ON PETITION FOR REVIEW AND CROSS-APPLICATION FOR ENFORCEMENT OF AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD Board No. 4-CA-8160
Before Adams, Van Dusen and Rosenn, Circuit Judges.
Many of the critical problems in contemporary legal discourse arise out of the difficulty of bringing ideals of public law into the basically private sector of community life. That difficulty has both a philosophical and legal dimension. It is necessary to accommodate norms of private right and individualism, fundamental to our society, with principles of public responsibility, which require limitations on the exercise of a purely private will. In jurisprudential terms, legislatures and courts are called upon to crystallize usable standards that reconcile the notions of public duty and individual interest.*fn1
One area of labor law reflecting the intricacy of bridging the private and public realms is that of the duty to bargain imposed on parties participating in the collective bargaining process. When a court is asked whether an employer is obliged to meet with a union before making a decision vitally affecting the employees, as we are here, the task of meshing public duty and private purpose is squarely presented. In discussing the scope of the employer's duty to bargain, it is essential to avoid overly simple solutions and instead to reflect the subtle interrelationship between public law principles and conceptions of private right.
With these concepts in mind, we now address ourselves specifically to the facts of the present appeal, which has emerged from a decision by Brockway Motor Trucks, a division of Mack Trucks, Inc., to close its facility in Philadelphia without first mentioning or discussing the possibility of closing with the affected union. The National Labor Relations Board (NLRB) has concluded that such unilateral action violates the duty to bargain imposed on an employer by the National Labor Relations Act (NLRA). Brockway has petitioned this Court for a review of the NLRB's ruling. At the same time, the Board has filed a cross-application for enforcement of its order that Brockway "cease and desist" from refusing to bargain with the union about the decision to shut down the plant, and that upon request the employer commence bargaining on that subject.*fn2
Prior to the plant closing, Brockway had a number of facilities, including the one in Philadelphia, that were engaged in the manufacture and sale of trucks.*fn3 The plant in Philadelphia was utilized for the sale and servicing of new and used vehicles. Employees at the plant were represented by Local 724, International Association of Machinists and Aerospace Workers, AFL-CIO. Brockway and the union negotiated a three-year collective bargaining agreement covering these employees, and the contract expired on September 14, 1975.
No new agreement between the parties was then reached, and an extended dispute ensued. As Brockway's counsel indicated at oral argument, the union commenced to strike the Philadelphia plant on May 26, 1976. The strike continued until the union was notified that management unilaterally had decided, on July 19, 1976, to shut down the facility. It is undisputed that the employer neither consulted the union about the decision to terminate nor gave the union any advance notice of the closing.
Less than one month after Brockway decided to cease operations at its plant, the union filed a charge with the NLRB alleging that Brockway, by failing to bargain about that decision, had violated §§ 8(a)(1) and (5) of the NLRA. The union directed its challenge solely at the employer's action of unilaterally closing the facility.*fn4
On September 23, 1976, the NLRB issued a complaint and notice of hearing in which it asserted that, on July 19, Brockway unlawfully had refused to bargain with the union regarding the plant closing. In its answer, Brockway admitted that it had decided unilaterally to shut down the facility and had refused to bargain with the union regarding that matter; it stated that notice had been given to the union on the day after the decision was made.
Both parties entered into a stipulation on December 27, 1976, in which they agreed that certain documents including the charge, complaint, notice of hearing, answer and stipulation would constitute the entire record in the case. They also waived all proceedings before an administrative law judge, and submitted the case directly to the NLRB for resolution on the basis of the record and opposing briefs.
It was stated in the stipulation that the discontinuance of operations at Brockway's Philadelphia facility was based solely on "economic considerations." Thus, it is to be assumed that the decision was not the product of anti-union animus on the part of Brockway.*fn5 There are no facts in the record, however, to explain in any detail the nature, extent or history of the considerations prompting the employer's decision to close its Philadelphia plant. Notably, the record does not make reference to economic Necessity as a basis of the decision. Moreover, there is no indication that in any specific way the employer's interest in managing the business would have been impeded by bargaining about the matter. For instance, there is no suggestion that any negotiations between Brockway and a third party about the firm's business had been underway or that relationships with suppliers or customers would have been adversely affected by bargaining with the union prior to deciding to close the plant. In short, the only explanation in the record for the unilateral determination by Brockway is the bare statement that the closing was prompted by "economic considerations."
