Endicott Interconnect Technologies, Inc. v. National Labor Relations Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 5, 2006 Decided July 14, 2006

No. 05-1371

ENDICOTT INTERCONNECT TECHNOLOGIES, INC.,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

No. 05-1381

NATIONAL LABOR RELATIONS BOARD,

CROSS-PETITIONER

v.

ENDICOTT INTERCONNECT TECHNOLOGIES, INC.,

RESPONDENT

On Petition for Review and

Cross-Application for Enforcement

of an Order of the National Labor Relations Board

Raymond J. Pascucci argued the cause for Endicott

Interconnect Technologies, Inc.

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Christopher W. Young, Attorney, National Labor Relations

Board, argued the cause for the National Labor Relations Board.

Ronald E. Meisburg, General Counsel, John H. Ferguson,

Associate General Counsel, Aileen A. Armstrong, Deputy

Associate General Counsel, and Meredith L. Jason, Attorney,

National Labor Relations Board, were on brief. Daniel A. Blitz,

Attorney, National Labor Relations Board, entered an

appearance.

Before: HENDERSON, ROGERS and GRIFFITH, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

Concurring opinion filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Endicott

Interconnect Technologies (EIT) petitions for review of an order

of the National Labor Relations Board (NLRB or Board)

concluding that EIT violated section 8(a)(1) of the National

Labor Relations Act (NLRA or Act). See Endicott Interconnect

Techs., Inc., 345 N.L.R.B. No. 28 (Aug. 27, 2005) (NLRB Op.).

Section 8(a)(1) makes it an unfair labor practice “to interfere

with, restrain, or coerce employees in the exercise of the rights

guaranteed in [section 7 of the NLRA].” 29 U.S.C. § 158(a)(1).

Included among the employee rights enumerated in section 7 is

the right “to engage in . . . concerted activities for the purpose of

collective bargaining or other mutual aid or protection.” 29

U.S.C. § 157. The Board found that EIT violated section

8(a)(1) on two occasions: (1) when one of its owners threatened

to discharge employee Richard White for making a disparaging

remark to a newspaper reporter about the company’s loss of

technical expertise after a large lay-off and (2) when the owner

discharged White after he posted a message on the newspaper’s

website criticizing the owner’s managerial abilities. We

conclude that White’s communications were so disloyal to EIT

as to remove them from section 7’s protection and that the

Board erred in holding otherwise.

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I.

In 2002 EIT purchased a computer circuit board

manufacturing facility in Endicott, New York from International

Business Machines Corporation (IBM), which had been

contemplating “massive layoffs” at the plant.1 NLRB Op. at 1.

At the time of the purchase Alliance@IBM/Communications

Workers of America, Local 1701, AFL-CIO, (Local 1701) had

been trying unsuccessfully to organize the facility’s workers for

several years. Following the sale, IBM became the predominant

purchaser of EIT’s circuit boards, accounting for about sixty per

cent of its sales.

On November 15, 2002, two weeks after the sale was

completed, EIT permanently laid off 200 employees, about ten

per cent of its workforce. The same day, Local 1701 contacted

employee White, who was a union member, and requested that

he speak to a reporter for the Binghamton Press & Sun-Bulletin

in connection with an article about the lay-offs. On November

16, 2002, the newspaper published a story based in part on the

reporter’s interview with White. The article characterized White

as among those EIT employees who disagreed with

management’s lay-off decision because it would “hurt the

company over the long term.” NLRB Op. at 2. The article

reported White’s statements as follows:

“There’s gaping holes in this business,” said Rick White,

an employee with 28 years at the Endicott plant who,

with nearly 2,000 other people, recently transferred from

IBM to Endicott Interconnect. White, who kept his job,

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According to the Board, EIT’s motivation in acquiring the company

“was, in part, to protect the local economy from massive layoffs being

contemplated by IBM, and in part to take advantage of a potentially

profitable business investment.” NLRB Op. at 1. The State of New

York provided financial assistance for the acquisition “[i]n exchange

for [EIT’s] commitment to maintain jobs at the facility.” Id.

