The opinion
OPINION ON REHEARING
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
NATIONAL LABOR RELATIONS BOARD,
Petitioner,
v.
No. 00-1969
PEPSI COLA BOTTLING COMPANY OF
FAYETTEVILLE, INCORPORATED,
Respondent.
On Application for Enforcement of an Order
of the National Labor Relations Board.
(11-CA-14889, 11-CA-15034, 11-CA-15181, 11-CA-15281,
11-CA-15289, 11-CA-15383, 11-CA-15556)
Argued: May 8, 2001
Decided: October 12, 2001
Before NIEMEYER, WILLIAMS, and KING, Circuit Judges.
Enforcement granted in part and denied in part by unpublished per
curiam opinion.
COUNSEL
ARGUED: Thomas Witbeck Budd, CLIFTON, BUDD &
DEMARIA, L.L.P., New York, New York, for Pepsi. Robert James
Englehart, Supervisory Attorney, NATIONAL LABOR RELATIONS
BOARD, Washington, D.C., for Board. ON BRIEF: Scott M. Wich,
CLIFTON, BUDD & DEMARIA, L.L.P., New York, New York, for
2 NLRB v. PEPSI COLA BOTTLING CO.
Pepsi. Leonard R. Page, Acting General Counsel, John H. Ferguson,
Associate General Counsel, Aileen A. Armstrong, Deputy Associate
General Counsel, NATIONAL LABOR RELATIONS BOARD,
Washington, D.C., for Board.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
The National Labor Relations Board (NLRB) petitions to enforce
an order that it issued after proceedings held following a remand by
this Court, in which the NLRB found that the Pepsi-Cola Bottling
Company of Fayetteville, Inc. (Pepsi) violated §§ 8(a)(3) and (5) of
the National Labor Relations Act, 29 U.S.C.A. § 158 (West 1998)
(the Act), by unilaterally changing various employment practices and
policies. Because substantial evidence in the record indicates that
each of the changes implemented by Pepsi represented material
changes to the terms and conditions of employment, and further, that
the United Food and Commercial Workers, Local 204, AFL-CIO-
CLC (the Union) did not waive its right to bargain over these
changes, we grant enforcement of the NLRB’s order, except insofar
as it finds that salesman Jerry Parker is entitled to reinstatement.
I.
A.
The NLRB has found that Pepsi violated the Act by unlawfully
implementing a change to its moving violations policy, resulting in
the discharge of two employees, by unlawfully changing its "zero set-
tlement" policy, resulting in the discharge of one employee, by
unlawfully changing other terms and conditions of employment, and
by unlawfully withholding a wage increase from employees. Pepsi-
NLRB v. PEPSI COLA BOTTLING CO. 3
Cola Bottling Co. of Fayetteville, 330 NLRB No. 134 (2000) (herein-
after NLRB II). In 1994, the NLRB made the same conclusions.
Pepsi-Cola Bottling Co. of Fayetteville, 315 NLRB 882 (1994) (here-
inafter NLRB I). It sought enforcement before this Court, which
enforced the NLRB’s order in part, denied enforcement in part, and
remanded to the NLRB for further development of the record on
remaining issues. NLRB v. Pepsi-Cola Bottling Co. of Fayetteville,
No. 95-1924, 1996 U.S. App. LEXIS 23936 (4th Cir. Sep. 10, 1996)
(unpublished) (hereinafter Pepsi I). This Court upheld the NLRB’s
determination that two employees, Hyatt and Faas, were terminated
based on anti-union animus in violation of § 8(a)(3) of the Act,
reversed the NLRB’s determination that two employees, Deskin and
Evers, were made to change tires and clean garage drains on the basis
of anti-union animus, and remanded with respect to the issues now
raised by this appeal. Id. at *22. Following this Court’s remand, two
days of additional evidentiary hearings were held before an Adminis-
trative Law Judge, whose findings that Pepsi violated the Act in each
of the areas alleged were upheld by the NLRB. The NLRB now peti-
tions for enforcement of its order.
B.
Pursuant to a petition filed by the Union, the NLRB ordered a rep-
resentation election at Pepsi’s Fayetteville, N.C. plant, which was
held on October 11, 1991. The preliminary result of the election
showed 33 votes in favor of representation, 31 against, and 3 determi-
native ballots challenged by the NLRB agent on the ground that the
employees’ names did not appear on the voter eligibility list. After
proceedings to resolve a challenge to these disputed ballots, the
NLRB resolved the challenged ballots favorably to the Union on
August 17, 1992, and on September 4, 1992, the Union was certified
by the NLRB as the bargaining agent for the bargaining unit employ-
ees at the Fayetteville plant. Thereafter, Pepsi took several actions
which the NLRB held to constitute unfair labor practices in violation
of the Act. We will examine the record regarding each of these
actions in turn.