In a decision dated July 21, 1977,*fn6 the NLRB concluded that Brockway had violated its duty to bargain with the union regarding "wages, hours and other terms and conditions of employment." The Board's opinion is rooted in the premise that an employer who decides to shut down part of its business violates § 8(a)(5) of the NLRA if it fails to bargain with the union about that subject.*fn7 When an employer's action directly affects the conditions of employment as does the decision to close a plant the employer was said by the Board to have a duty to bargain about the action "notwithstanding an employer's contention that such a requirement significantly restricts its ability to manage the business." The reason for such a result, it asserted, is that the union has a right under the NLRA to engage in a "full and frank discussion regarding such decisions."*fn8 Further, the Board noted, its finding of a duty to bargain does not compel the parties to come to any substantive agreement, but merely directs a process in which the union has an opportunity to discuss and perhaps influence the employer's final decision.*fn9
Brockway challenges the Board's conclusion as contrary to the law of this Court. It also insists that the prevailing view among the Circuits is that there never is any duty to bargain about a partial closing, such as we have here,*fn10 and that that view should be embraced in this case. In response, the Board urges that Brockway's refusal to bargain about the closing is properly seen to constitute an unfair labor practice. Further, the Board maintains that the opinion of this Court on which Brockway primarily relies NLRB v. Royal Plating & Polishing Co.*fn11 is not only distinguishable from the present case, but also should not be read to reach this situation.
Ever since the Supreme Court in NLRB v. Jones & Laughlin Steel Co., 301 U.S. 1, 30-40, 46-47, 57 S. Ct. 615, 81 L. Ed. 893 (1937), upheld the NLRA as constitutional, it has been a prime principle of American labor law that the parties to an industrial dispute are not free to act unrestrictedly in their own economic self-interest. The Court in Jones & Laughlin observed that "when industries organize themselves on a national scale, making their relation to interstate commerce the dominant factor in their activities, how can it be maintained that their industrial labor relations constitute a forbidden field into which Congress may not enter when it is necessary to protect interstate commerce from the paralyzing consequences of industrial war?"*fn12 The authority of Congress in establishing a structure of duties within which the participants in labor controversies are to fit themselves is thus based on an abiding sense of a national need for a system of restraints on unbridled, and potentially destructive, private force.
At the center of the Congressional effort to provide a framework for peaceful labor relations is the idea that collective bargaining between the parties should be encouraged.*fn13 The NLRA provides affirmative legal protection against the employer's exercise of its power to frustrate the organization of employees for collective bargaining.*fn14 Also, the Act imposes on employers an enforceable duty to bargain with unions representing appropriate bargaining units.*fn15
Congress did not undertake to specify the precise subjects that the parties are obliged to discuss. Rather, § 8(a)(5) of the NLRA, an aspect of the original legislation enacted in 1935, deals only in general terms with an employer's duty to negotiate, saying that it shall be an unfair labor practice for an employer:
In 1947 Congress amended the NLRA to include a new section, § 8(b)(3), which imposes a correlative duty to bargain upon labor organizations.*fn17 In order to clarify the nature of the obligations set forth in §§ 8(a)(5) and 8(b)(3), Congress also enacted § 8(d), which defines collective bargaining as good faith negotiation with respect to "wages, hours, and other terms and conditions of employment."*fn18
A matter falling within the scope of § 8(d) namely, one involving "wages, hours, and other terms and conditions of employment" is a mandatory subject of bargaining.*fn19 In practical terms, the elaboration of the identity of mandatory subjects of bargaining is crucial, for such matters must be discussed in bargaining sessions before any unilateral action with respect to them is taken. If, for example, an employer proceeds on its own without submitting a mandatory subject to the bargaining process, it violates its duty under the NLRA, and its professed good faith in so doing will have no bearing upon the legality of its action.*fn20 Moreover, if one party insists on the inclusion of such a subject in a collective bargaining agreement, the other party is obligated at least to discuss it.*fn21 The converse of these propositions is also true. A permissive subject of bargaining need not be discussed at the bargaining table, and one party may not compel the other to address it as a condition of executing a collective bargaining agreement.*fn22
The range of subjects that courts have held to be mandatory topics of bargaining is rather broad, and includes such diverse matters as compensation,*fn23 pensions,*fn24 profit-sharing plans,*fn25 bonuses,*fn26 stock purchase arrangements,*fn27 merit wage increases,*fn28 insurance schemes,*fn29 company housing and meals,*fn30 hours*fn31 and the category relevant here issues of employment security. Subjects touching on the employees' interest in the security of their employment include those of hiring practices,*fn32 procedures for bidding jobs,*fn33 methods of selecting employees for layoffs,*fn34 procedures for promotion or transfer,*fn35 the operation of an employer's seniority program,*fn36 policies relating to compulsory retirement,*fn37 subcontracting out unit work*fn38 and partial closings.*fn39
We shall confine further discussion to the last two areas: subcontracting out unit work and partial closings.
