Local 65-B, Graphic Communicat v. NLRB

In the

United States Court of Appeals

For the Seventh Circuit

No. 08-4045

L OCAL 65-B, G RAPHIC C OMMUNICATIONS C ONFERENCE

OF THE INTERNATIONAL B ROTHERHOOD OF T EAMSTERS,

Petitioner,

v.

N ATIONAL L ABOR R ELATIONS B OARD ,

Respondent,

and

Q UBECOR W ORLD M T. M ORRIS II, LLC,

Intervenor.

On Petition for Review of an Order of the

National Labor Relations Board

A RGUED M AY 28, 2009—D ECIDED JULY 10, 2009

Before B AUER, F LAUM, and K ANNE, Circuit Judges.

F LAUM, Circuit Judge. Local 65-B, Graphic Communica-

tions Conference of the International Brotherhood of

Teamsters, a collective bargaining representative for

2 No. 08-4045

some of the employees at a commercial printing plant

in Mt. Morris, Illinois, brought an unfair labor practices

charge against Quebecor World Mt. Morris II, LLC, the

plant’s owner. The union alleged that the plant’s manage-

ment had imposed a new employee disciplinary system,

and demoted one employee under that system, without

first negotiating that change in working conditions with

the union. The substance of that charge turns on the

validity of a management rights provision in the par-

ties’ previous collective bargaining agreement; if the

agreement with the management rights clause was ex-

tended (the company’s position) then management had

the authority to change certain working conditions with-

out negotiating with the union first. If the old collective

bargaining agreement was not extended but, instead,

had expired when the company put the new system in

place (the union’s position) then the management rights

clause was no longer in effect and, consequently, man-

agement could not have made any changes to working

conditions without negotiating first.

The validity of the management rights provision, in

turn, depends on whether the company and the union

agreed orally to extend the old collective bargaining

agreement during their negotiations. The Administrative

Law Judge assigned to the case initially concluded that

the parties had not agreed to extend the old agreement;

the National Labor Relations Board reversed that deter-

mination and dismissed a portion of the union’s com-

plaint. The union now petitions for review.

For the following reasons, we find that the Board’s

conclusion that the parties agreed to extend the

No. 08-4045 3

contract, including the management rights clause, is

supported by substantial evidence and we deny the

petition for review.

I. Background

Quebecor World Mt. Morris II, LLC (“the company”),

owns and operates a large commercial printing plant in

Mt. Morris, Illinois. Local 65-B of the Graphic Communica-

tions Conference of the International Brotherhood

of Teamsters (“the union”) is the bargaining representative

for 275 employees in the company’s finishing department,

and has been their representative since approximately

1918.

The last collective bargaining agreement that the com-

pany and the union entered into prior to the present

litigation expired on March 31, 2006. In March 2006,

consequently, various representatives from the company

and the union sat down to negotiate a new agreement

in a joint bargaining session sometime prior to March 31

(the exact date is unimportant, but the union says the

exchange took place on March 31, while the NLRB claims

that it could have happened on March 30). At any rate,

the company’s representatives brought up the idea of

setting forth a written extension of the current contract,

which would last until the parties had reached an agree-

ment on a new CBA. One of the union’s representatives,

Dave Strohecker, testified about that discussion in the

hearing before the ALJ (he offered the testimony when

examined by counsel for the union):

4 No. 08-4045

Q: Mr. Strohecker, with respect to the status of the

expired agreement were you present when there

was a discussion between Mr. Roberts [a union

negotiatior] and Mr. McCarthy [a company negotia-

tor]?

A: Yes, I was.

Q: And what was that discussion about?

A: About the expiration of the agreement.

Q: And what date—or when did that take place?

A: It was either the day before or the day of the expira-

tion.

Q: And in what context did it take place?

A: We were in a contract bargaining meeting.

Q: Okay. And Mr. Mc—

A: McCarthy.

Q: McCarthy. What did Mr. McCarthy say, and what

did Mr. Roberts say?

***

A: Mr. McCarthy asked if we were going to sign a

written extension. And—because he said that it

was their intention to work under our current agree-

ment. And Mr. Roberts said that we didn’t see any

need for a written extension. That it was our intention,

too, to just work under the current agreement. And

Mr. McCarthy said he was okay with that. That was

the extent of the conversation.

No. 08-4045 5

Ron Slade, an employee in the company’s human resources

department, also testified that the parties agreed orally

to extend the existing contract. Here is his testimony

from the hearing:

Q: Did he [Roberts] say to your recollection that the

parties would agree to—that the Union would agree

to work under the terms of the old contract?

