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National Labor Relations Board v. Pincus Brothers Inc.

decided as amended june 12 1980.: April 17, 1980.



Before Gibbons, Rosenn, and Garth, Circuit Judges.

Author: Rosenn


Statutory policy of the Labor Management Relations Act (the Act), 29 U.S.C. § 173(d) (1976), encourages the use of the grievance and arbitral machinery for the settlement of disputes agreed upon by the parties to a collective bargaining agreement. The dominant issue raised by this petition of the National Labor Relations Board (the Board) for enforcement of its order is whether the Board committed error in declining to defer to an arbitration award which determined that the employer had discharged an employee for just cause. We conclude that the Board abused its discretion in refusing to defer to the arbitration award and therefore deny enforcement of the Board's order.


Pincus Brothers, Inc.-Maxwell (Pincus Brothers or the Company) is a Philadelphia manufacturer and wholesale distributor of men's clothing. Its employees are represented by the Philadelphia Joint Board, Amalgamated Clothing Workers of America (the Union). Jane Richardson was employed in the sleeve department of the plant from December 5, 1975, until her discharge on February 18, 1977.

On several occasions during her employment Richardson left her work station to converse with other employees and was directed by her supervisor not to waste time. In October 1976, when there was insufficient work to keep all the sleeve department employees working a 40-hour week, several employees and the union business agent asked Company President, Irwin N. Pincus, to lay off Richardson, the least senior member of the department. At the time, Pincus refused.

On February 15, 1977, the Company and the Union held their semi-annual plant meeting with employees and union representatives during which employee complaints and suggestions were discussed. Pincus spoke about general company developments, including certain style changes. Several sleeve setters questioned Pincus as to whether the piece rate would be changed as a result of the style changes.*fn1 Pincus responded that more flexibility would be required.

Following the meeting Richardson prepared a one-page leaflet entitled "WE WON'T SACRIFICE FOR PINCUS' PROFITS."*fn2 The leaflet called the plant meeting a "circus" and characterized Pincus' call for flexibility as effectuating "pay cuts" to "our already stinking pay checks." The leaflet further stated that "(t)he way we have to work ain't no different from any other stinking garment shop in this city" and referred to the "lousy style of clothes" Pincus was making.

On February 18, 1977, Richardson brought copies of the leaflet to the plant and prior to the 8 A.M. starting time placed some in the women's restroom. She also gave a stack of the leaflets to another employee, Joe Ferraro, and asked him to place them in the men's restroom. After reading one leaflet, Ferraro tore up the stack he had been given. Richardson also handed out leaflets elsewhere in the plant until approximately 8:05 A.M. About 8:15 A.M. Pincus was informed of the leafletting by Plant Manager, Peter Matazzo. According to Matazzo, production was disrupted on the work floor because of employees' reading the leaflet. At approximately 1:40 P.M. that day, Pincus instructed Matazzo to discharge Richardson. Matazzo called Richardson and the union shop chairman into his office. After an initial denial, Richardson admitted distributing the leaflet. Matazzo discharged her without further questions or discussion.

Soon after the discharge the Union filed a grievance on behalf of Richardson which, under the collective bargaining agreement, terminated in arbitration. On April 12, 1977, the arbitrator*fn3 rendered his decision, concluding that the discharge was for cause because Richardson had (1) abused working time, and (2) written a handbill which she distributed during both working and nonworking time which "intentionally misrepresented or distorted facts related to certain employment practices and to certain business policies and product status of the Company in a denigrating, disparaging fashion so as to constitute detrimental unprotected disloyalty."

