The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 7, 2015 Decided December 11, 2015
No. 14-1021
MIKE-SELL'S POTATO CHIP COMPANY,
PETITIONER
v.
NATIONAL LABOR RELATIONS BOARD,
RESPONDENT
Consolidated with 14-1031
On Petition for Review and Cross-Application
for Enforcement of an Order of
the National Labor Relations Board
Jennifer R. Asbrock argued the cause for petitioner. With
her on the briefs was Eric S. Clark.
Micah P.S. Jost, Attorney, National Labor Relations Board,
argued the cause for respondent. With him on the brief were
Richard F. Griffin, Jr., General Counsel, John H. Ferguson,
Associate General Counsel, Linda Dreeben, Deputy Associate
General Counsel, and Elizabeth A. Heaney, Supervisory
Attorney.
2
Before: MILLETT, Circuit Judge, and SILBERMAN and
WILLIAMS, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
SILBERMAN.
SILBERMAN, Senior Circuit Judge: Mike-sell’s, a snack
food manufacturer and distributor, challenges an NLRB
determination that petitioner violated the NLRA (8(a)(5)) when
it unilaterally instituted terms and conditions of employment for
its employees represented by the Teamsters. Mike-sell’s claims
that it was entitled, under our precedent, to do so because
negotiations with the Union had reached an impasse. The
Board, however, adopted the ALJ’s determination that no
impasse existed. Although this is a close case – the Petitioner’s
predicament is unfortunate – we are obliged to affirm the Board
and deny the petition.
I.
Petitioner had fallen on economic hard times, losing almost
$5.5 million over four years, before the events in this case. Its
main competitor, Frito-Lay, was underselling the Company and
taking increasing market share. Frito-Lay, a much larger
company, had apparently lower operating costs in part because
it produced its own inputs. Petitioner, on the other hand, was
obliged to purchase commodities on the open market.
The Company employs three groups of unionized
employees. Its warehouse workers package the Company’s
manufactured products for distribution. Its over-the-road drivers
deliver product from the warehouse to regional distribution
centers and warehouses. And last, its route sales drivers deliver
the product to local retailers, collect payments, and, importantly,
3
work to increase sales at the retail locations on their routes.
While technically the Union is broken into two bargaining units
– one for warehouse workers and one for drivers – negotiations
have proceeded in the past, and continued as such in this case,
separately for each of the three groups. Yet negotiations were
coordinated. Although a separate collective bargaining
agreement, running from October 26, 2008, to October 26,
2012, covered only the warehouse workers, an agreement
covering both groups of drivers was almost co-extensive,
running from November 17, 2008 to the same day in 2012.
Negotiations for new agreements started in the late summer
of 2012. The Company, which showed the Union its books,
sought from the beginning to lower costs by reducing its
obligations in wages, pension and health care. The Union
wished to maintain existing pensions and health benefits and
restore wage cuts it had given up in prior negotiations. By the
middle of November, the parties had reached agreement for the
warehouse workers and over-the-road drivers on nearly all
matters, including wages but not pensions and health benefits.
It was agreed that those subjects would be resolved in the crucial
route sales drivers negotiation.
Those negotiations were more complicated because, on top
of the pension and health dispute, the parties also focused on
direct compensation, the mix between commissions and fixed
amounts. The Company proposed a change to the commission
structure. The existing commissions were based on “gross
sales,” which does not reflect the amount Mike-sell’s actually
receives. The Company wished to substitute “net sales,” which
more accurately represents the Company’s actual revenue. The
Company also sought a reduction in commission rates. The
Union wanted, by contrast, to preserve the existing commission
structure and increase the rates.
4
The Company, seeking to avoid locking in its health care
obligation, proposed that it be entitled to review it after only a
year. It explained that the new Affordable Care Act could have
unforeseen consequences. To further reduce its health costs, it
proposed to cut off health care for retirees. As to pensions, the
Company sought a reduction in its contribution, with employees
picking up part of the costs. It later proposed that, at a
minimum, its contribution rate be frozen.
Illustrating its financial squeeze, on October 10 the
Company notified the Union it was selling routes and
distribution centers in Ohio to independent operators (who
would continue to service Mike-sell’s). That caused the layoff
of some thirty employees. Severance packages for the laid-off
employees were agreed to two weeks later, as well as some other
minor matters, but the Union rejected the Company’s suggestion
of a federal mediator to deal with the core issues of pensions,
health benefits and commissions. Instead, the Union suggested
the Company switch its health care provider to Central States.
