Act, to engage in a representation proceeding . . ." There was no explicit finding by the Trial Examiner or the Board that the employer's conduct was "inherently destructive" of employee rights protected by the Act. On the other hand, the underlying premise of the Trial Examiner's decision was that the employer's reduction in salary and fringe benefits was at least "comparatively slight" within the standards of Great Dane and Fleetwood.

After a review of the entire record, this Court is of the opinion that the impact of the reduction in salary and fringe benefits at least, had the " potential for adverse effect upon employee rights," Great Dane Trailers, 388 U.S. 26, 35, 18 L. Ed. 2d 1027, 87 S. Ct. 1792, and, therefore, required the employer to come forward with an adequate justification of his conduct.*fn12

At the time the reduction in salary and other employee benefits were imposed, the prior collective bargaining agreement had expired. The unresolved status of the election left the employees without a representative qualified to engage in collective bargaining on their behalf.*fn13 If such a unilateral reduction had been imposed, during the negotiations of a collective bargaining agreement but before impasse, the employer's conduct clearly would have been an unfair labor practice. National Labor Relations Board v. Katz, 369 U.S. 736, 82 S. Ct. 1107, 8 L. Ed. 2d 230 (1962). The potential for adverse impact in the employer's conduct here is not the rebuke to the process of collective bargaining involved in a unilateral change in salary during negotiations. Rather, it is the indication to employees that by engaging in a representation proceeding, and incurring the risk that an unresolved election may leave the employees temporarily without a representative, the employees will for that period be vulnerable to a reduction in salary and other benefits through the unilateral action of the employer. Because of the employee recognition of this vulnerability to serious reduction in economic benefits during the period when a representation election remains unresolved, the Board was justified in concluding that "employees would tend to think twice before again engaging in a representation proceeding."

Because we agree with the conclusion of the Board that the employer's imposition of economies before the resolution of the representation election "could have adversely affected employee rights to some extent" it is thus necessary to consider whether the employer has come forward with evidence of "legitimate and substantial business justifications" for his action. Fleetwood Trailer, supra, p. 380; Great Dane Trailers, supra, p. 34.

The basic justification offered by Hudson for instituting the challenged economies was that the unresolved status of the election in January and February of 1967, and the consequent uncertainty concerning when negotiations would begin and successfully be concluded, left the Company with "no assurance" of operations during the crucial summer months and, therefore, required the reduction of expenditures to the level of current revenues -- in the company's words, required cutting "the suit to the cloth."

Hudson first claims that its decision to institute economies "was a matter peculiar to management prerogative" and as such, could not be questioned by the Board. In support of this extreme position, the Company relies on Textile Workers Union v. Darlington Manufacturing Co., 380 U.S. 263, 13 L. Ed. 2d 827, 85 S. Ct. 994 (1965). This reliance is seriously misplaced. In Darlington, the Supreme Court upheld the right of a company to go out of business in order to avoid the unionization of the employees of the plant. This recognition of a right of "industrial suicide" in Darlington has little relevance to the situation here, where an ongoing concern imposed drastic reductions in the salaries and fringe benefits of all employees, before the resolution of a representation proceeding, when the employees were without a representative to protect their interests through collective bargaining. We, therefore, feel Darlington is inapposite and are not in any way persuaded to extend the scope of Darlington beyond the narrow and unusual factual situation there involved.

Further, the company has not contended, or offered any case which indicates, that the institution of economies "in face of union negotiating demands but before impasse" is a matter peculiar to management prerogative. If it is not a matter of exclusive management prerogative to institute economies while negotiations are in progress, there seems no reason for finding such a prerogative to institute economies "in the face of a representation proceeding" when there is no representative with whom to conduct negotiations.

Hudson further contends that even if the institution of economies was not justified as a matter "peculiar to management prerogative," the need to make current operating expenses meet current revenues, because of the lack of assurance of summer operations, constituted "legitimate and substantial" business justification for the company's conduct. The Board found that the possibility of a strike in July or August was a remote and tenuous possibility which was "not commensurate with" and which, therefore, did not justify the drastic character of the company's action on February 5 and the overwhelming probability of its effect on employees' rights when the action was taken.

In reviewing this determination by the Board, it must be recognized that it is the primary responsibility of the Board and not of the courts "to strike the proper balance between the asserted business justifications and the invasion of employee rights in light of the Act and its policy." 389 U.S. at 278. In Erie Resistor, the Court recognized the special function of the Board in applying the general provisions of the Act to the complexities of industrial life and of "[appraising] carefully the interests of both sides of any labor-management controversy in the diverse circumstances of particular cases" from its special understanding of "the actualities of industrial relations. . . . 'The ultimate problem is the balancing of the conflicting legitimate interests. The function of striking that balance to effectuate national labor policy is often a difficult and delicate responsibility, which the Congress committed primarily to the National Labor Relations Board, subject to limited judicial review.'" 373 U.S. at 236.

After a full consideration of the record -- the weight of the evidence and convincing quality of the reasoning supporting the conclusions of the Board -- we feel that the Board properly concluded that the adverse impact of the economies clearly outweighed the business justification for the economies offered by the employer. The Board's determination was faithful to the governing precedents, and supported by substantial evidence. Universal Camera Corp. v. National Labor Relations Board, 340 U.S. 474, 95 L. Ed. 456, 71 S. Ct. 456 (1951).

The Board, having found that the Company withdrew and reduced employee benefits in violation of the Act, directed the Company to make whole all employees for losses sustained to the extent it had not already done so. Before the Board, the Company complained that the remedy was couched in general terminology, ambiguous and indefinite. But it is well settled that the Board is justified in framing its order in general terms and leaving the working out of the details to the subsequent compliance proceedings.*fn14 Such a rule is particularly salutary where, as here, the record does not disclose the extent to which, if at all, the Company may have restored to the non-unit employees the benefits which it eliminated or reduced on February 5.*fn15

Hudson also objects to the scope of the order, contending that the Board improperly extended the make whole remedy to employees not within the bargaining unit. But it is clear that these employees, as well as those within the unit, were deprived of substantial economic benefits because the latter group had engaged in protected activity. Since the Company chose to extend its unlawful conduct to non-unit employees, it is hardly in a position to complain that these employees are to be made whole for the losses visited upon them as a result of such conduct. Cf. National Labor Relations Board v. Zelrich Company, 344 F.2d 1011, 1014 (5th Cir. 1965).

The Board's remedies for unfair labor practices will be upheld as valid if reasonably "adapted to the situation which calls for redress."*fn16 The Board directed that all employees be made whole because "only thus can there be a restoration of the situation, as nearly as possible, to that which would have obtained but for the illegal [conduct]." Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 194, 85 L. Ed. 1271, 61 S. Ct. 845 (1941). It follows that the Board's order is reasonable and valid and will be ordered enforced.

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