A: Yes.

Q: Did he say anything more than that?

A: Tom, we’ve been negotiating for a long time.

I can’t—I can’t recall. There’s been a lot of things said.

But I confirmed honestly the conclusion.

At least at the time that the NLRB issued its opinion

below, the two sides had still not come to an agreement on

a new collective bargaining agreement. The old collective

bargaining agreement contained a number of terms,

including a management rights clause in Article IV of the

CBA, stating that:

Except as limited by the express provisions of this

Agreement, the Company shall have the exclusive

right to manage the plant and to direct the working

forces including, but not limited to, the right to

direct, plan and control plant operations; to assign

employees; to establish and change work schedules;

to hire, recall, transfer, promote, demote, suspend,

discipline or discharge for cause; to layoff employees

because of lack of work or other legitimate reasons;

to establish and apply reasonable standards of perfor-

mance and rules of conduct . . .

6 No. 08-4045

The central dispute in this case is whether or not that

clause remained in effect after the collective bargaining

agreement nominally expired on March 31, 2006. If the

parties orally agreed to extend the CBA, as the company

and the NLRB claim, then the CBA—together with all of

its ancillary clauses—remained in effect during the

course of the negotiations. The union contends, however,

that they did not agree to extend the CBA but were

simply stating their intention to work under certain

terms of the agreement that, under the NLRA, the em-

ployer could not change during the negotiation process.1

This difference matters because the company later took

disciplinary action against one employee, Robert Gigous,

and did so by means of a seemingly new procedure. On

September 7, 2006, two supervisors met with Gigous

and told him they were placing him on a “90 Shift Per-

formance Improvement Plan” for unsatisfactory per-

formance. The Administrative Law Judge found that

Gigous was the first bargaining unit employee subject

to “90 Shift Performance Improvement Plan.” Previously,

the company had addressed unsatisfactory performance

through a progressive discipline policy stepping up from

a verbal warning, a written warning, administrative

1

Under NLRB v. Katz, 369 U.S. 736 (1962), an employer’s

unilateral changes to certain bargaining subjects, such as

wages, hours, and working conditions, during the time of

negotiations can constitute an unfair labor practice. Id. at 747-48.

The union contends that its intention was simply to accept

this default position, and keep in place those terms from the

old CBA that, legally, the employer could not change.

No. 08-4045 7

suspension, actual suspension, and then, assuming none

of the above had worked, termination. The company

implemented the new performance improvement plan

without winning the union’s agreement to it in any of

the ongoing negotiation sessions.

The next day, Strohecker wrote to Slade objecting to

the plan, and requesting additional information about

it. The union then filed a step one grievance on Septem-

ber 11, 2006 and put the grievance in writing the next day.

The grievance did not proceed any further than that

because the company and the union never held a step

two grievance meeting. Gigous was subsequently

demoted, pursuant to the performance plan, on Feb-

ruary 26, 2007.

The union filed an unfair labor practices charge with

the NLRB on March 1, 2007 and amended the charge on

May 30, 2007. The parties held an evidentiary hearing

before an ALJ on September 17, 2007 and the ALJ issued

factual findings and a recommended order finding that

the company violated § 8(a)(5) and (1) of the NLRA by

unilaterally implementing the performance improve-

ment plan as a disciplinary measure and changing the

working conditions of employees, demoting Gigous

under the plan, and not providing the union with infor-

mation about the plan and Gigous’ demotion.

There are conflicting statements in the hearing transcript

about the theory of the case brought by the Board’s General

Counsel. At one point, in the opening statement, the

general counsel stated that, “The evidence will show

that they’ve agreed to work under the terms of the last

8 No. 08-4045

agreement.” The ALJ then asked, “Oral extension?” The

general counsel responded, “Yes.” Later, however, the

general counsel for the NLRB and the ALJ had an ex-

change which seems to demonstrate a different theory.

The general counsel stated that, “My understanding and

would think our evidence would be that the parties

have continued to work under the terms [of the expired

CBA], which I believe is somewhat different than an oral

extension.” The ALJ responded, “Oh, I understand that.”

Ultimately, with respect to the issue of the extension

of the then-existing collective bargaining agreement,

the ALJ found that,

Undisputed testimony establishes that, at a bargaining

session shortly before the expiration of the prior

agreement, Company spokesperson David McCarthy

asked if the Union was going to “sign a written exten-

sion.” Union spokesperson Phil Roberts replied that

he did not “see any need for a written extension,” that

it was the Union’s intention to continue to “work

under the current agreement.” McCarthy replied

that he was “okay with that.” There was no written

extension of the collective bargaining agreement.