1. The Annual Wage Increase
First, the NLRB found that Pepsi illegally withheld a customary
annual pay increase from the non-supervisory employees at the Fay-
4 NLRB v. PEPSI COLA BOTTLING CO.
etteville plant, during the interval between the representation vote and
the resolution of challenges to several determinative ballots. The evi-
dence indicates that in or about August of each year, Pepsi’s corporate
parent, Pepsi Bottling Ventures, LLC, estimates a cap on wage
increases for the following year and gives this estimate to each of
Pepsi’s facilities; in turn, these facilities have latitude to determine if,
and how much, of a wage increase to give each individual employee,
subject to the requirement that the total payroll increase for each facil-
ity must be within the cap authorized by the corporate office. In 1992,
with the exception of the Fayetteville plant, each of Pepsi’s facilities
provided a general, across-the-board pay increase for employees. At
the Fayetteville facility in 1992, management decided to grant pay
increases to all supervisory employees while withholding wage
increases from all non-supervisory employees, that is, employees who
would be in the Union bargaining unit if the Union won the election
and was certified by the NLRB.
David Schriber, a former route salesman for Pepsi at the Fayette-
ville plant, testified at the remand hearing that he worked at the Fay-
etteville plant from 1987 to 1993, and received a one cent per case
cost of living increase in his commission every year except 1992.
Schriber also testified that in February 1992 he attended a meeting
where the subject of wage increases came up and that at this meeting,
Fayetteville General Sales Manager Randall Kennedy stated that
raises were delayed because Pepsi was waiting for the NLRB to
resolve the ballot challenges and determine whether the Union had
won the representation election. Thomas Leak, another former
employee at the Fayetteville plant, testified that he worked for Pepsi
from 1986 to 1997 and received an annual pay increase during every
year except 1992. Kennedy testified that he did not have knowledge
of the decision making process at the Fayetteville plant for wage
increases prior to 1992, when he transferred to Fayetteville from the
Lumberton plant, but that at the Lumberton plant it was customary to
grant a general wage increase to all, or nearly all, employees within
the wage increase parameters set by Pepsi headquarters each year.
In Pepsi I, this Court remanded the wage increase issue to the
NLRB for the NLRB to, inter alia, "identify the employees, if any,
affected by the wage increase," explain possible inconsistencies in the
NLRB v. PEPSI COLA BOTTLING CO. 5
NLRB’s position regarding the wage increase,* develop additional
evidence regarding whether the wage increase was discretionary in
nature, and explain the effect of any compliance proceedings regard-
ing the wage increase. Pepsi I, 1996 U.S. App. LEXIS 23936, at *14.
In its decision, the NLRB determined that compliance proceedings
would be a better device to determine the specific affected employees.
NLRB II, 330 N.L.R.B. No. 134 at *3 n.10. The NLRB denied having
adopted inconsistent positions regarding the wage increase and
pointed to additional record evidence adduced on remand indicating
that the wage increase was not discretionary. Id. at *17.
2. Zero Settlement
On December 9, 1991, Pepsi announced a change in its zero settle-
ment policy; this policy requires drivers to account for any discrep-
ancy between payments received and the number of cases of soda
missing from their trucks. Prior to the change, employees were
required to account for their stock on a daily basis and pay any short-
fall to Pepsi on a weekly basis. After the new policy, as a memoran-
dum from Randall Kennedy explains, drivers were required to
account for their stock on a daily basis and immediately pay any
shortfall at the end of each business day. Both prior to and after the
zero settlement policy, drivers were required to account for their stock
each day; the difference was that before zero settlement, drivers had
*Pepsi argued below, but does not argue on appeal, that the NLRB has
taken inconsistent positions regarding the discretionary nature of the
withheld 1992 wage increase. Apparently Pepsi was referring to the
inconsistency allegedly created by the NLRB’s finding that the withheld
1992 wage increase was customary vis a vis the Office of General Coun-
sel’s 1993 refusal to pursue a claim that the similar 1993 wage increase
was customary. Pepsi also could have been referring to the NLRB’s
apparent doctrine that the Act is violated when an employer fails to grant
a customary raise prior to the certification of a union, while the Act also
may be violated when an employer grants a customary raise prior to cer-
tification because the raise may be viewed as an impermissible attempt
to "buy off" employees in order to cause them to vote against unioniza-
tion. (See J.A. at 388-389); Perdue Farms, Inc. v. NLRB, 144 F.3d 830,
839 (D.C. Cir. 1998) (Randolph, J., dissenting in part) (describing as
"unimaginable" the NLRB’s position that both the granting and with-
holding of customary pre-election wage increases violate the Act).