The critical bargaining session took place November 14,
three days before the expiration of the agreement. On that
occasion, fatefully, for the first time, the Union was represented
by counsel but the Company was not. The Union started out by
seeking an extension of the contract. The Company responded
it could not afford the contract terms, but did suggest a one-year
extension if there was a modification of the commission
structure in return for a slightly higher commission rate and a
freeze of its pension contributions. The Union rejected that
proposal and the parties continued to negotiate. Later in the day,
the Union, for the first time, indicated a willingness to accept the
Company’s preferred commission structure (“net sales”), but it
sought an increase in commission rates. The Company
countered with a proposal that moved slightly towards the
5
Union’s position. The Union then agreed to an increase in
employee contributions to the health plan, but its position still
included a shift to the Central States health plan.
At 8:00 pm, without agreement on the major issues,1 the
Company suggested a further meeting two days later on
November 16 – a day before the expiration of the agreement.
The Company stated that it did not intend to extend the
agreement. The Union indicated its representatives were not
available on the 16th, but it would be in touch to propose further
days. (The parties did meet on the 15th to discuss the warehouse
workers’ contract.)
On November 16, the Company delivered the following
letter to the Union (dated the day before):
This letter will confirm our conversation of yesterday
in which the Company asked to meet with your Union
and your Union Committee with regard to our Labor
Agreement for the Sales/Over-the-Road group, which
is due to expire on November 17, 2012. Since you
indicated that you would not be available to meet either
today or tomorrow, I wish to inform you that our last
proposal to you, which was made on Wednesday,
November 14, 2012...is the Company’s full and final
offer. We have also attached a full and Final Offer for
1
Petitioner claims it asked the Union to submit its position to the
membership for a vote – which the Union declined. But the Union
representative did not recall such a conversation and the ALJ did not
make a finding on the issue. Of course, a company is not entitled to
insist on such a vote. See NLRB v. Wooster Div. of Borg-Warner
Corp., 356 U.S. 342 (1958).
6
the Warehouse group. We would request that you take
these Final Offers to a vote of the Union membership
before the Labor Agreement expires.
The Company and Union representatives spoke briefly as
the letter was delivered. The Union representative said it was
only scheduling conflicts preventing a meeting prior to the
expiration of the contract on November 17. On the 18th, the
Company sent the Union another letter, declaring an impasse
and stating it would unilaterally implement its last offer, which
it did the next day. The Union, for its part, insisted that the
parties were not at impasse. The Company and Union continued
to negotiate in the months following the unilateral
implementation, but never reached agreement.
***
The ALJ’s opinion, largely adopted by the Board,
concluded that no impasse existed prior to Petitioner’s unilateral
imposition of its terms. He emphasized that the parties reached
some agreements and that they went back and forth on pensions,
health benefits, and route sales drivers’ commissions – most
notably on November 14. The Petitioner, according to the ALJ,
did not indicate at that time that it had made a final offer, still
less that an impasse had been reached and both parties were
open to scheduling further negotiating sessions. Therefore, the
declaration of impasse expressed on November 18 (following
the “final” offer on the 16th) came abruptly, seemingly
inconsistent with the tenor of the negotiations on the 14th.
The ALJ cited previous Board decisions holding that “an
employer’s declaration of impasse is not valid when it is
motivated by an employer’s determination to implement cuts
immediately upon the expiration of the contract,” Newcor Bay
7
City Division of Newcor, Inc., 345 N.L.R.B 1229, 1240 (2005).
The Board indicated that it did not rely on that conclusion.2 Nor
did the Board base its approval of the ALJ’s decision on his
discussion of negotiations that took place after the alleged
impasse.
The ALJ further emphasized that the Union had made
concessions and that “where a party has already made
significant concessions indicating a willingness to compromise
further,” previous cases hold it would be “both erroneous as a
matter of law and unwise as a matter of policy for the Board to
find impasse merely because the party [that made concessions]
is unwilling to capitulate immediately and settle on the other
party’s unchanged terms.” Grinnell Fire Protection Systems Co.,
328 N.L.R.B. 585, 586 (1999).
II.
Petitioner asserts that the Board’s finding that no impasse
existed at the time it instituted its “final offer” lacked substantial
evidence. It is argued that the ALJ focused on progress on
peripheral matters and ignored the parties’ positions on the key
issues of pension, health benefits and commissions (for route
sales drivers). The ALJ also, according to Petitioner, improperly
considered post-impasse bargaining as a factor in determining
that no impasse existed. Petitioner reiterates the defense made
before the ALJ (and Board) that the Union had engaged in
dilatory bargaining tactics in an effort to avoid an impasse.
2
If an employer unilaterally imposed terms after a contract
expired “irrespective of the state of negotiations,” that would be an
obvious violation of 8(a)(5). See CBC Industries, Inc., 311 N.L.R.B.
123, 127 (1993).
