Prime Service, Inc. v. National Labor Relations Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 7, 2001 Decided October 12, 2001

No. 00-1306

Prime Service, Inc., d/b/a Prime Equipment,

Petitioner

v.

National Labor Relations Board,

Respondent

International Union of Operating Engineers,

Local Union No 3, AFL-CIO,

Intervenor for Respondent

On Petition for Review and Cross-Application

for Enforcement of an Order of the

National Labor Relations Board

Harry J. Secaras argued the cause for petitioner. With

him on the briefs was Howard L. Bernstein.

Steven B. Goldstein, Attorney, National Labor Relations

Board, argued the cause for respondent. With him on the

brief were Arthur F. Rosenfeld, General Counsel, John H.

Ferguson, Associate General Counsel, Aileen A. Armstrong,

Deputy Associate General Counsel, and Julie B. Broido,

Senior Attorney. Howard E. Perlstein, Deputy Assistant

General Counsel, entered an appearance.

Before: Henderson, Randolph, and Rogers, Circuit

Judges.

Opinion for the Court filed by Circuit Judge Randolph.

Randolph, Circuit Judge: Prime Service, Inc.'s petition to

review and the National Labor Relations Board's cross-

petition to enforce an order of the Board raise the question

whether Prime Service should have been treated as a succes-

sor employer who breached its duty to bargain with the

incumbent union and, if so, whether the Board's affirmative

bargaining order is an appropriate remedy. Also before us is

Prime's motion for an order requiring the Board to reopen

the record. We deny Prime's petition and its motion and

enforce the Board's order.

Prime Service, a Delaware corporation headquartered in

Houston, Texas, rented and sold construction and industrial

equipment. In 1998 Prime entered into an agreement to

acquire the assets of Clementina, Ltd., a company in a similar

line of business in California. Clementina had a collective

bargaining agreement with the Operating Engineers Local

Union No. 3, International Union of Operating Engineers,

AFL-CIO (the "Union"), covering seventeen employees work-

ing at its stores in San Francisco, San Mateo, Sacramento,

San Jose, and Berkeley.

On August 7, 1998, Prime notified the Union that it was in

the process of acquiring Clementina's assets and that it would

meet with Clementina's employees to discuss the sale. In an

August 11 reply, the Union requested a meeting with Prime

and asserted that its collective bargaining agreement with

Clementina should remain in force after the sale. Prime

responded on August 13, stating that although it would

consider Clementina's employees for jobs with Prime, it

would not be bound by the Clementina collective bargaining

agreement. The next day the Union again suggested a

meeting with Prime and cautioned Prime against making any

unilateral changes in the Clementina employees' terms and

conditions of employment.

Sometime between August 25 and 27, Roland M. Katz, the

contracts manager for the Union, and other Union represen-

tatives met with representatives of Prime, including Prime's

director of human resources, regional manager, and in-house

counsel. At this lunch meeting, Prime's representatives ex-

pressed the company's desire to have a "seamless transition,"

and stated that they were thinking of calling the acquired

operation "Clementina/Prime" in order to facilitate a smooth

transition. Katz stated the Union's position that Prime had

to recognize Local 3 and had to continue to employ the

Clementina collective bargaining unit employees. The Prime

people stated that they would have to recognize the Union

only if a majority of employees were former Clementina

employees.

The participants also discussed potential locations for con-

ducting negotiations. Katz told Prime's representatives that

the Union always negotiated near the workplaces and sug-

gested Alameda as a location. One of Prime's representatives

proposed Houston; another suggested a location in between

such as Phoenix.

Prime took over Clementina's five unionized facilities on

August 28. Of Clementina's seventeen bargaining unit em-

ployees, twelve accepted Prime's offer of employment. Dur-

ing the next few weeks, several of the twelve employees

resigned, forcing Prime to run advertisements seeking new

employees. Prime also was forced to transfer temporarily

employees from its other facilities. By September 25, 1998,

due to resignations and Prime's hiring of additional non-

Union employees, the former Clementina bargaining unit

employees no longer constituted a majority of Prime's work

force.