6 NLRB v. PEPSI COLA BOTTLING CO.
until the end of the week to locate and return any missing stock before
being required to pay for the shortage, whereas after zero settlement,
payment had to be made at the end of each day. Jerry Parker, whom
the NLRB asserts was terminated based on the new zero settlement
policy, paid his shortage on the day it occurred and was terminated
a week later for failing to settle his account correctly.
The undisputed record evidence indicates that the Union was not
given formal notification of the zero settlement policy before it was
implemented, but that at some point after the policy was announced,
the Union’s representatives heard of the new policy from employees.
The Union filed an unfair labor practice charge with the NLRB, but
did not request bargaining over the new policy.
3. Moving Violations/Accidents
Pepsi has long had a policy providing that employees who drove
company vehicles would be discharged if they committed too many
moving violations or were involved in an excessive number of
chargeable (i.e. at-fault) accidents within a given period of time. On
January 14, 1993, Pepsi announced a change in its moving violations
policy, the precise nature of which is not entirely clear from the
record. The NLRB’s original decision held that the "new" policy was
that "moving violations without convictions and accidents without
fault" now counted against an employee. NLRB I, 315 NLRB at 897.
Pepsi asserts that no record evidence demonstrates that the "new pol-
icy" was actually new; the company contends that Pepsi’s policy had
always been to count a citation against the moving violations limit,
leaving the citation on the employee’s record unless and until the
employee was fully acquitted. Thus, Pepsi asserts that the policy both
before and after the "change" was that an employee who had, for
example, two moving violation convictions or unacquitted citations
would be immediately terminated upon receipt of his or her third cita-
tion, without awaiting the result of court proceedings. Randall Ken-
nedy testified that prior to the announcement of the "new" policy, he
had informed employees eight to twelve times that citations counted
for purposes of the moving violations policy even if the charges were
later reduced. The Union was not notified prior to the implementation
of the "new" moving violations policy.
NLRB v. PEPSI COLA BOTTLING CO. 7
4. Compensation for Drivers and Salesmen
In July 1992, Pepsi unilaterally changed the compensation system
for bulk truck drivers, "tell-sell" (restaurant-focused) salesmen, and
"full-service" (vending machine focused) salesmen. This change
involved moving from a pure commission system to a system charac-
terized by a lower commission and an hourly wage. One employee
testified that the new system reduced his compensation. The Union
was not notified in advance of this change.
5. Changes in Starting Times and Work Schedules
In July 1993, Pepsi changed the work schedules of merchandisers
so that they were required to work nearly every Saturday, but received
a day off during the week. At the same time, Pepsi changed the start-
ing time for route salesmen from 6 A.M. to 5:45 A.M. The Union was
not notified in advance of the announcement of these changes. When
the Union learned of the changes, it wrote to Pepsi requesting bar-
gaining, but to no avail. Pepsi, without prior notice to the Union, also
changed the work schedules of sparemen so that they no longer per-
formed work substituting for regular drivers.
6. Break Periods and Telephone Privileges
On May 12, 1992, Pepsi eliminated employees’ ability to make and
receive personal telephone calls at work, changed break periods, and
restricted the ability of employees to converse during lunch. The
Union was not notified in advance of these changes.
II.
A.
The NLRB’s interpretations of the Act are entitled to deference if
they are reasonable, even if the NLRB’s reading of the Act is not "the
best way to read the statute." Holly Farms Corp. v. NLRB, 517 U.S.
392, 409 (1996) (emphasis in original). "If the NLRB’s legal interpre-
tations are rational and consistent with the Act, they will be upheld
by reviewing courts." Sam’s Club v. NLRB, 173 F.3d 233, 239 (4th
8 NLRB v. PEPSI COLA BOTTLING CO.
Cir. 1999) (internal quotation marks omitted). "When we review
mixed questions [of fact and law], the NLRB’s application of legiti-
mate legal interpretations to the facts of a particular case should be
upheld if they are supported by substantial evidence based upon the
record as a whole." Id. at 239-40. Substantial evidence review must
consider evidence which detracts from as well as supports the
NLRB’s findings, and substantial evidence is "such relevant evidence
as a reasonable mind might accept as adequate to support a conclu-
sion." Id. (internal quotation marks omitted). A reviewing court
engaged in substantial evidence review may not "displace the
NLRB’s choice between two fairly conflicting views" of the evi-
dence, "even though the court would justifiably have made a different
choice had the matter been before it de novo." Universal Camera
Corp. v. NLRB, 340 U.S. 474, 488 (1951).
B.