To place Brockway's appeal in the appropriate legal perspective, it is necessary to provide, in some detail, a picture of the evolution of the law relating to an employer's duty to bargain about the decisions to subcontract out work and to close one of a firm's facilities. For in this area there are several doctrinal cross-currents.*fn40
The starting point is the Supreme Court's landmark opinion of Fibreboard Paper Products Corp. v. NLRB.*fn41 In affirming decisions by the NLRB and the court of appeals, the Supreme Court there held that "the replacement of employees in the existing bargaining unit with those of an independent contractor to do the same work under similar conditions of employment" is within the reach of Section 8(d), and thus that it is a mandatory subject of bargaining.*fn42 The company in Fibreboard had become concerned about the high costs of its maintenance operations, and had decided to discontinue the employment of its own maintenance workers and to engage the services of an independent contractor. The Supreme Court wrote that such a decision to subcontract out unit work came "well within the literal meaning" of the statutory phrase, "terms and conditions of employment."*fn43
Also, the Court noted, to conclude that such a matter was a mandatory subject of bargaining would promote the basic purpose of the NLRA, which is to encourage the peaceful settlement by the parties themselves of industrial disputes.*fn44 This position was said to be reinforced by existing practices in industry, which indicated that contracting out is a fit subject for negotiation since many collective bargaining agreements include a clause covering that eventuality.*fn45
Shortly after Fibreboard, this Court and the Eighth Circuit decided cases in which they distinguished Fibreboard factually and did not impose a duty to bargain. in NLRB v. Royal Plating & Polishing Co.,*fn46 we held that there was no duty to bargain about a determination to close one of two plants engaged in the business of metal plating and polishing, since prior to the decision the employer had been suffering from "severe" economic losses for years, and the property on which the plant that was closed was located had been designated by the city's housing authority for redevelopment.*fn47 Particularly in light of the action by the governmental entity, the Court asserted that there was "no room for union negotiation in these circumstances."*fn48
Royal Plating distinguished Fibreboard on the ground that the subcontracting of concern in Fibreboard did not lead to a "change in the economic direction of the company," for the same functions were to be performed by the independent contractor as had been handled by the firm's employees. Also, the employer's decision in Royal Plating, unlike the one in Fibreboard, was said to entail a major "commitment of capital investment."*fn49
The Eighth Circuit in NLRB v. Adams Dairy, Inc.*fn50 which had been remanded by the Supreme Court for reconsideration in light of Fibreboard likewise concluded that the facts of its case were distinguishable from those in Fibreboard.*fn51 In Adams Dairy, the company had decided to terminate the distribution of its own milk. The court, in ruling that such a decision was not a mandatory subject of bargaining, said that the choice had contemplated a "basic operational change" in the company, for after it was made, the company's milk trucks were sold, the milk was conveyed to an independent contractor who took title to it and who distributed it along routes of its own choosing, and the dairy retained no operational control over the contractor's performance.*fn52 Such an arrangement was contrasted to the situation in Fibreboard, where the independent contractor performed the same work that previously had been performed by the company's employees with company-owned equipment and the contractor remained under the company's direct control.
