Tri-State Health Service, Inc. v. National Labor Relations Board

United States Court of Appeals

Fifth Circuit

F I L E D

In the June 21, 2004

United States Court of Appeals Charles R. Fulbruge III

for the Fifth Circuit Clerk

_______________

No. 03-60498

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TRI-STATE HEALTH SERVICE, INC.,

DOING BUSINESS AS EDEN GARDENS NURSING HOME

Petitioner-Cross-Respondent,

VERSUS

NATIONAL LABOR RELATIONS BOARD,

Respondent-Cross-Petitioner,

_________________________

Petition for Review and Cross-Application for Enforcement

of an Order of the National Labor Relations Board

_________________________

Before GARWOOD, HIGGINBOTHAM, and enforcement. Agreeing with Tri-State that the

SMITH, Circuit Judges. decision violates Allentown Mack Sales &

Serv. Corp. v. NLRB, 522 U.S. 359 (1998),

JERRY E. SMITH, Circuit Judge: we grant the petition for review and deny the

cross-petition for enforcement.

Tri-State Health Service, Inc. (“Tri-State”),

seeks review of a decision of the National I.

Labor Relations Board (“NLRB” or “Board”) We consider whether Tri-State committed

finding that Tri-State lacked a good faith an unfair labor practice in violation of § 8(a)-

doubt in the continued majority status of a (1) and (5) of the National Labor Relations

union with which it refused to bargain. The Act (“NLRA”), 29 U.S.C. § 158(a)(1), (5),

Board pursues a cross-petition for when it refused to bargain with the incumbent

Service Employees International Union.1 Tri- same period, some union members began to

State is the owner and currently the operator, grow dissatisfied with the union’s repre-

of Eden Gardens Nursing Home. Though Tri- sentation.4

State has owned the facility since it opened in

1975, it has periodically leased it to other man- Circumstantial evidence of that develop-

agement firms. It was during one such period ment came in several different forms. For ex-

in 1996, with the nursing home under the ample, between early 1998 and the fall of

management of Woodard Health Services, Inc. 1999, the number of employees authorizing

(“Woodard”), that the union was certified as automatic deductions of their union dues

the bargaining representative for the home’s (known as dues checkoffs) fell from eleven to

unskilled labor.2 By the time a collective zero. None of the nursing home’s employees

bargaining agreement (“CBA”) was success- served as a union steward, and the sole

fully negotiated in October 1997, Woodard example of union activity consisted of the

had subleased operations to Camelot Health- posting of a flyer announcing the grievance

care, L.L.C. (“Camelot”).3 being pursued against Camelot.

Camelot’s tenure in charge of the nursing Anecdotal evidence paints a similar picture.

home was rocky, marked by an inability to pay Wanda Smith, a supervisor at the nursing

contractual wages, the union’s successful pur- home, overheard three nurse’s aides com-

suit of an unfair labor practice charge, and, plaining that their union dues had not earned

eventually, an inability to pay rent. During this them meaningful benefits.5 An assistant ad-

ministrator, Suzanne Price, similarly claims to

1

have been approached by four employees and

Section 8(a)(5) makes it an unfair labor prac-

tice for an employer “to refuse to bargain collec-

tively with the representatives of his employees.”

4

29 U.S.C. § 158(a)(5). Generally, any such viola- To the extent there is any causal connection

tion is also taken to be a violation of § 8(a)(1), between Camelot’s actions and the decline in union

which makes it an unfair labor practice for an em- support, the Board expressly disavows the notion

ployer “to interfere with, restrain, or coerce em- that Tri-State, as a successor entity, is thereby

ployees in the exercise of the rights guaranteed in disqualified from asserting it possesses a good faith

section 157 of this title.” 29 U.S.C. § 158(a)(1). doubt concerning the union’s continued majority

status. Cf. Raven Serv. Corp. v. NLRB, 315 F.3d

2

The bargaining unit was comprised of nurse’s 499, 506 (5th Cir. 2003) (requiring employer to

aides, and maintenance, laundry, housekeeping, show that the doubt arose “in a context free of

and food service workers. At all relevant times, unfair labor practices that could have reasonably

there were between thirty and forty workers in the tended to contribute to employee dissatisfaction

unit. with the union”). We therefore express no opinion

on that question.