Pepsi argues that because this Court decided in an earlier appeal
that a remand was necessary to further develop the factual record
regarding the materiality of the various changes to Pepsi’s policies,
the NLRB is precluded from re-arguing the sufficiency of the prior
record on appeal.
Under the doctrine of law of the case,
[w]hen a decision of an appellate court establishes the "law
of the case," it must be followed in all subsequent proceed-
ings in the same case in the trial court or on a later appeal
. . . unless: (1) a subsequent trial produces substantially dif-
ferent evidence, (2) controlling authority has since made a
contrary decision of law applicable to the issue, or (3) the
prior decision was clearly erroneous and would work mani-
fest injustice.
Sejman v. Warner-Lambert Co., 845 F.2d 66, 69 (4th Cir. 1988)
(internal quotation marks omitted); see Plyler v. Evatt, 924 F.2d 1321,
1328 (4th Cir. 1991). The law of the case doctrine is "not an inexora-
ble command but rather a prudent judicial response to the public pol-
icy favoring an end to litigation." Sejman, 845 F.2d at 69 (internal
quotation marks omitted).
NLRB v. PEPSI COLA BOTTLING CO. 9
Pepsi’s principal argument is that the NLRB is precluded from
arguing the sufficiency of the pre-remand record to establish the
materiality of Pepsi’s unilateral policy changes. Pepsi contends that
because this Court directed the NLRB to address the materiality of the
unilateral changes on remand, we have of necessity already deter-
mined that the original record was legally insufficient to establish the
materiality of the changes. Were materiality the only reason for our
earlier remand, this logic would be compelling. The primary basis for
this Court’s remand to the NLRB, however, was a lack of evidence
regarding the issue of whether the Union received effective notice of
the changes and thus waived its right to bargain over them. Pepsi I,
1996 U.S. App. LEXIS 23936, at *20-22. Thus, our mention of the
desirability of adducing additional materiality evidence on remand
does not compel a conclusion that we found the existing materiality
evidence to be legally insufficient; it means merely that, after decid-
ing to remand the findings at issue on other grounds, we determined
that additional materiality evidence would be helpful. Based upon our
review of our prior opinion in this case, we conclude that the NLRB
is precluded from re-arguing the sufficiency of the original record as
to notice and waiver issues — the principal bases for our remand —
but not as to materiality.
III.
A.
This Court, in Pepsi I, stated that because the parties had not sub-
mitted evidence that there was an established practice of awarding
wage increases at the Fayetteville plant, "we cannot determine how
established any practice of paying wage increases was, nor can we
determine whether any discretion entered the calculus for disbursing
the wage increase." Pepsi I, 1996 U.S. App. LEXIS 23936 at *13 (4th
Cir. Sep. 10, 1996). We noted that absent an anti-union motive, an
employer may disburse or fail to disburse discretionary bonuses, but
noted, however, that if a practice of paying bonuses is well-
established, withholding such a bonus unilaterally may violate the
Act. See id. at *13-14; Phelps Dodge Mining Co. v. NLRB, 22 F.3d
1493, 1496-1500 (10th Cir. 1994) (holding that where there was no
established practice of distributing bonuses, employer was not
required to bargain over their distribution). This Court, in Southern
10 NLRB v. PEPSI COLA BOTTLING CO.
Maryland Hosp. Ctr v. NLRB, 801 F.2d 666 (4th Cir. 1986), summa-
rized the law in this area as follows:
There is general agreement that when an employer by prom-
ises or by a continuous course of conduct has made a partic-
ular benefit part of the established wage or compensation
system, then the withholding of that benefit during an orga-
nizational campaign raises the inference of improper
employer conduct. An employer can avoid the finding of a
violation in such a case only if he can separately justify his
action with a legitimate business purpose. On the other
hand, when there is no "established practice" of granting
benefits, the General Counsel must show that the employ-
er’s withholding of particular benefits was motivated by
anti-union sentiment to prove a violation of the Act.
Id. at 668-69 (internal citation omitted). We found that a one-time
payment of a Christmas bonus the year before a union election did not
suffice to establish a practice of paying such bonuses, so that the
employer was not required to bargain before declining to pay the
bonus again; further, we held that isolated anti-union comments made
to a handful of employees did not suffice to demonstrate that the
bonus was withheld based on anti-union animus. Id. at 670-71. If a
company has a longstanding practice of granting wage increases to
keep up with the cost of living, a certain amount of discretion as to
the amount of the wage increase does not prevent the regular wage
increase from becoming a condition of employment and, thus, a sub-
ject of mandatory bargaining. NLRB v. Beverly Enter.-Massachusetts,
Inc., 174 F.3d 13, 25 (1st Cir. 1999).