While the grievance was pending, Richardson filed a charge on February 24, 1977, with the Board alleging that Pincus Brothers violated section 8(a)(1) of the Act*fn4 by discharging her because she engaged in concerted activities. The General Counsel issued a complaint and agreed with the Company to waive a decision by an Administrative Law Judge (ALJ) and submit to the Board the question of whether the Board should defer to the arbitrator's award. The Board delegated its authority to a three-member panel pursuant to section 3(b) of the Act.*fn5 The panel relied on the facts as found by the arbitrator and concluded it would not defer because Richardson engaged in protected activity and her discharge violated section 8(a)(1), 237 N.L.R.B. No. 159. The Board thereupon remanded the case to an ALJ for a hearing. He found that Pincus committed an unfair labor practice in discharging Richardson and ordered the Company to reinstate her. In a Supplemental Decision and Order of April 9, 1979, the Board adopted the ALJ's findings and conclusions. The Board then commenced this action for enforcement of its order.*fn6

The Board recognized that the applicable standard for its deference to arbitral awards was the standard enunciated in Spielberg Manufacturing Co., 112 N.L.R.B. 1080 (1955). In Spielberg, the Board stated that it would defer to the arbitrator's award where (1) the proceedings have been fair and regular; (2) the parties agreed to be bound; and (3) the decision is not "clearly repugnant" to the purposes and policies of the Act. In this case, the parties agree that the proceedings were fair and regular and that the parties agreed to be bound by arbitration.*fn7 The Board concluded that the findings of the arbitrator were "clearly repugnant" to the Act and declined to defer. Thus, the determinative issue in this enforcement petition is whether the Board erred in concluding that the arbitration award was "clearly repugnant" to the Act.


The first issue we must resolve is this court's standard of review of the Board's refusal to defer to the arbitration award. The company urges that we review the Board's refusal to defer as a matter of law while the Board claims the substantial evidence rule is applicable. It is our duty to insure that the Board adheres to its established criteria unless it clearly decides to modify or alter those standards. We, therefore, adhere to the prevailing view that the decision of the Board in refusing to defer will be overturned only if the Board has abused its discretion.*fn8 Hawaiian Hauling Service, Ltd. v. NLRB, 545 F.2d 674, 676 (9th Cir.), cert. denied, 431 U.S. 965, 97 S. Ct. 2921, 53 L. Ed. 2d 1061 (1976); NLRB v. Horn & Hardart Co., 439 F.2d 674, 679 (2d Cir. 1971).*fn9

We turn now to the merits of the Board's order. The Spielberg doctrine evolved as a means of accommodating the national policy in favor of the private resolution of labor disputes through consensual arbitration.*fn10 That policy finds expression in Section 203(d) of the Act, 29 U.S.C. § 173(d) (1976), which declares: "Final adjustment by a method agreed upon by the parties is hereby declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective-bargaining agreement." As more fully explained in International Harvester Co., 138 N.L.R.B. 923 (1962), the source of the Board's deferral policy is rooted in both congressional and Supreme Court pronouncements.

The Act, as has repeatedly been stated, is primarily designed to promote industrial peace and stability by encouraging the practice and procedure of collective bargaining. Experience has demonstrated that collective-bargaining agreements that provide for final and binding arbitration of grievance and disputes arising thereunder, "as a substitute for industrial strife," contribute significantly to the attainment of this statutory objective. . . .

Recognizing arbitration as an instrument of national labor policy for composing contractual differences, which it found imbedded in the (Act) and other Federal legislation and sources, the Supreme Court of the United States has given this policy meaningful substance. . . . So important a role did the Court regard arbitration as playing in the national labor scheme as "a stabilizing influence" that the Court in later cases cautioned the lower courts in Section 301 suits to refrain from passing on the merits of the grievances under the guise of determining the question of arbitrability, but to construe contractual arbitration provisions expansively if "congressional policy in favor of settlement of disputes by the parties through the machinery of arbitration" is to be realized.

If complete effectuation of the Federal policy is to be achieved, we firmly believe that the Board, which is entrusted with the administration of one of the many facets of national labor policy, should give hospitable acceptance to the arbitral process as "part and parcel of the collective bargaining process itself," and voluntarily withhold its undoubted authority to adjudicate alleged unfair labor practice charges involving the same subject matter, unless it clearly appears that the arbitration proceedings were tainted by fraud, collusion, unfairness, or serious procedural irregularities or that the award was clearly repugnant to the purposes and policies of the Act.