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said development and support people with specific

knowledge of unique processes were let go, leaving

voids in the critical knowledge base for the highly

technical business.

NLRB Op. at 2. The article also quoted James J. McNamara,

Jr., EIT’s president and chief executive officer, who defended

the reduction in force.

The day the article was published, William Maines, one of

EIT’s owners, received a telephone call from Thomas Calfield,

an IBM vice president responsible for procuring circuit boards.

Having read White’s statements in the newspaper article,

Calfield expressed concern over whether EIT had “gutted” its

engineering staff and as a consequence had “gaping holes.” Tr.

128; Joint App. (JA) 186. Maines assured Calfield that there

was no reason for concern.

On November 19, 2002 Maines met with White and

expressed displeasure over his comments in the newspaper

which, he said, “disparaged the Company in violation of the

company Handbook” and he “threatened to terminate White if

it happened again.” NLRB Op. at 2. White said he was “on

board” and it would not happen again. JA 79, 268.

On December 1, 2002 White posted a message on a website

that the Press & Sun-Bulletin maintained as a public forum for

comment on EIT’s acquisition of the plant. Responding to an

anti-union posting on the site, White wrote:

To Mr. House: Why do you continue to try to bundle

reasons why a union is suspect and not so desirable for

EIT employees? Why do you site [sic] all the bad things

about Unions, and ignore all the bad things that IBM and

EIT have done to the employees and their families and

the community at large? Isn’t it about time you

seriously thought about the fact that no one else will help

to stop the job losses, and root for the workers of the

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community instead of defending the likes of Bill Maines,

George Pataki, and Tom Libous? Hasn’t there been

enough divisiveness among the people working in this

area? Isn’t it about time we stood up for our jobs, our

homes, our families and our way of life here? Do you

want to sit by and watch this area go to hell and dissolve

into a welfare town for people over 70? This business is

being tanked by a group of people that have no good

ability to manage it. They will put it into the dirt just

like the companies of the past that were “saved” by Tom

Libous and George Pataki, i.e., “Telespectrum”, “IFT

(Flex)”. When are you going to get it??? A union is not

just a protection for the employees. It’s an organization

that collectively fights for improvements and benefits for

working people in communities like ours. Forget Jimmy

Hoffa and the mob. Those people and situations are

stereotypes of fools who chose to undermine the very

system they vowed to protect. They are the minority and

always have been. Look around. Do you think the

government will help you when you lose your job and

your house? Think again. A union is the beginning of

a community standing up for itself. It’s [sic] time is

now.

NLRB Op. at 2.

On December 19, 2002 Maines again met with White and,

after pointing out that White had “disparaged EIT again,”

discharged him, “consistent with Maines’ warning of November

19.” NLRB Op. at 2.

The NLRB General Counsel filed a complaint in April 2003

alleging the November 19, 2002 threat and the December 19,

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2002 discharge violated section 8(a)(1) and (3) of the NLRA.2

After a hearing on June 19, 2003 the administrative law judge

issued a decision in which he found EIT violated section 8(a)(1)

and ordered that EIT reinstate White.3 Endicott Interconnect

Techs., Inc., No. 3-CA-24105 (Aug. 7, 2003). EIT filed

exceptions to the decision with the NLRB.

In a two-to-one decision issued August 27, 2005 the Board

upheld the finding of violation under NLRB v. Electrical

Workers Local 1229 (Jefferson Standard), 346 U.S. 464 (1953),

in which the United States Supreme Court set out the standard

for determining whether an employee’s actions are protected

under section 7 of the Act. The Court there explained that when

an employee “attacks” his employer, whether or not he is

engaged in “a concerted activity wholly or partly within the

scope of those mentioned in § 7,” the attack will deprive the

employee of section 7’s protection if it constitutes

“insubordination, disobedience or disloyalty,” which, the Court

made clear, is “adequate cause for discharge.” 346 U.S. at 477-

78, 475. The Board found that White’s statements in both the

article and the web posting constituted “concerted activities”

protected under section 7 of the Act because they were related

to a “labor dispute”—in the former, to the 200-person lay-off

and in the latter, to both the lay-off and the ongoing union

organization drive. The Board further determined White’s

comments were “not so misleading, inaccurate, or reckless, or

otherwise outside the bounds of permissible speech, to cause

2

Section 8(a)(3) makes it an unfair labor practice “by discrimination

in regard to hire or tenure of employment or any term or condition of

employment to encourage or discourage membership in any labor

organization.” 29 U.S.C. § 158(a)(3).