Pepsi argues that the NLRB, on remand, failed to develop suffi-
cient evidence either that the wage increases at the Fayetteville plant
occurred over a number of years or that Pepsi lacked discretion in
determining whether to raise wages and if so, by what amount. The
NLRB argues that evidence adduced at the remand hearing estab-
lished that Pepsi budgeted annual wage increases for each of its thir-
teen North Carolina plants; that on each of six occasions prior to
1992, each North Carolina plant granted general wage increases to all,
or nearly all, employees; that the Fayetteville plant was the only Pepsi
facility in North Carolina to decline to grant a pay increase to bargain-
NLRB v. PEPSI COLA BOTTLING CO. 11
ing unit employees in 1992; and that this decision was a distinct
departure from the practice of management at the Fayetteville plant
prior to 1992. The NLRB also notes that the Southern Maryland
Court held that the withholding even of a discretionary benefit vio-
lates the Act when motivated by specific anti-union animus, and here,
the record shows that Pepsi told employees prior to the election that
if they voted for the union, Pepsi would freeze wages. Moreover, in
announcing that no wage increase would be given, Pepsi stated that
the pendency of the NLRB proceedings to resolve the union election
was the reason for its decision.
We conclude that while the NLRB’s evidence at the remand hear-
ing could have been more complete, its determination that Pepsi
established over a number of years a regular pattern of granting gen-
eral wage increases at the Fayetteville plant is supported by substan-
tial evidence. David Schriber, who worked at the Fayetteville plant
from 1987 to 1993, testified that Pepsi "normally" announced a one
cent per case increase in driver commissions during November or
December of each year (J.A. at 329), and the only year that this did
not occur was 1992, when Kennedy announced to the delivery drivers
that the wage increase was "waiting on the [NLRB] to make a deci-
sion on the [election ballot challenge] case." (J.A. at 331.) Kennedy
himself testified that during every year that he worked at the Lumber-
ton plant, management implemented a broad-based wage increase
based on the targets provided by Pepsi’s corporate headquarters. The
NLRB could reasonably infer that practice was similar at the Fayette-
ville plant, there being no evidence to the contrary and some evidence
(Schriber’s testimony) supportive of this view. Thomas Leak, a sales-
man at the Fayetteville plant from 1986 to 1997, stated that towards
the end of every year of his tenure except 1992, the company held a
meeting for all sales employees and announced a general pay
increase.
Pepsi argues that the NLRB has failed to carry its burden on this
issue because it introduced no evidence of the process for setting pay
increases at the Fayetteville plant. Pepsi misconceives the nature of
the controlling legal standard. Some discretion as to the amount of the
increase does not cause the increase to become discretionary in its
entirety and thus, not a subject of mandatory bargaining. Substantial
evidence was adduced at the remand hearing that Pepsi’s Fayetteville
12 NLRB v. PEPSI COLA BOTTLING CO.
plant generally, during every year except 1992, granted wage
increases in line with the cap set by corporate headquarters. The fail-
ure to grant any wage increase at all in 1992 to the bargaining unit
employees was obviously a change in Pepsi’s customary practice.
This situation is utterly unlike the occasional, sporadic, indeed one-
time, Christmas bonus at issue in Southern Maryland. See Southern
Maryland, 801 F.2d at 668. Here, a reasonable finder of fact could
conclude that Pepsi generally granted cost of living increases to bar-
gaining unit employees from 1986 to 1991, did not do so in 1992
immediately following the Union vote and while the results of the
election were pending, and resumed doing so after 1992. Thus, annual
wage increases were a condition of employment and could not be var-
ied unilaterally by Pepsi during the pendency of the union election
results. Further, if there were an evidentiary infirmity in the NLRB’s
finding that pay increases were a customary practice, such an infir-
mity would be irrelevant because Southern Maryland held that even
a discretionary benefit may not be withheld out of anti-union animus.
Id. at 669. Here, Pepsi’s statement before the representation election
that it would freeze wages if the union won the election provides rea-
sonably strong evidence that its freezing of wages after the union
election — explicitly in order to see how the election would turn out
after the ballot challenge — was motivated by such animus.
We thus conclude that the NLRB adduced sufficient evidence on
remand to establish that the withheld 1992 wage increase was custom-
ary, and thus, Pepsi’s act of withholding it from the Fayetteville bar-
gaining unit employees violated the Act.
B.
The NLRB found that Pepsi violated 29 U.S.C.A. § 158(a)(5) by
unilaterally changing the method of compensation for bulk truck driv-
ers, restaurant-focused ("tell-sell") salesmen, and vending machine
("full-service") salesman; changing telephone access, break period,
and lunch period policies; and implementing the zero-settlement pol-
icy, without providing advance notice to the Union. NLRB II, 330
N.L.R.B. No. 134, at *22-23 (2000). An employer violates 29 U.S.C.