8
Finally, Petitioner offers a fallback position; even if no impasse
existed prior to its institution of its last offer, an impasse was
created the next February.
We can easily dispose of the last three contentions.
Although it is clear that the Union wished to avoid an impasse,
we don’t think the ALJ’s determination that the Union did not
improperly delay bargaining sessions can be effectively
challenged. There were 12 total negotiation meetings and the
Union’s inability to meet on November 16 (the day before the
contract expired), by itself, can not be regarded as evidence of
a delaying tactic. After all, the Union indicated it would get
back to the Company with proposed dates. The Union does not
have to be available on two days’ notice, and as discussed
below, the expiration of the agreement does not have bargaining
significance.
Petitioner’s criticism of the ALJ’s reliance on bargaining
that took place after the Company put into effect its offer
puzzles us. The Board explicitly cordoned off the ALJ’s
discussion of that matter by deciding it did not rely on it when
adopting the ALJ’s recommended decision. Petitioner’s
criticism, therefore, is irrelevant. We have also considered the
Company’s fallback argument regarding an alleged impasse in
February, but we think it is insubstantial and therefore does not
merit discussion.
That leaves Petitioner’s main argument and that, we think,
is quite troubling – particularly in light of our precedent. See
TruServ Corp. v. NLRB, 254 F.3d 1105 (D.C. Cir. 2001); Laurel
Bay Health & Rehabilitation Center v. NLRB, 666 F.3d 1365
(D.C. Cir. 2012). On the other hand, the government’s response
– that the Board’s finding of no impasse is entitled to deference
because it relies on the Board’s expertise in evaluating the
9
parties’ bargaining tactics and intentions – is also a powerful
one.
To take a step back, the doctrine that an employer is entitled
to institute its last offer after impasse is an ancient one in labor
law. Its stated purpose is to accelerate negotiations. See
McClatchy Newspapers, Inc v. NLRB, 131 F.3d 1026, 1032
(D.C. Cir. 1997). But it should be obvious that it presents an
employer – at least one negotiating in good faith – with a
powerful weapon. Therefore, typically a Union will seek to
frustrate its use by attempting to avoid an impasse. See, e.g.,
Laurel Bay, 666 F.3d at 1375.3 This is analogous to another area
of labor law in which an employer is not obliged to bargain at all
– decisions concerning whether to discontinue a portion of its
business. See generally First National Maintenance Corp. v.
NLRB, 452 U.S. 666 (1981). There too, the Supreme Court
recognized that a union has every incentive to delay and impede
any accommodation. Id. at 683-84; see also Hawaii Meat
Company v. NLRB, 321 F.2d 397, 400 (9th Cir. 1963)
(recognizing a union incentive to delay bargaining over a
subcontract to replace strikers makes a bargaining requirement
inappropriate). Thus although it is often said by both the Board
and courts that an impasse exists when both parties believe
bargaining has reached a dead end, as we recently recognized in
TruServ, “[a] contemporaneous understanding as to impasse
does not...require the parties to reach mutual agreement as to the
state of negotiations.” TruServ, 254 F.3d at 1117 (quotations
3
One exception to that incentive may be where a union has signed
a “most favored nation” clause in other contracts which limits its
freedom of action in bargaining.
10
omitted).4 If the law were otherwise, an employer would
virtually never be entitled to implement a final offer. It would,
in effect, require the union’s consent.
Therefore, we recently held in TruServ and Laurel Bay that
if an employer maintains a firm position, and has made clear that
acceptance of its position on particular issues is essential to
agreement, a union’s last minute movement, short of agreement,
will not avoid an impasse. For that reason, we reject the ALJ’s
statement that the Union does not have to “capitulate” to the
Company’s position to rebut an impasse. That sounds like a
substantive evaluation of the parties’ positions which – it is
black letter law – the Board may not do. See NLRB v. American
National Insurance Co., 343 U.S. 395, 404 (1952).
Of course, an employer must have bargained in good faith
to be permitted to unilaterally institute its last offer after an
alleged impasse. But good faith bargaining simply means a
desire to reach an agreement. See United Steelworkers of
America, Local Union 14534 v. NLRB, 983 F.2d 240, 245 (D.C.
Cir. 1993). It does not mean that an employer is not entitled to
insist on certain terms. See Atrium of Princeton, LLC v. NLRB,
684 F.3d 1310, 1317 (D.C. Cir. 2012). Indeed, if an employer
is not firm – at least eventually – on certain terms, it would be
difficult to establish that an impasse exists.