3

The administrative law judge dismissed the 8(a)(3) allegation for

failure to establish anti-union animus.

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[him] to lose the Act’s protection.’ ”4 NLRB Op. at 5 (quoting

Titanium Metals Corp., 340 N.L.R.B. 766, 766 n.3 (2003),

review granted and enforcement denied on other ground, 392

F.3d 439 (D.C. Cir. 2004)) (alteration in original). EIT filed a

timely petition for review and the Board filed a cross-application

for enforcement.

II.

“We will affirm the judgment of the Board unless, ‘upon

reviewing the record as a whole, [this Court] conclude[s] that

the Board’s findings are not supported by substantial evidence,

or that the Board acted arbitrarily or otherwise erred in applying

established law to the facts of the case.’ ” Beverly Health &

Rehab. Servs., Inc. v. NLRB, 317 F.3d 316, 320 (D.C. Cir. 2003)

(quoting Tradesman Int’l, Inc. v. NLRB, 275 F.3d 1137, 1141

(D.C. Cir. 2002)) (alterations in original). For the reasons set

out below, we conclude the Board misapplied Jefferson

Standard and its progeny to the facts of this case and we

therefore set aside its decision.

In Jefferson Standard, the Supreme Court upheld the

Board’s determination that a television broadcaster in Charlotte,

North Carolina did not violate the Act when it discharged a

group of nine technicians who had distributed a handbill

criticizing the quality of the station’s programming and

suggesting the station considered Charlotte a “second-class”

city. 346 U.S. at 468. The Court found the handbill constituted

“a demonstration of such detrimental disloyalty as to provide

4

Dissenting Board Chairman Battista concluded that White’s

comments in the article and on the internet “were unprotected by the

Act because they failed to reference an ongoing labor dispute and

because they were disloyal to [EIT]” and that EIT “was, therefore,

fully within its rights to discipline White because of the November 16

article, and to discharge him for cause because of the December 1

posting.” NLRB Op. at 6-7 (Battista, Chairman, dissenting).

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‘cause’ for its refusal to continue in its employ the perpetrators

of the attack.” 346 U.S. at 472. The Court explained that,

although section 7 of the NLRA “safeguard[s] . . . the right of

employees to engage in ‘concerted activities for the purpose of

collective bargaining or other mutual aid or protection,’ ” id. at

473, it does not override the employer’s authority to discharge

“for cause” under section 10(c) of the Act, which expressly

provides: “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.” 29 U.S.C.

§ 160(c); see also George A. Hormel & Co. v. NLRB, 962 F.2d

1061, 1064 (D.C. Cir. 1992) (“Nothing in the Act prevents an

employer from disciplining or discharging an employee for

disloyalty . . . .”). The Court found it immaterial that the

technicians’ union was contemporaneously picketing the

company and distributing handbills related to a bona fide labor

dispute (the station’s refusal to renew a provision in the expired

collective bargaining agreement) because “[t]he fortuity of the

coexistence of a labor dispute affords . . . no substantial

defense.” 346 U.S. at 476; see id at 477-78. Thus, the bona fide

labor dispute notwithstanding, the station was justified in

discharging the nine technicians “because, at a critical time in

the initiation of the company’s television service, they

sponsored or distributed 5,000 handbills making a sharp, public,

disparaging attack upon the quality of the company’s product

and its business policies, in a manner reasonably calculated to

harm the company’s reputation and reduce its income.” Id. at

471.