A two-member panel of the NLRB later reversed the

ALJ’s finding that the company committed an unfair

labor practice by unilaterally implementing the perfor-

mance improvement plan. The Board found that while

the parties had not entered into a written extension of

the terms of the contract, they had agreed to an oral

extension in Roberts and McCarthy’s exchange during

the negotiating session. As the Board concluded:

No. 08-4045 9

On or about March 31, 2006, the date that the parties’

most recent collective-bargaining agreement was set

to expire, the chief negotiators for the Respondent

and the Union orally agreed, without qualification, to

extend the collective-bargaining agreement while

they negotiated a successor contract. It is undisputed

that at all relevant times in this case, the parties under-

stood that they were operating under the terms of

the expired contract, as extended.

Because the oral extension of the contract would have

extended the management rights clause, the company

was within its rights to implement the performance

improvement plan and demote Gigous. The union now

appeals from the NLRB’s decision.

II. Discussion

The issue before us in this appeal is whether substantial

evidence supports the Board’s determination that the

parties agreed to extend the previous collective

bargaining agreement, including the management rights

clause. We apply a deferential standard of review to

rulings from the NLRB. SCA Tissue North America LLC v.

NLRB, 371 F.3d 983, 987 (7th Cir. 2004). We review its

factual findings for substantial evidence and its legal

conclusions for a reasonable basis in law. Sears, Roebuck &

Co. v. NLRB, 349 F.3d 493, 502 (7th Cir. 2003). Substantial

evidence means “such relevant evidence as a reasonable

mind might accept as adequate to support the con-

clusion of the Board.” Huck Store Fixture Co. v. NLRB, 327

F.3d 528, 533 (7th Cir. 2003). Under the substantial evi-

10 No. 08-4045

dence test, a reviewing court may not “displace the

Board’s choice between two fairly conflicting views, even

though the court would justifiably have made a different

choice had the matter been before it de novo.” Universal

Camera v. NLRB, 340 U.S. 474, 488 (1951). However,

“When the Board purports to be engaged in simple

factfinding, unconstrained by substantive presumptions

or evidentiary rules of exclusion, it is not free to

prescribe what inferences from the evidence it will

accept and reject, but must draw all those inferences

that the evidence fairly demands. ‘Substantial evidence’

review exists precisely to ensure that the Board achieves

minimal compliance with this obligation, which is the

foundation of all honest and legitimate adjudication.”

Allentown Mack Sales and Service, Inc. v. NLRB, 522 U.S.

359, 378-79 (1998). The NLRB is of course free to

adopt findings of fact and conclusions of law different

from the ALJ’s conclusions, but its decision must still

conform with the substantial evidence standard. “[O]n

matters which the [ALJ], having heard the evidence

and seen the witnesses, is best qualified to decide, the

agency should be reluctant to disturb his findings

unless error is clearly shown.” Universal Camera, 340 U.S.

at 494. When we review the NLRB’s decision, “the

ALJ’s decision (including his findings of fact) is as

much a part of the record as the evidence put before

the ALJ, and we must consider the ALJ’s views in

deciding whether the Board’s order is supported by

substantial evidence.” Slusher v. NLRB, 432 F.3d 715, 727

(7th Cir. 2005).

The core question in this appeal is whether substantial

evidence supported the Board’s determination that the

No. 08-4045 11

parties orally agreed to extend the contract, along with

the crucial management rights clause. If the parties

did not agree to extend the contract past its expiration

date but instead only agreed to keep in place those

terms that the NLRA required them to keep in place

during the negotiations, then the company’s imposition

of a new disciplinary scheme was an unfair labor prac-

tice. The NLRB has previously determined that, “A con-

tractual reservation of managerial discretion . . . does not

survive expiration of the contract that contains it, absent

evidence that the parties intended it to survive.” In re

Guard Publishing Co., 339 NLRB 353, 355 (2003). If such

a clause is not in effect, then changes to working condi-

tions are mandatory bargaining subjects under § 8(d) of

the NLRA. The employer cannot make any changes to

those conditions without bargaining with the employees’

representative. See, e.g., Litton Financial Printing Div. v.

NLRB, 501 U.S. 190, 198 (1991).