3

The CBA was effective for only two years but

5

was renewable through an “evergreen clause” that The probative value of that assertion is lim-

required the parties to submit written notice of their ited, however, because Smith’s testimony was not

desire to terminate or amend the CBA. The introduced for the truth of those complaints, but

evidence suggests that the agreement was renewed only to establish the state of mind of Tri-State’s

in this fashion and therefore continued in force administrators when they subsequently refused to

through the fall of 2000. bargain with the union. Cf. FED. R. EVID. 801(c).

2

told that they wished to cancel their dues II.

checkoffs because they no longer wanted to be A.

represented by the union.6 We must uphold the Board’s finding that

Tri-State violated its duty to bargain if that

The present dispute arises from actions Tri- decision is supported by substantial evidence

State failed to take on its resumption of on the record as a whole. Fall River Dyeing

control of the nursing home in March 2000, & Finishing Corp. v. NLRB, 482 U.S. 27, 42

when Woodard’s lease expired. Tri-State (1987); 29 U.S.C. § 160(e). If a reasonable

chose not to inform the union of the change in jury could have reached the Board’s

management or to respond to the union’s conclusion, it must be upheld. Allentown

invitations to negotiate a new CBA. Mack Sales & Serv., Inc. v. NLRB, 522 U.S.

359, 366-67 (1998). Nevertheless, the Board

Tri-State later justified its refusal to bargain “is not free to prescribe what inferences from

on the ground that it possessed a genuine the evidence it will accept and reject, but must

doubt as to whether the union continued to draw all those inferences that the evidence

command the support of a majority of the bar- fairly demands.” Id. at 378.

gaining unit. The union responded by filing a

grievance with the Board. Following a hearing B.

before an administrative law judge (“ALJ”), it An employer is required to bargain with the

was determined that Tri-State was a successor representative of its employees, and its failure

to Camelot within the meaning of NLRB v. to do so constitutes an unfair labor practice.

Burns Int’l Sec. Serv., Inc., 406 U.S. 272 See NLRA § 8(a)(5), 29 U.S.C. § 158(a)(5).

(1972), and that Tri-State lacked sufficient That requirement, however, attaches only for

justification for refusing to bargain. so long as the union retains the support of a

majority of employees in the bargaining unit.

Accordingly, Tri-State was found to be in To that end, there is a conclusive presump-

violation of NLRA § 8(a)(1) and (5). In his tion that the union retains majority support for

ruling, the ALJ assigned probative weight only one year after its election as the representative

to Smith’s claim that she had heard three em- of a bargaining unit. Auciello Iron Works v.

ployees complain about the union. The ALJ NLRB, 517 U.S. 781, 786 (1996). The union

dismissed, for want of credibility, Price’s sim- also is entitled to a conclusive presumption of

ilar claim and found irrelevant the evidence of majority status during the pendency of a col-

declining dues checkoffs and low union lective-bargaining agreement, up to a

activity. The ALJ also rejected the notion that maximum of three years. Id.

Tri-State could rely on the union’s margin of

victory during the certification elections as an Thereafter, the union is entitled to only a

indicator of the union’s low level of support. rebuttable presumption of majority status.

The Board affirmed, taking only minor ex- NLRB v. Curtin Matheson Scientific, Inc., 494

ceptions to the ALJ’s reasoning. U.S. 775, 778 (1990). An employer may over-

come this latter presumption and refuse to bar-

gain if it shows either that the union did not

6

That evidence, too, was admitted only for pur- enjoy majority support within the relevant bar-

poses of establishing a state of mind, and the Board gaining unit, or that the employer had a

ultimately discredited it.

3

“‘good-faith’ doubt, founded on a sufficient by five pieces of evidence. Of these, the ALJ

objective basis, of the union’s majority and the Board credited only one and found it

support.” Id; see also Raven Serv. Corp., 315 insufficient, standing alone, to excuse Tri-

F.3d at 506.7 State’s refusal to bargain with the union.