4
In addition to the “contemporaneous understanding of the parties
as to the state of negotiations,” the Board considers factors such as
“the bargaining history, the good faith of the parties in negotiations,
the length of the negotiations, [and] the importance of the issue or
issues as to which there is disagreement” in evaluating whether an
impasse exists. TruServ, 254 F.3d at 1114 (quoting Taft Board Co.,
163 N.L.R.B. 475, 478 (1967)).
11
In the early days of collective bargaining, the typical case
of an employer’s claimed post-impasse institution of an
employer’s last offer involved an employer putting into effect an
increase in compensation, although not as much as would meet
the union’s demand. See, e.g., NLRB v. Katz, 369 U.S. 736
(1962). If an employer made a mistake – there was no actual
impasse – the Board’s remedy did not impose an economic
penalty, just an order to restore the status quo. In other words,
the downside risk of guessing wrong was not substantial. But
if an employer, such as Petitioner, facing financial difficulty
wishes relief from existing collective bargaining costs and
therefore puts into place significantly diminished compensation,
its risk is considerable because the Board, if it finds a violation
of 8(a)(5) (no impasse existed), will order extensive back
compensation, as it did in this case.
In that respect, an employer, facing a deadlock and planning
a post-impasse institution of its last offer, is entitled to an
understanding of clear legal principles that will govern its
behavior. The situation is analogous to an employer
contemplating discontinuing a portion of its business; in First
National Maintenance Corp., the Supreme Court emphasized
that employers deserve a degree of certainty in that situation.
See generally First National Maintenance, 452 U.S. at 675.
Such is the case here as well.
Our precedent closely read, although it recognizes the
Board’s expertise, does set forth certain principles that govern
at least our review of such cases. If an employer remains firm
in collective bargaining as to one or more essential issues and
12
credibly5 declares a last offer in the negotiations, a last offer that
is consistent with and follows logically from its negotiating
position, a union’s failure to agree creates an impasse. A union
official’s denial that an impasse exists, combined with a new
negotiating proposal that does not meet the employer’s position,
does not rebut an impasse. See TruServ, 254 F.3d at 1117;
Laurel Bay, 666 F.3d at 1375.
***
At the close of the bargaining on November 14, it would not
have been apparent to a neutral observer that the parties had run
into a brick wall. The Union, as we mentioned, armed with
counsel, seemed to acquiesce in the Company’s framework for
route sales drivers’ pay, which prompted the parties to go back
and forth on percentages for commissions. Turning to health
benefits, the Union suggested the possibility of a shift to Central
States, proposing that a representative come and present its
conditions. The Company negotiators (without counsel6) did not
reject that notion, and they never put forth a last offer nor
declared the parties were at impasse. Instead, two days later,
apparently prompted by the termination of the collective
5
See Serramonte Oldsmobile, Inc. v. NLRB, 86 F.3d 227, 233
(D.C. Cir. 1996); Chicago Typographical Union No. 16 v. Chicago
Sun-Times, Inc., 935 F.2d 1501, 1508 (7th Cir. 1991). Of course, if an
employer repeatedly claimed different positions as a “last offer,” it
would not be credible. See Teamsters Local Union No. 175 v. NLRB,
788 F.2d 27, 31 (D.C. Cir. 1986). And as we noted in TruServ, at
1115-16, an employer benefits if it carefully explains how to identify
its last offer.
6
Cf. Laurel Bay, 666 F.3d at 1368 (noting that the company was
represented by counsel throughout negotiations).
13
bargaining agreement, the Company, in writing, presented a
“last offer” and later abruptly declared an impasse.
Under those circumstances, we think the Board’s
determination that an impasse had not been reached is a
legitimate finding (a mixed question of fact and law). Petitioner
had not displayed the requisite firmness on the key issues in
negotiations, it had not made a last offer – a necessary if not a
sufficient condition – nor declared an impasse in the crucial
bargaining session.
Although the Board disavowed the ALJ’s reliance on
Petitioner’s supposed intent to institute “cuts” following
termination of the contract, without regard to the status of
collective bargaining, the timing of the Company’s abrupt
declaration of an impasse and institution of the last offer does
seem to be connected to the termination of the agreement. We
have the impression that the Company was under the mistaken
understanding that it was free to change the terms of
employment conditions once the contract expired. But the law
is clear that the terms and conditions of a collective bargaining
agreement continue (with exceptions not here relevant) until
either of the parties agrees to change the terms or an impasse is
reached. See Laborers Health & Welfare Trust Fund v.
Advanced Lightweight Concrete Co., Inc., 484 U.S. 539, 544 n.6
(1988). In any event, Petitioner did not carefully “touch the
bases” that we have held obliges the Board to recognize the
existence of an impasse thereby authorizing the institution of a
last offer.
***
For the above reasons, we deny the petition and grant the
Board’s cross-petition for enforcement.