Most significantly, Adams Dairy noted that the record indicated that bargaining about the matter of concern in fact had taken place before the then-existing collective bargaining agreement came into effect. That was in contradistinction to the situation in Fibreboard where as in the present case the employer's action occurred in the absence of prior discussion and during contract negotiations when, as the Eighth Circuit put it, "there was little or no excuse for not negotiating the disputed issue . . ."*fn53
After Royal Plating And Adams Dairy, the NLRB took the opportunity in Ozark Trailers, Inc.*fn54 to explain its interpretation of Fibreboard in the setting of a partial closing. In Ozark Trailers, the Board held that the closing of a plant engaged in the manufacture of refrigerated truck bodies was a mandatory subject of bargaining. It flatly refused to accept the notion that whenever a "basic" change in a business or a management decision to recommit or reinvest funds is involved, such a factor By itself is enough to preclude a duty to bargain.*fn55 The NLRB emphasized that that approach represented an excessively one-sided allegiance to the interests of management, and that the appropriate mode of analysis in deciding what is a mandatory subject of bargaining is to balance the interests of the employer against those of labor.*fn56 In addition, the Board stressed that, in the circumstances of Ozark Trailers, bargaining would likely be efficacious since during the negotiations the union could be expected at least to attempt to alleviate the employer's concern about the costs of production.*fn57
The suggestion that the duty to bargain does not exist simply because it would impinge upon the management's prerogative in running a business was unequivocally rejected. In dealing with that contention, Ozark Trailers underscored that Congress, in enacting the NLRA, had made the policy decision not to permit employers to remain entirely free to take actions affecting the future of a firm such as a partial closing unconstrained by the need to bargain with labor. The Board reasoned that to permit employers to close a plant without even advising the union or in any way discussing the matter with it would undermine the fundamental legislative aim embodied in the NLRA of fostering collective bargaining.*fn58
Ozark Trailers emphasized that to hold that there was a duty to bargain requires only that the parties participate in discussion, and does not in any way compel them to reach an agreement about the issue of the plant closing. If bargaining fails, declared the Board, "the employer is wholly free to make and effectuate his decision."*fn59 Because the employer's ability to act as it sees fit ultimately remains untrammelled, Ozark Trailers concluded that the employer's discretion to close the plant cannot be said to be unduly hampered by allowing employees to bargain about the partial-closing determination.
After Ozark Trailers, there existed a tension between the approach of the Board toward the duty to bargain in the partial-closing context and that of some courts of appeals. For instance, in a case in which the evidence suggested that the company "was faced with the . . . threat of becoming unable to serve adequately its principal customer,"*fn60 the Ninth Circuit held that the removal of a shipyard's facilities to a new location was not a mandatory subject of bargaining. Also, in a situation in which there was evidence that a company had lost the "major part" of its business,*fn61 the Tenth Circuit held that the employer did not have a duty to bargain about the closure of a terminal. Such cases are distinguishable from the present one because they involved evidence which the record before us lacks disclosing that the employer was forced to close part of its facilities in order to remain in business or that the employer had lost substantial amounts of money prior to the partial closing.*fn62
In 1972, the NLRB held in Summit Tooling Co.*fn63 that a subsidiary's decision to cease operations was not a mandatory subject of bargaining, for "its practical effect was to take the Respondent out of the business of manufacturing tool and tooling products."*fn64 But in subsequent opinions, the Board made clear its view that cases like Summit Tooling Should be seen as representing only a limited exclusion from the duty to bargain about a partial closing. Thus, in Royal Typewriter Co.,*fn65 the Board distinguished Summit Tooling by saying that Summit Tooling merely had protected "the prerogative of an employer . . . to eliminate itself as an employer," and that in other circumstances, a duty to bargain persisted.*fn66
Contrary to the suggestion made by the dissent, the NLRB has not been alone in holding that the employer has a duty to bargain about a decision to close one of its operations. In NLRB v. Winn-Dixie Stores, Inc.,*fn67 the Fifth Circuit declared that the discontinuance of business activities at a company's warehouse that concerned cheese cutting and prepackaging was a mandatory subject of bargaining, even though the trial examiner had found that uncontroverted evidence established that the company had "discontinued its cheese operation for sound business reasons, namely, the adoption of a new, better and more economical method for merchandising its prepackaged cheese products to the public, rather than any opposition to (union) organization."*fn68 The court reasoned that it could see no significant difference between the facts of its case and of a prior Fifth Circuit decision, NLRB v. American Manufacturing Co.,*fn69 where it had held that there was a duty to ...