To claim validly that it possesses a good The Board erred in refusing to credit two

faith doubt regarding the union’s majority stat- further items of evidence. Once these

us, an employer need not prove that it has a additional data points are factored into the

sincere belief that the union in fact lacks analysis, it is apparent that the Board’s finding

majority support. Allentown Mack, 522 U.S. of an unfair labor practice is not supported by

at 367. Rather, it must only substantiate un- substantial evidence.

certainty on that score. Id. It is therefore un-

reasonable for the Board to disregard evidence A.

that would tend to support the inference that The Board accepted the ALJ’s determina-

workers do not support the union, even if the tion that Smith’s testimony supports Tri-

same evidence is capable of supporting other, State’s claimed good faith doubt, and we

more neutral inferences. Id. at 369.8 agree. We also concur with the Board that

this evidence is insufficient, by itself, to create

III. a genuine good faith doubt about the union’s

Tri-State argues that its good faith doubt majority status. Although Smith’s testimony

about the union’s majority status is supported supports an inference that three employees

shifted their support away from the union, that

inference is countered by the fact that the un-

7 ion had been certified by a much larger margin.

Although the record suggests the CBA was in

As a result, the substance of Smith’s testimony

force and in only its third year when Tri-State re-

sumed control of the facility in March 2000, nei- would not cause a reasonable employer to

ther party argues that the union is thereby entitled question whether the union had lost its

to a conclusive presumption of its majority status. majority support.

We therefore assume that the presumption relevant

to this case is the rebuttable one. B.

The Board rejected Tri-State’s contention

8

In the wake of Allentown Mack, the Board that it could look to the decline in union dues

has adopted a more restrictive interpretation of the checkoffs as a barometer of the union’s

NLRASSone that it abjectly denied using in its ar- support. The Board explained:

guments to the Allentown Mack Court. See Levitz

Furniture Co., 333 NLRB No. 105, 2001 WL Employee cancellations of dues-checkoff

314139 (2001). Under the Board’s current

authorizations may be attributable to many

interpretation, an employer can justify a refusal to

bargain with an incumbent union only by showing

factors other than opposition to a union

that the union has in fact lost the support of a . . . . [E]mployees may prefer to pay their

majority of the bargaining unit. Id. at *11-*12. dues only at convenient times or in person,

The Board concedes, however, that this more re- or may even be ‘free riders’ who desire and

strictive standard does not apply to the current accept union representation without joining

case, which was pending when the Board decided the union and paying dues.

Levitz.

4

(Internal quotations omitted.) level of support the union enjoys.

Nevertheless, it is equally as reasonable for an

This is precisely the sort of reasoning re- employer to witness a decline in checkoffs and

jected in Allentown Mack, 522 U.S. at 369. infer that its current work force is less

There, the Court discussed the significance of supportive of the union than it was just a few

an employee’s statement that could have been years before, when eleven employees

interpreted as reflecting only a desire for better manifested support for the union by

union representation, but also could have been authorizing direct withdrawal of dues from

interpreted as reflecting a desire to abandon their paychecks.

the union. Id. The Board purported to re-

solve the ambiguity, concluding (as it did here We agree with the only court of appeals to

with the dues checkoffs) that the evidence was have considered the issue in the wake of Allen-

most reasonably interpreted in a manner that town Mack, that “[t]he natural inference is that

did not cast doubt on the union’s majority stat- the decline reflected a loss of union support,”

us. Id. Accordingly, the Board determined and that “[i]n some circumstances, and this is

that the evidence was not probative of the em- certainly one of them, membership and dues

ployer’s uncertainty. checkoff data ‘can unquestionably be probative

to some degree’ of [the employer’s] doubt.”

The Court reversed, reasoning that the ex- McDonald Partners, Inc. v. NLRB, 331 F.3d

istence of two possible interpretations of the 1002, 1007 (D.C. Cir. 2003) (quoting

evidence meant only that it could not establish Allentown Mack, 522 U.S. at 380).9 To that

the fact of a decline in majority status. Nev-

ertheless, “[t]he statement would assuredly en-

gender an uncertainty whether the speaker 9

In support of its claim that this evidence is

supported the union, and so could not be en- irrelevant, the Board relies on a number of

tirely ignored.” Id. Thus, in evaluating an em- decisions that pre-date Allentown Mack and stand

ployer’s claim of uncertainty, the Board is not for the proposition that a decline in dues check-offs

free to choose between two reasonable in- lacks probative value because it is susceptible to

terpretations of the evidence and prescribe the more than one interpretation. See, e.g., People’s

one that the employer should have adopted. Gas Sys., Inc. v. NLRB, 629 F.2d 35, 40 n.9 (D.C.