§ 158(a)(5) if it unilaterally amends terms or conditions of employ-
ment if it has not bargained with the Union regarding the unilateral
amendments. Oneita Knitting Mills, Inc. v. NLRB, 375 F.2d 385, 388
NLRB v. PEPSI COLA BOTTLING CO. 13
(4th Cir. 1967). If the Union has notice of an employer’s unilateral
amendments, but does not request bargaining, the Union waives the
right to bargain. YHA, Inc. v. NLRB, 2 F.3d 168, 173-74 (6th Cir.
1993); W.W. Grainger, Inc. v. NLRB, 860 F.2d 244, 248-49 (7th Cir.
1988) (stating that "a union, which has notice of a proposed change
which affects a mandatory bargaining subject, must make a timely
request to bargain. Moreover, formal notice is not necessary as long
as the union has actual notice. A union’s failure to assert its bargain-
ing rights will result in a waiver of these rights." (internal citation
omitted)). In Pepsi I, this Court stated that "[t]o demonstrate that the
Union waived the right to bargain over the unilateral amendments,
Pepsi must show the right to bargain was clearly and unmistakably
relinquished." Pepsi I, 1996 U.S. App. LEXIS 23936 at *20-21 (inter-
nal quotation marks omitted). The ALJ observed on remand that this
language appears to assign the burden of proof on this issue to Pepsi
rather than the NLRB; Pepsi counters that this cannot be the case
because the NLRB always bears the burden of proof of showing
unfair labor practices. Pepsi is precluded from making this argument
for the same reason that the NLRB is precluded from arguing that the
prior record was sufficient as to notice and waiver: this Court’s prior
opinion is the law of the case. Thus, Pepsi bears the burden of proof
of showing that the Union clearly waived its right to bargain over var-
ious unilateral policy changes; this approach comports with the ordi-
nary rule that the burden of proving affirmative defenses to liability
rests with the defendant.
In Pepsi I, Pepsi asserted that the Union had notice of the new zero
settlement policy, the moving violations policy, and other alleged pol-
icy changes, and by failing to request bargaining, waived any objec-
tions to these alleged changes. This Court stated that it could not
properly evaluate this argument because Pepsi had not "provide[d]
any particulars, such as the type of notice, how the notice was con-
veyed, or the length of time the Union had to respond to the propos-
al[s] to implement unilateral amendments." Pepsi I, 1996 U.S. App.
LEXIS 23936 at *21. On this issue, the NLRB did develop significant
additional evidence on remand. The ALJ, in a finding adopted by the
NLRB, credited the testimony of Union representative Shelda
Upchurch, who testified that Pepsi provided no notice to the Union
prior to announcing the changes to the employees and that she learned
14 NLRB v. PEPSI COLA BOTTLING CO.
of the changes only by hearing of the announcement from employees.
NLRB II, 330 N.L.R.B. No. 134 at *22.
Pepsi argues that numerous Board and court decisions establish
that formal notice to the Union is not necessary where the Union has
actual notice of a proposed policy change; thus, Pepsi argues, the "no-
tice" test is a practical one, and the Union’s actual knowledge of the
changes, obtained through employees who contacted the Union,
means that the Union’s failure to request bargaining amounts to a
waiver. See Haddon Craftsmen, Inc., 300 NLRB 789, 790 (1990);
Southern California Stationers, 162 NLRB 1517, 1543 (1967).
Because certain of the policy changes — such as zero settlement —
had not been formally implemented when announced, Pepsi argues
that the evidence establishes that the Union did, in fact, have notice
prior to implementation of the proposed changes.