Id. at 926-27 (footnotes omitted).

In Collyer Insulated Wire, 192 N.L.R.B. 837, 842 (1971), the Board applied Spielberg to require deferral when "(t)he contract and its meaning . . . lie at the center of (the) dispute."*fn12 The Board explained its rationale as follows:

We are not compelling any party to agree to arbitrate disputes arising during a contract term, but are merely giving full effect to their own voluntary agreements to submit all such disputes to arbitration, rather than permitting such agreements to be side-stepped and permitting the substitution of our processes, a forum not contemplated by their own agreement.

Nor are we "stripping" any party of "statutory rights." The courts have long recognized that an industrial relations dispute may involve conduct which, at least arguably, may contravene both the collective agreement and our statute. When the parties have contractually committed themselves to mutually agreeable procedures for resolving their disputes during the period of the contract, we are of the view that those procedures should be afforded full opportunity to function.

Id. at 842-43.

This court has dealt with the similar issue of judicial deference to arbitration awards in the context of suits under Section 301.*fn13 In Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1128 (3d Cir. 1969), this court recognized "the strong public policy of encouraging the peaceful settlement of industrial disputes by means of the device of arbitration." Accordingly, we stated:

At the very least this means that the interpretation of labor arbitrators must not be disturbed so long as they are not in "manifest disregard" of the law, and that "whether the arbitrators misconstrued a contract" does not open the award to judicial review.

Id. at 1128 (footnotes omitted). See also Acme Markets, Inc. v. Local 6, Bakery & Confectionery Workers International Union, 613 F.2d 485 (3d Cir. 1980).

As a result of both judicial and Board deference to arbitration awards, an arbitral result could be sustained which is only arguably correct and which would be decided differently in a trial de novo. The national policy in favor of labor arbitration recognizes that the societal rewards of arbitration outweigh a need for uniformity of result or a correct resolution of the dispute in every case. The parties are not injured by deference to arbitration because it is the parties themselves who have selected and agreed to be bound by the arbitration process. To the extent that the parties surrender their right to a subsequent full hearing before the Board or a court, it is a voluntary waiver, consistent with the national policy.*fn15

Based on the Board's Spielberg doctrine, congressional action, and judicial decisions of the Supreme Court as well as this circuit, we conclude that it is an abuse of discretion for the Board to refuse to defer to an arbitration award where the findings of the arbitrator may arguably be characterized as not inconsistent with Board policy.*fn16 In other words, "(i)f the reasoning behind an award is susceptible of two interpretations, one permissible and one impermissible, it is simply not true that the award was "clearly repugnant' to the Act." Douglas Aircraft Co. v. NLRB, 609 F.2d 352, 354 (9th Cir. 1979).

Deference by the Board to the arbitration process, especially when the award has already been rendered and it is arguably consistent with Board policy, will effectuate the intent of the parties in the collective bargaining agreement and avoid the time, expense, and inconvenience of duplicative proceedings.*fn17 The parties accepted the risk that arbitration results could differ from Board decisions when they elected to proceed by arbitration and the Board recognized such possibilities when it adopted the policy to defer to an arbitrator's award. However, when the arbitration award cannot be arguably reconciled with the policies of the Act, the Board will vindicate the federal interest by declining to defer.*fn18


In this case the arbitrator found that Richardson was terminated for "cause" because she abused working time and wrote and distributed the leaflet. The Board concluded that Richardson's leafletting activity was protected by section 7 of the Act and declined to defer. We hold that the Board abused its discretion in refusing to defer to the arbitration award because Richardson's leafletting was arguably unprotected activity and therefore not "clearly repugnant" to the Act.

The Board relied exclusively on the facts as found by the arbitrator in concluding that Richardson was engaged in protected activity.*fn19 It reexamined the language of the leaflet which the arbitrator characterized as "detrimental unprotected disloyalty" and concluded that "(t)he expression by employees of their opinions as to working conditions, whether done in colorful speech, as here, or in more formal terms, is a fundamental right under Section 7 of the Act." 237 N.L.R.B. No. 159 at 8.