So long as the employer’s interpretation is rea- Cir. 1980) (averring that although a high level of

sonable, and the evidence so interpreted tends dues checkoffs indicates support for the union, the

to engender uncertainty as to whether the un- converse is not true); NLRB v. Wallkill Valley

ion still commands majority support, the evi- Gen. Hosp., 866 F.2d 632, 637 (3d Cir. 1989)

dence is probative and must be considered. (accepting Board’s conclusion that low number of

dues checkoffs is not probative of a decline in

union support). After Allentown Mack, such

The same principle governs our consid-

reasoning is faulty, for it overstates the Board’s

eration of the decline in dues checkoffs. The objective in assessing doubt. The existence of two

Board is, of course, correct to note that a de- possible interpretations is the very essence of

cline in checkoffs may be attributable to some uncertainty, not a rebuttal of it.

innocent explanation, and an employer

reasonably could conclude that such evidence Further, in Allentown Mack, 522 U.S. at 379,

does not engender any uncertainty about the the Court stressed that the issue of assessing good

(continued...)

5

end, it is inescapable that one of first things an union.10 In other words, the evidence tends to

employee would do, on resolving to leave the create some uncertainty, but on the facts of

union, is ask the employer to stop taking union this case it is nevertheless an insufficient basis

dues out of his paycheck. Although this might for Tri-State’s refusal to negotiate.

not be the only reasonSSor even the most

common reasonSSan employee asks to cease C.

participation in the checkoff program, it is The ALJ and the Board discredited the tes-

nonetheless a realistic possibility that can timony of Price, who claimed to have had con-

engender some degree of uncertainty in the versations with four employees who had ex-

mind of the employer. The board erred in pressed their dissatisfaction with the union and

disregarding this evidence altogether. requested cancellation of their dues checkoffs.

The ALJ apparently discredited Price solely on

In considering the weight accorded this evi- the ground that her memory of those

dence, however, we are mindful that some of conversations was insufficiently detailed to

the decline in dues checkoffs is the product of convince him that they took place. The Board

employee terminations. Indeed, according to deferred to the ALJ’s credibility assessment

an affidavit submitted by one of Tri-State’s su- and asks us to do the same.

pervisors, the final two employees enrolled in

the program had their checkoff authorizations Ordinarily, we defer to an ALJ’s finding

canceled unilaterally by Camelot in 1999. that turns on an evaluation of a witness’s cred-

ibility. Brown & Root, Inc. v. NLRB, 333 F.3d

At best, therefore, the evidence would lead 628, 635 (5th Cir. 2003). Nevertheless, no

a reasonable employer only to believe that un- deference is owed the ALJ or the Board in

ion supporters who lost their job were their interpretations of the law, J. Vallery

replaced by employees who did not manifest Elec., Inc. v. NLRB, 337 F.3d 446, 450 (5th

the same degree of outward support for the Cir. 2003), and the error here is a legal one.

In dismissing the probative impact of

Price’s testimony, the ALJ focused only on

9

(...continued) whether it was convincing evidence that the

faith doubt “is a matter of logic and sound conversations occurred sometime in 1998.

inference from all the circumstances, not an That is not the relevant inquiry. To the

arbitrary rule of disregard to be extracted from contrary, since it was neither Price nor the ALJ

prior board decisions.” When reason counsels that who formed the conclusion that Tri-State need

a category of evidence has a logical connection to not bargain with the union, it is ultimately ir-

the matter in dispute, it is not enough for the Board relevant whether the ALJ believed Price was

merely to string-cite a list of cases in which similar

evidence was found to have no bearing on a dispute

involving different parties and a different set of

10

operative facts. Rather, the Board is justified in The employer is not entitled automatically to

dismissing evidence outright only if it can show assume that all replacement workers oppose the

that it isSSas a matter of logic and union, Curtin Matheson., 494 U.S. at 778-79, but

reasonSSunhelpful to the position in support of it may rely on objective evidence tending to show

which it is proffered. The Board has not done that that this is the case, Allentown Mack, 522 U.S. at

here. 369-70.