The union claims that the Board, in concluding that the

parties agreed to extend the collective bargaining agree-

ment, reversed a credibility determination of the ALJ

and did so without analyzing the record to identify a

clear error on the part of the ALJ. The Board presents us

with the preliminary question of whether the union is

barred from making this argument because they did not

raise it before the Board. § 10(e) of the NLRA bars us

from considering arguments that the party petitioning

for review did not raise before the Board. The Board now

argues that the ALJ’s decision rejected the company’s

contention that the management rights clause remained

in effect because the ALJ found that the companies had not

12 No. 08-4045

entered into a formal, written extension of the contract.

The union should have sought review of that finding

and argued before them that the parties did not agree

orally to extend the CBA. As they failed to raise that

objection to the Board, according to this argument, it is

now waived.

The union contends that their position has always been

that the parties did not agree to extend the collective

bargaining agreement past March 31 and that the Board

was on notice about the arguments that they are now

making. We have ruled on similar jurisdictional claims

before, albeit not recently. § 10(e) and its implementing

regulations do require a party to file an exception to

any objectionable factual or legal determination of an

ALJ. See 29 C.F.R. § 102.46(b)(1). In Barton Brands, Ltd. v.

NLRB, 529 F.2d 793 (7th Cir. 1976), however, we held

that a party petitioning for reviewing of the NLRB’s

decision to reverse the ALJ need not always file an ex-

ception, since the factual findings of the ALJ were

before the Board and it is presumably the reversal of

those factual findings that the petitioner is now objecting

to. Id. at 801.

It is true that the union, if it wanted to cover all its

bases, might have argued that the ALJ should have

found that the parties not only did not enter into a

written agreement to extend the contract but did not

enter an oral agreement to do so, either. The ALJ did not

make an adverse finding to the union on that point,

however. They would have had no need to file an excep-

tion on that point. The Board also argues that the union

No. 08-4045 13

should have petitioned the Board for reconsideration

of its decision. We have held that a petition for recon-

sideration is not required under § 10(e), however. U.S.

Marine Corp. v. NLRB, 944 F.2d 1305, 1319 n. 17 (7th Cir.

1991).

We proceed, then, to the merits of the argument. The

union claims that the NLRB reversed a critical factual

finding of the ALJ and did so without finding further

support in the record. The union frames the ALJ’s

finding that, “[t]here was no written extension of the

collective bargaining agreement” as a credibility determi-

nation based on the testimony presented to the ALJ.

The union has good reasons for casting the ALJ’s deci-

sion as a credibility determination, as we have

previously said that “any of the ALJ’s findings that turn

on express or implied credibility determinations take

on particular significance on review.” Slusher, 432 F.3d at

727. However, a credibility determination is a decision

about whether or not to believe testimony in the first

place or which witness to believe when testimony con-

flicts. Id. (assessing motive requires credibility deter-

minations about witnesses); see also United States v. Wil-

liams, 553 F.3d 1073, 1080 (7th Cir. 2009) (discussing

credibility determination). But the difference between

the ALJ’s opinion and the Board’s opinion was not a

decision to credit different pieces of testimony. The ALJ

and the Board simply disagree about what conclusion to

14 No. 08-4045

draw from the same piece of testimony.2 The evidence

in the record about the extension of the contract is rather

thin; both sides cite the testimony of Dave Strohecker

as supporting their view of the case. The ALJ and the

Board both took that testimony at face value, they

simply reached different conclusions about what it meant.

Second, what testimony there is provides equal support

to both the Board’s and the ALJ’s view of the case.

Strohecker’s testimony was surprisingly ambiguous

about just what the parties agreed to. One could reach

the same conclusion as the ALJ, and decide that when

Roberts said he “didn’t see any need for a written exten-

sion” he was turning down the company’s offer to extend

the contract. Or one could use that same testimony to

support the Board’s determination that since he did not

see any need for a written extension and that it “was our

intention, too, to just work under the current agreement”

that the union was accepting the company’s proposal

and did not see the need to negotiate a formal written

extension of the old collective bargaining agreement.

(While Strohecker’s testimony was second-hand, his

2

The Board’s opinion cited Strohecker’s testimony in footnote

six of its opinion, in support of its finding that “On or about

March 31, 2006, the date that the parties’ most recent collective-

bargaining agreement was set to expire, the chief negotiators

for the Respondent and the Union orally agreed, without

qualification, to extend the collective-bargaining agreement

while they negotiated a successor contract.” The ALJ, of course,

cited the same piece of testimony when discussing the same

issue.

No. 08-4045 15

statement that it “was our intention, too” can reasonably

be viewed as endorsing the company’s basic proposal.)