Throughout September and October, the Union repeatedly

contacted Prime regarding its assurance that it would honor

all legal obligations and negotiate with Local Union No. 3 if

legally required to do so. When Prime refused to bargain,

the Union filed an unfair labor practice charge, alleging that

Prime had a duty to bargain with the Union as a successor

employer and that its refusal to bargain violated the National

Labor Relations Act. After a hearing, an Administrative

Law Judge found that Prime had violated sections 8(a)(1) and

(a)(5) of the Act, see 29 U.S.C. ss 158(a)(1) and (a)(5), and

recommended the issuance of a cease and desist order and an

affirmative bargaining order. On March 10, 2000, the Board

affirmed the ALJ's findings, and ordered Prime to bargain

with the Union.

After the Board issued its order, Prime took affirmative

steps on March 24, 2000, to comply by posting a "Notice to

Employees." The notice informed employees that the Board

had found that Prime violated the National Labor Relations

Act and that Prime would not refuse to bargain with the

Union as the exclusive representative of its employees. With-

in three weeks of the posting, fifteen of twenty-six Prime

employees submitted written objections expressing their op-

position to the Union's representing them. This led Prime to

inform the Union that it would not proceed with collective

bargaining because a majority of employees opposed Union

representation.

I.

We shall deal first with the Board's decision that Prime

was a successor employer obligated to recognize and bargain

with the Union. In order to preserve industrial peace during

the transition between employers, the presumption of majori-

ty support ordinarily enjoyed by a certified union may contin-

ue in successor situations, thereby obligating a successor

employer to bargain with its predecessor's union. See Fall

River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 41

(1987); NLRB v. Burns Int'l Sec. Servs., Inc., 406 U.S. 272

(1972). This presumption of majority status attaches if there

is a "substantial continuity" between the predecessor's busi-

ness and that of the new employer; if the incumbent union

has made a bargaining demand; and if the new employer has

hired a "substantial and representative complement" of its

work force, a majority of which consists of the predecessor's

employees. See Williams Enters., Inc. v. NLRB, 956 F.2d

1226, 1232 (D.C. Cir. 1992). These are primarily factual

inquiries, and to that extent the Board's judgment must be

sustained if it is supported by substantial evidence. Fall

River, 482 U.S. at 43; Williams, 956 F.2d at 1232.

The parties agree that substantial continuity existed be-

tween Prime and Clementina. The dispute is whether the

Union made a valid bargaining demand on Prime before

August 28 and whether Prime had hired a substantial and

representative complement of its work force by that date.

A. Demand

A union need utter no particular words to convey its

demand for bargaining with a successor employer. The

demand may be in writing or it may be oral. Although it is

customary for a union seeking recognition to inform the

employer that it represents a majority of employees, even

this elementary representation may be unnecessary when the

successor has retained the entire workforce and hired no one

else. See Burns Int'l Sec. Servs., 406 U.S. at 278-79. Still, in

conveying its intentions to the successor the union must do

more than simply suggest a meeting without specifying the

subjects of the meeting or when or where the union would

like to get together. We have held that such a vague

proposal is not enough to trigger an employer's s 8(a)(5)

obligation to bargain. Williams, 956 F.2d at 1233; see also

K & S Circuits, Inc., 255 N.L.R.B. 1270, 1297 (1981); Sheboy-

an Sausage Co., 156 N.L.R.B. 1490, 1500-01 (1966). If the

union does not clearly express its purpose, if it does not

explicitly demand bargaining, then "some indicia of a demand,

such as a suggested meeting place and time, proposed topics,

and a method for reply" should be conveyed to the new

employer. Williams, 956 F.2d at 1233. The burden is on the

union to make its desires known.

For example, in K & S Circuits, the Board held that a

union's verbal communication to a company stating that its

employees were forming a union and asking to negotiate did

not constitute a request for recognition and bargaining. 255

N.L.R.B. at 1297. The Board relied on the fact that the

communication "did not claim majority status, nor did it

indicate how, or to whom" the company was to reply. Id.