Following Jefferson Standard, the Board has formulated its

own two-part test under which an employee’s communication to

a third party is deemed protected under section 7 if, first, it is

related to an ongoing labor dispute and, second, it is “not so

disloyal, reckless or maliciously untrue as to lose the Act’s

protection.” Am. Golf Corp., 330 N.L.R.B. 1238, 1240 (2000)

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(Mountain Shadows); see also Cincinnati Suburban Press, 289

N.L.R.B. 966, 967-968 (1988); Emarco, Inc., 284 N.L.R.B. 832,

833 (1987); Richboro Cmty. Mental Health Council, 242

N.L.R.B. 1267 (1979). Although the Board’s formulation

accurately reflects the holding in Jefferson Standard, we

conclude that in this case the Board misapplied the second part

of the test.5

The Board initially characterized the second prong of the

test correctly as requiring that the speech not be “so disloyal,

reckless or maliciously untrue as to lose the Act's protection,”

NLRB Op. at 3 (quoting Mountain Shadows, 330 N.L.R.B. at

1240). In examining White’s particular communications,

however, the Board seemingly ignored the very attribute that

justified discharging the technicians in Jefferson Standard for

cause: the “detrimental disloyalty” of their assault on their

employer. 346 U.S. at 472; see NLRB Op. at 5 (finding White’s

communications “not so misleading, inaccurate, or reckless, or

otherwise outside the bounds of permissible speech, to cause

[him] to lose the Act’s protection,’ ” with no mention of

disloyalty) (quoting Titanium Metals Corp., 340 N.L.R.B. at 766

n.3) (alteration in original). And White’s communications were

unquestionably detrimentally disloyal.

In the November 16, 2001 newspaper article, White,

identified as an employee of 28 years’ experience, stated there

were “gaping holes” in EIT’s business and that “development

and support people with specific knowledge of unique processes

were let go, leaving voids in the critical knowledge base for the

highly technical business.” NLRB Op. at 2. The damaging

5

It is therefore unnecessary to decide whether the Board properly

determined that White’s communications constituted protected activity

under the test’s first prong because his statements to the reporter were

related to the 200-employee lay-off and the internet posting was

related to both the lay-off and the ongoing union organization drive.

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effect of the disloyal statements, made by an experienced insider

at a time when EIT was struggling to get up and running under

new management, is obvious from the immediate reaction of

IBM’s vice president, who telephoned Maines concerned about

EIT’s continuing ability to supply IBM’s circuit board needs.

The critical nature and injurious effect of White’s newspaper

comments alone gave EIT “cause” to immediately discharge

him. Nonetheless, Maines gave a second chance to White, who

agreed not to repeat such behavior. Yet, two weeks later he did

just that when he posted his message on the internet and

caustically attacked EIT management—and William Maines, in

particular, alleging that he lacked “good ability to manage” EIT,

was causing the business to be “tanked” and was going to “put

it into the dirt.” NLRB Op. at 2. As in Jefferson Standard, the

communications here constituted “a sharp, public, disparaging

attack upon the quality of the company’s product and its

business policies” at a “critical time” for the company.

Jefferson Standard, 346 U.S. at 471. Thus, as in Jefferson

Standard, the disloyal, disparaging and injurious nature of

White’s attacks on the company “ha[s] deprived [him] of the

protection of that section, when read in the light and context of

the purpose of the Act.” Id. at 477-78. We therefore conclude

that EIT did not violate the Act when it discharged White for

cause. Accordingly, we grant EIT’s petition for review, deny

the Board’s cross-application for enforcement and vacate the

Board’s order.

So ordered

KAREN LECRAFT HENDERSON, Circuit Judge, concurring:

I concur in the majority opinion because I agree that

White’s statements were not protected under the second prong

of the Jefferson Standard test as iterated in the Board’s

decisions. I write separately to express my opinion that the

statements did not satisfy the test’s first prong which requires

that they relate to an ongoing labor dispute—an issue the

majority does not reach, see maj. op. at 9 n.5. As the dissenting

Board chairman observed, although both the article and the

posting included references to labor disputes, the specific

statements that precipitated EIT’s ultimate discharge of White

related not to any labor issue but to the capabilities of EIT and

its management. See NLRB Op. at 5-7 (Battista, Chairman,

dissenting). Thus, I do not believe that White’s communications

qualify for protection under section 7 in the first place.