We believe there are several reasons why Richardson's activities were arguably unprotected. First, an employee loses the protection of the Act where his or her statements are "deliberately or maliciously false." Texaco, Inc. v. NLRB, 462 F.2d 812 (3d Cir.), cert. denied 409 U.S. 1008, 93 S. Ct. 442, 34 L. Ed. 2d 302 (1972).*fn20 Richardson's leaflet called the semi-annual plant meeting a "circus" and said Pincus was instituting "pay cuts" to "our already stinking pay checks." She further stated that the Company's working conditions "ain't no different from any other stinking garment shop in this city" and that the Company was making a "lousy style of clothes." The arbitrator found that the plant meeting was a periodic semi-annual plant meeting, co-sponsored by the Union and the Company for perfectly legitimate and constructive reasons; that the Company was not instituting any pay cuts; that its average wages exceeded the industry's general average in the market area; that the working conditions at Pincus Brothers were among the best in the area; and that the Company's garments were among the finest in the industry. From the arbitrator's findings it appears at least arguable that Richardson's leaflet can be labeled as "defamatory or insulting material known to be false," Linn v. Plant Guard Workers, 383 U.S. 53, 61, 86 S. Ct. 657, 662, 15 L. Ed. 2d 582 (1966), and thus can be characterized as unprotected under the Act.

Second, it is arguable that Richardson's actions constituted unprotected disloyalty. In NLRB v. Local Union No. 1229, IBEW (Jefferson Standard), 346 U.S. 464, 74 S. Ct. 172, 98 L. Ed. 195 (1953), the Court upheld the Board's refusal to order the reinstatement of workers who, during a lawful strike, issued a leaflet disparaging their employer. The Court stated:

Section 10(c) of the Taft-Hartley Act (29 U.S.C. § 160(c) (1976)) expressly provides that "No order of the Board shall require the reinstatement of any individual as an employee who has been suspended or discharged, or the payment to him of any back pay, if such individual was suspended or discharged for cause." There is no more elemental cause for discharge of an employee than disloyalty to his employer.

Id. at 472, 74 S. Ct. at 176 (footnote omitted; emphasis supplied). The Court noted that in protecting workers under section 7 of the Act, Congress "did not weaken the underlying contractual bonds and loyalties of employer and employee." Id. at 473, 74 S. Ct. at 177. In Local Union No. 1229, supra, the leaflet held to be objectionable was distributed during the heat of a lawful strike. Here, there was neither a strike nor any disagreement between the Company and the Union bargaining agent and thus even less justification for the arguably objectionable leaflets.

In this case the arbitrator found "a profile by (Richardson) of detrimental disloyalty tarnishing the image and impeding the legitimate business goals of the Company insofar as its other employees and its business competitors are concerned." He further found that Richardson "engaged in her course of action primarily to create or incite a maximum measure of disgruntlement and friction relating to the then functioning and long standing give and take of the ongoing collective bargaining relationship and process." Given the plain language of the leaflet and the arbitrator's view of the effect of that language we believe Richardson's conduct could arguably be characterized as unprotected disloyalty.

Third, it is arguable that Richardson's activity was unprotected because it was inconsistent with the fundamental policy of the Act, to encourage collective bargaining and the industrial stability flowing therefrom. In Emporium Capwell Co. v. Western Addition Community Organization, 420 U.S. 50, 95 S. Ct. 977, 43 L. Ed. 2d 12 (1975), the Court affirmed the Board's conclusion that minority employees had no right to bargain with the employer separate from the Union's bargaining right because to hold otherwise would undermine the statutory purpose of collective bargaining. In this case the arbitrator concluded that Richardson's activities were intended to interfere with the Company's long-established collective bargaining relationship with the Union.*fn21 Given that Richardson was represented by the Union and the Union had a ...

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