Pepsi is correct that indirect notice to a union may suffice to
require the union to request bargaining at risk of waiving its bargain-
ing rights. W.W. Grainger, 860 F.2d at 248. The difficulty with
Pepsi’s argument is that the decisions on which it relies — in particu-
lar, Haddon Craftsmen — have been limited by later decisions of the
NLRB and the courts to situations in which the changed policy was
not announced to employees as a fait accompli prior to the notifica-
tion of the Union. See Roll & Hold Warehouse & Distr. Corp., 325
N.L.R.B. 41, 42 (1997) (distinguishing Haddon Craftsmen on the
basis that in that case, "notice was given to union officials . . . before
general notice was given to employees," and holding that "a union’s
role in [the collective bargaining] process is totally undermined when
it learns of the change incidentally upon notification to all employ-
ees"), enforcement granted, 162 F.3d 513, 519 (7th Cir. 1998) (stat-
ing, "we find . . . convincing the NLRB’s second reason for finding
that no opportunity for reasonable negotiation existed here: that by
presenting the plan directly to employees before notifying the Union,
the Union’s negotiating role was seriously undermined. . . . When an
employer first presents a policy to its employees without going
through the Union, the Union’s role as the exclusive bargaining agent
of the employees is undermined."). The current state of the law, there-
fore, is that informal notice of proposed changes is sufficient, but the
presentation as a fait accompli of a complete plan directly to employ-
ees without any prior contact, formal or informal, with the Union does
NLRB v. PEPSI COLA BOTTLING CO. 15
not create effective notice such that the Union’s failure to request bar-
gaining creates a waiver. The deference given to the NLRB’s inter-
pretations of the Act causes us to conclude that this interpretation of
the Act is within the range of reasonable interpretations to which this
Court must defer. See id. at 520 (deferring to the NLRB’s conclusion
that a full-blown announcement of a new policy directly to employees
prior to notifying the Union "harmed [the Union] enough to justify its
failure to demand bargaining"). Thus, accepting the NLRB’s decision
to credit Upchurch’s testimony that the Union received notice of the
proposed changes only after they were announced generally to
employees, we conclude that the Union did not waive its right to bar-
gain over these changes by failing to request bargaining. As a result,
if the changes were material alterations of the terms and conditions
of employment, Pepsi’s unilateral imposition of the changes violated
the Act.
C.
A duty to bargain over changes to wages, hours, or terms or condi-
tions of employment arises only if these changes are "material, sub-
stantial, and . . . significant one[s] affecting the terms and conditions
of employment of bargaining unit employees." Angelica Healthcare
& Serv. Group, 284 NLRB 844, 853 (1987) (internal quotation marks
omitted). Pepsi argues that the zero-settlement policy, moving viola-
tions policy, new compensation scheme for salesmen and drivers, and
miscellaneous changes in telephone and breaks policy, work starting
times, etc., were not material. Having concluded that the Union did
not waive its right to bargain over the changes and that the NLRB is
not precluded from arguing the sufficiency of the original record, we
will address the materiality of each of the unilateral changes in turn.
1. Zero Settlement
The NLRB argues that the new zero settlement policy was a mate-
rial change because (1) it substantially inconvenienced employees
because if they were short on stock at the end of one day, they could
not subsequently locate the missing stock and avoid having to person-
ally pay for the shortage; and (2) salesman Jerry Parker was dis-
charged for violating the new system, demonstrating its materiality.
Union representative Sheila Upchurch testified to the inconvenience
16 NLRB v. PEPSI COLA BOTTLING CO.
that the new zero settlement policy caused for drivers and route sales-
men.
Pepsi argues persuasively that Parker was not terminated as a result
of the new aspects of zero settlement. The record indicates unmistak-
ably that he was terminated for failing to settle his account to zero
each day, which was required even under the old system, but was not
terminated for failing to pay the shortfall on a daily, as opposed to
weekly, basis, which was the only change to the policy; uncontro-
verted evidence demonstrates that Parker paid for his shortage on the
day it occurred and thus cannot possibly have been terminated for
failing to do so. We thus conclude that Parker was not terminated as
a result of the new policy, and the NLRB’s reliance on his termination
as evidence of materiality was error. As a result, we must deny
enforcement of the Board’s order insofar as it orders Pepsi to reinstate
Parker.
Upchurch’s testimony that the zero settlement policy greatly incon-
venienced drivers, however, suffices to enable the NLRB to carry its
materiality burden. Given the deference accorded the NLRB’s deter-
mination of what is a mandatory subject of bargaining, see Beverly
Enter.-Massachusetts, 174 F.3d at 29, we conclude that the require-
ment that drivers and salesmen pay shortfalls on a daily, as opposed
to a weekly, basis imposes substantial inconvenience and thus should
be regarded as a material change in the terms and conditions of
employment. Requiring employees to pay shortfalls on a daily basis
requires them to carry sufficient cash each day to pay any shortfall
and prevents them from making up for a shortfall on one day with an
overage during the same week, as, for example, when extra cases of
product are inadvertently delivered to a customer but can be returned
the following day. We therefore uphold the NLRB’s finding that the
unilateral imposition of the new zero settlement policy violated the
Act.
2. Telephone Access, Break Periods, and Lunch Periods
The NLRB found, based upon substantial evidence, that Pepsi
changed its break period policy to limit employees to two 15-minute
break periods, placed new restrictions on conversations among
employees during their lunch breaks, and changed its telephone use
NLRB v. PEPSI COLA BOTTLING CO. 17
policy so that employees could use the company’s telephones for per-
sonal calls only in emergencies. NLRB II, 330 NLRB No. 134, at *5.