Similarly, in Williams, we held that a phone call indicating

that the union "would ... like to represent the employees of

the new company" and "would like to have an opportunity to

discuss, perhaps negotiate" was not a sufficient request for

recognition. 956 F.2d at 1229. The call was vague and

nothing more than a suggestion. Id. at 1233.

The facts of this case are different. Katz testified that he

made a demand for recognition on behalf of the Union in

early August. The ALJ credited his testimony. Katz also

testified that when they met for lunch at the end of August he

informed the Prime representatives of the Union's position

that the company had to recognize Local 3. Katz further

testified that the Union and Prime then discussed potential

bargaining locations, and the subject of the transition from

Clementina to Prime, which was about to occur. Substantial

evidence thus supported the ALJ's and the Board's finding

that the Union made a bargaining demand. The Union

requested recognition, and the parties discussed bargaining

locations and the subject of negotiation.

We recognize the line of judicial authority holding that a

bargaining demand is not required in cases--such as this

one--in which there has been an immediate rather than a

gradual transition period. See Banknote Corp. of America v.

NLRB, 84 F.3d 637, 645-46 (2d Cir. 1996). Whether this

circumstance sufficiently distinguishes Fall River, 482 U.S. at

47, and Williams, 956 F.2d at 1230, 1232-34, which required a

bargaining demand in the context of gradual hiring during

prolonged start-up periods, is an issue about which we ex-

press no opinion in light of our agreement with the Board

that the Union did make a bargaining demand.

B. Substantial and Representative Complement

Prime also challenges the ALJ's (and the Board's) finding

that a substantial and representative complement of the

workforce existed at the five California stores on August 28.

In fixing the time for determining the composition of the

successor's workforce, the "substantial and representative

complement" rule reconciles the employees' interest in choos-

ing a bargaining agent with their interest in being represent-

ed at the earliest possible time. Fall River, 482 U.S. at 47, 48

& n. 15. "If, at this particular moment,"--the moment when

a substantial and representative complement is on board--"a

majority of the successor's employees had been employed by

its predecessor, then the successor has an obligation to

bargain with the union that represented these employees."

Id. at 47.

Deciding when a substantial and representative comple-

ment existed can be difficult, particularly when the new

employer has plans to expand or alter operations. See Sulli-

van Indus. v. NLRB, 957 F.2d 890, 895-96 (D.C. Cir. 1992);

see also Pennsylvania Transformer Tech. v. NLRB, 254 F.3d

217, 223 (D.C. Cir. 2001). Here the matter is relatively

simple. Prime was not rebuilding a moribund business and

the ALJ properly refused to give weight to the company's

unsupported assertions that it planned to expand the work-

force. Prime was intent on having what it described as a

"seamless transition." Appendix 65-66 (testimony of Roland

M. Katz). When Prime took over the stores on August 28, it

encountered a shortage of workers because several former

Clementina employees had rejected their employment offers

or had quit immediately. But the company quickly brought

in new workers to fill the vacancies. Employing twelve of

Clementina's seventeen former bargaining unit employees, it

continued Clementina's full operations on August 28 without

any hiatus. See NLRB v. Cutter Dodge, Inc., 825 F.2d 1375,

1378 (9th Cir. 1987). Prime itself wrote the Union on Octo-

ber 28 stating that its "substantial and representative comple-

ment of employees" consisted of eighteen workers, only one

more than the contingent under Clementina. See Appendix

345. Substantial evidence therefore supported the ALJ's

finding, adopted by the Board, that August 28 was the correct

date for determining whether the successor had a majority of

union members in its workforce. On that date a majority of

Prime's employees were former Clementina employees.

Prime was thus a successor employer obligated to recognize

and bargain with the Union. The Board properly decided

that the company's failure to do so violated sections 8(a)(1)

and (a)(5) of the National Labor Relations Act.

II.

This brings us to Prime's motion to reopen the record.