This is a close question, but the Board’s conclusion is not

one that we can reverse under the substantial evidence

standard. Rather than being a credibility determina-

tion, this case turns on competing inferences. While

Strohecker’s testimony may give rise to several equally

valid interpretations, the NLRB’s is supported by the

record and is at the very least a rational conclusion

based on the testimony (even if the conclusion is not,

as they claimed in their opinion, undisputed).

The union objects that the NLRB should not have over-

turned the ALJ’s conclusions without citing further

evidence in the record. There is, however, additional

testimony in the record from Strohecker that the manage-

ment rights provision was in effect during the negotia-

tion period.3 That bolsters the Board’s conclusion that

3

The relevant testimony follows.

Q: (By Mr. Haman) And so then I take it the grievance

procedure and the management rights provision of Respon-

dent’s No. 1 has been in effect for all times covered by

the chart and the grievance?

A: Correct.

Counsel for the union objected that the question called for a

legal conclusion, although the ALJ disagreed. The question

was also compound, since it asks about the grievance

procedure and the management rights provision. But Strohecker

also said, in response to a similar question about the grievance

(continued...)

16 No. 08-4045

the parties agreed to extend the CBA. Moreover, the only

other witness to testify at the hearing, Ron Slade, also

claimed that the parties agreed to extend the CBA, al-

though his testimony was more conclusory than

Strohecker’s.

The union also raises two additional arguments for

reversing the Board’s decision. First, they claim that the

Board overruled, without explanation, two cases in

which it held that an agreement to work under certain

terms of a contract was not in itself an agreement to

extend the entire contract. In S.W. Motor Lines, Inc., 236

NLRB 938 (1978), the Board determined that, when there

was conflicting testimony about whether the parties

decided to extend a contract and the only written agree-

ment concerned the retroactive application of benefits,

there was no agreement to extend the contract but only

to extend certain terms of it. In Cardinal Operating

Company, 246 NLRB 279 (1979) the Board determined

that an employer’s statement that it intended to abide

by its obligations under an expiring collective

bargaining agreement was not an effective extension of

all of the terms of that agreement. The union contends

that this case is very much in line with those previous

two cases and that the NLRB has effectively overruled

them sub silentio.

3

(...continued)

procedure and management rights provision, “[w]ell, we’re

working under this agreement” referring to the old collective

bargaining agreement, which presumably would include

both provisions.

No. 08-4045 17

The Board first contends that the union has waived this

argument by not presenting it as an exception to the ALJ’s

finding or in a motion to reconsider, but the argument is

even weaker here than it was with respect to the first

argument. The union obviously had no way of knowing

that the Board would (in their view) overrule its

precedent prior to the final decision. The argument,

accordingly, does not appear to have been waived.

The cases cited by the union are distinguishable on their

facts. In both S.W. Motor Lines and Cardinal Operating

Company the Board determined that the parties had not

agreed to an extension of the collective bargaining agree-

ment. The present case, however, is not one where the

parties agreed to extend certain terms and not others

but rather one where they agreed to extend the entire

CBA. Insofar as those two cases appear to stand for a

different legal principle—namely that an agreement to

extend some terms of a collective bargaining agreement

is not an agreement to extend all the terms, and that

both parties must agree to an extension for it to be enforce-

able—the Board was not inconsistent with its

prior precedent, and its legal conclusion was reasonable.

The union finally argues that the Board’s decision is

inconsistent with the Supreme Court’s decision in Metro-

politan Edison Co. v. NLRB, 460 U.S. 693 (1984). In Metropoli-

tan Edison the Court held that a union’s waiver of its

statutory rights (including the right to bargain over

changes to working conditions) must be “explicitly stated”

and “clear and unmistakable.” Id. at 708. The union

argues that the waiver in this case was neither of those

18 No. 08-4045

things. Even if we were to accept the testimony before

the ALJ as evidence of an extension of the previous collec-

tive bargaining agreement, there was no discussion

about key contractual provisions (such as arbitration,

wages, hours, disciplinary action, etc.) and thus no

explicit waiver of the union’s statutory rights.

No one disputes that the management rights provision

of the previous contract was a valid waiver of the

union’s statutory rights, however. An agreement to

extend that prior collective bargaining agreement was a

clear and unmistakable waiver of those same rights, since

the union’s negotiators could be fairly charged with

knowledge of the prior agreement and the consequences

of extending that agreement. If the NLRB’s key fact

finding is correct, then, their decision is consistent with

Metropolitan Edison.

III. Conclusion

For the foregoing reasons, we D ISMISS the petition for

review.

7-10-09