The NLRB has held in the past that telephone policies and lunch and
break periods can constitute mandatory subjects of bargaining. See
Advertiser’s Mfg. Co., 280 NLRB 1185, 1191 (1986) (stating that
telephone use is a term or condition of employment and employee
telephone privileges are a mandatory subject of bargaining), enforce-
ment granted, 823 F.2d 1086 (7th Cir. 1987); Garrison Valley Ctr.,
Inc., 246 NLRB 700, 709 (1979) (lunch and break periods are a man-
datory subject of bargaining). Given the NLRB’s longstanding posi-
tion that telephone, lunch, and break policies are mandatory subjects
of bargaining, we find that substantial evidence supports the NLRB’s
conclusion that Pepsi’s changes to these policies effected impermissi-
ble, unilateral, and material changes to the terms and conditions of
employment.
3. Method of Compensation for Salesmen and Drivers
The NLRB concluded that because § 8(d) of the Act, 29 U.S.C.A.
§ 158(d), requires employers to bargain with a collective-bargaining
representative regarding, specifically, "wages," Pepsi’s move from a
pure commission system to a system involving a lower commission
plus an hourly wage, which reduced the pay of some employees (J.A.
at 8-11), was the very paradigm of a forbidden unilateral change
under the Act. Given § 8(d)’s specific mention of "wages" as a man-
datory bargaining subject and the evidence indicating that Pepsi’s
new policy reduced the wages of at least some employees, it is clear
that the NLRB correctly found the new compensation system for
salesmen and drivers to be an impermissible unilateral change in
wages.
4. Sparemen’s Work Schedule
In November 1992, Pepsi changed the work schedule for sparemen
so that they no longer were responsible for filling in for drivers. The
NLRB reasoned that § 8(d) requires employers to bargain regarding,
specifically, "hours." In the past, the NLRB has held that even a rela-
tively small change in working hours is a mandatory subject of bar-
gaining under the Act. Hedison Mfg. Co., 260 NLRB 590, 592-94
(1982) (holding that a five-minute change in employee starting time
18 NLRB v. PEPSI COLA BOTTLING CO.
is a mandatory subject of bargaining). In light of the well-established
principle that working hours are a mandatory subject of bargaining,
we cannot conclude that the NLRB erred in finding that Pepsi’s
changes to the sparemen’s work schedules constituted an impermissi-
ble unilateral change in violation of 29 U.S.C. § 158(a)(5). Similarly,
the NLRB’s finding that Pepsi violated § 158(a)(5) by unilaterally
changing the work schedules of merchandisers and route salesmen is
supported by substantial evidence.
5. Moving Violations Policy
Pepsi argues that no record evidence establishes that the prior mov-
ing violations policy was different from the "new" policy, in that cita-
tions were always counted against the policy’s limits unless and until
an employee was entirely acquitted. Evidence in the record, however,
indicates that Pepsi’s prior policy applied only to "convictions"
whereas under the new policy, citations counted against an employ-
ee’s record unless and until an employee was acquitted. Further, the
record also indicates that the new policy played a role in justifying the
discharge of three employees, Hyatt, Lee, and Curtis. The record is
not entirely clear as to the precise nature of the policy prior to the
change, and Pepsi’s argument that there was in fact no change is not
without record support. On balance, however, we find that substantial
evidence supports the NLRB’s finding that Pepsi changed its policy
so that unadjudicated citations immediately were counted against an
employee’s driving record, and that this change led to the discharge
of Hyatt, Lee, and Curtis, rendering it material. The NLRB therefore
did not err in finding that Pepsi’s change to the moving violations and
accidents policy was an impermissible unilateral change in the terms
and conditions of employment.
IV.
No substantial evidence exists to support the Board’s conclusion
that Parker was terminated based on the changed aspects of the zero-
settlement policy; therefore, we deny enforcement of that portion of
the Board’s order that finds that his termination violated § § 8(a)(1)
and 8(a)(5) of the Act and requires his reinstatement. Because the
NLRB adduced sufficient evidence on remand indicating that the
Union did not waive the right to bargain over any of Pepsi’s unilateral
NLRB v. PEPSI COLA BOTTLING CO. 19
changes to policy, because the evidence indicates that Pepsi’s with-
held 1992 wage increase was not discretionary and was withheld
based on anti-union animus, and because adequate evidence exists to
permit the NLRB reasonably to conclude that each of Pepsi’s unilat-
eral changes was material in nature, we grant enforcement of the
NLRB’s order in all other respects.
ENFORCEMENT GRANTED IN PART AND
DENIED IN PART