Prime asserts that regardless whether the Board correctly

found it to be a successor employer, it still had no duty to

bargain with the Union because new evidence showed that

the Union lacked the support of unit employees. Prime asks

this court to grant its motion to reopen the record pursuant

to s 10(e) of the Act, 29 U.S.C. s 160(e), so that it can adduce

petitions and letters signed by fifteen of twenty-six bargain-

ing unit employees in April 2000 stating that they did not

want to be represented by the Union. Section 10(e) provides

that reviewing courts may order evidence to be taken before

the Board if the party moving for leave to adduce additional

evidence shows "that such additional evidence is material and

that there were reasonable grounds for the failure to adduce

such evidence in the hearings before the Board." See NLRB

v. Mexia Textile Mills, Inc., 339 U.S. 563, 569 (1950). This

information, according to Prime, gave it a good faith doubt

about the Union's majority status.

Once a successor employer develops a "good faith doubt"

about a union's majority status, it is no longer obligated to

recognize and bargain with the union. Williams, 956 F.2d at

1234; see also St. Agnes Med. Ctr. v. NLRB, 871 F.2d 137,

145 (D.C. Cir. 1989). An anti-union petition signed by a

majority of the successor's employees stating that they do not

want to be represented by the union may serve to create such

a good faith doubt. See Williams, 956 F.2d at 1234. But the

Board has adopted a presumption--which this court has

upheld--that an employer's unlawful refusal to bargain taints

any later anti-union petition. See Harter Tomato Prods. Co.

v. NLRB, 133 F.3d 934, 938-39 (D.C. Cir. 1998); see also Lee

Lumber & Bldg. Material Corp. v. NLRB, 117 F.3d 1454,

1458-61 (D.C. Cir. 1997). An employer can rebut this pre-

sumption of taint only by showing : (1) that employee disaf-

fection arose after it resumed recognition of the union; and

(2) that it bargained with the union for a reasonable time

without committing additional unfair labor practices. See

Harter Tomato, 133 F.3d at 939.

Prime did post a notice at some of its locations in compli-

ance with the Board's order, but it never engaged in bargain-

ing with the Union. The company canceled a bargaining

session scheduled for April 13, 2000. Given these facts,

Prime has not rebutted the Board's presumption that an

employer's unlawful refusal to bargain taints any later anti-

union petition.

We reject Prime's argument that we should reopen the

record so that it can demonstrate that at the time the Board

issued the bargaining order (March 10, 2000) the Union no

longer enjoyed majority status. If Prime had objected to the

bargaining order it might have a point. We have held that

before the Board issues a bargaining order on the basis of a

union majority of authorization cards--a Gissel order, after

NLRB v. Gissel Packing Co., 395 U.S. 575 (1969)--the Board

must take into account changes between the time of the

unfair labor practices and the issuance of its order. See

Flamingo Hilton-Laughlin v. NLRB, 148 F.3d 1166, 1170-71

(D.C. Cir. 1998). In mounting this argument Prime assumes

that it may attack the bargaining order, an assumption we

reject for the reasons given in the next section.

III.

Prime argues that the Board erred in issuing the bargain-

ing order without offering a reasoned explanation. This court

has repeatedly held that the Board must supply a reasoned

analysis for issuing a bargaining order rather than milder

relief. See Vincent Indus. Plastics, Inc. v. NLRB, 209 F.3d

727, 738 (D.C. Cir. 2000); Flamingo Hilton-Laughlin, 148

F.3d at 1173. But Prime failed to raise any specific objec-

tions to the propriety of the bargaining order in the Board

proceedings. It merely excepted to the remedy "in its entire-

ty" and to the order "in its entirety." Appendix 350-52

(Exceptions of Respondent/Employer Prime Service, Inc. to

the Administrative Law Judge's Decision). This form of

generalized objection is insufficient to preserve the argument

for appeal. See Quazite Div. v. NLRB, 87 F.3d 493, 497

(D.C. Cir. 1996). Section 10(e) of the Act precludes reviewing

courts from considering objections not first presented to the

Board "unless the failure or neglect to urge such objection

shall be excused because of extraordinary circumstances," 29

U.S.C. s 160(e), circumstances not present here. See

Exxel/Atmos, Inc. v. NLRB, 147 F.3d 972, 978 (D.C. Cir.

1998); Quazite, 87 F.3d at 497-98.

The petition for review and the motion to reopen are

denied. The Board's cross-petition for enforcement is grant-

ed.

So ordered.