6

telling the truth when she claimed to have one of good faith doubt than of strict liability.

heard four employees express a desire to aban- Any time an employer acted on an uncertainty

don the union. All that matters is whether the that was later resolved against it, it would be

ALJ had reason to believe that Tollie subject to a finding of an unfair labor practice

Bordeaux, the owner and President of Tri- merely because it lacked the prescience to an-

State ultimately responsible for the refusal to ticipate subsequent developments.

bargain, either did not believe, or should not

have believed Price’s claims when she related It would be a different matter altogether if

them to him. the evidence relied on was so lacking in indicia

of reliability that any reasonable employer

It is Bordeaux’s mind set, and the level of would doubt its veracity. We know that is not

doubt and uncertainty lingering therein, that is the case here, however, because the type of

of ultimate consequence. Indeed, the ALJ ad- evidence Tri-State relied on is nearly identical

mitted Price’s testimony over a hearsay to that the Court sanctioned in Allentown

objection only because it was offered to prove Mack. There, the Court required the Board to

not the truth of her assertions, but Bordeaux’s credit, as supporting a good faith doubt,

state of mind when he decided not to bargain. statements by individual employees claiming to

Accordingly, the ALJ based his credibility de- speak for a larger group of employees, even

termination on an irrelevant ground, and we do where the larger group’s views were not sub-

not defer to it. stantiated in any other form:

At oral argument, the Board conceded that Unsubstantiated assertions that other

the evidence shows Price communicated the employees do not support the union

substance of her testimony to Bordeaux before certainly do not establish the fact of that

he charted a course of refusing to negotiate. disfavor with the degree of reliability

Rather than contest that fact, the Board took ordinarily demanded in legal proceedings.

the untenable position that even if Price told But under the Board’s enunciated test . . .

Bordeaux that these conversations occurred, it is not the fact of disfavor that is at issue

and he acted in reliance on that representation, . . . but rather the existence of a reasonable

the ALJ was free to disregard the evidence if uncertainty on the part of the employer

Price’s assertions later proved to be untrue. regarding that fact. On that issue, absent

That is to say, even if Price genuinely some reason for the employer to know that

convinced Bordeaux that employees were [the declarant] had no basis for his

dissatisfied with the union, and he had no information, or that [the declarant] was

reason to doubt her veracity, he could rely on lying, reason demands that the statement be

that evidence only at his peril, because a given considerable weight.

subsequent showing that Price lacked

credibility worked to undermine his use of the Allentown Mack, 522 U.S. at 369-70. There

evidence, too. is nothing in the record even tending to show

that Bordeaux should have believed Price was

That position is unsound as both a logical lying to him. The Board therefore erred in

and a doctrinal matter. If adopted, the failing to consider this evidence.

position advanced by the Board would be less

7

Once Price’s testimony is factored into the

analysis, Tri-State’s showing of a good faith

doubt is more than sufficient to justify its re-

fusal to bargain with the union. This is

because Price’s testimony amplifies and

reinforces the inference that the decline in dues

checkoffs corresponds with a decline in union

support. Because Bordeaux was entitled to

draw a connection between the two events,

and to combine those two factors with Smith’s

claim that an additional three employees ex-

pressed their dissatisfaction with the union, he

had good cause to be uncertain whether the

union continued to have majority support.11

We therefore GRANT the petition for re-

view, VACATE the Board’s opinion,

DISMISS the charges against Tri-State, and

DENY the cross-petition for enforcement.

11

The Board also erred in ignoring altogether

evidence of the union’s margin of victory in the

most recent election. This court’s decision in

NLRB v. A.W. Thompson, Inc., 651 F.2d 1141,

1145 (5th Cir. Unit A Sept. 1981), does not stand

for the proposition that election results are

categorically irrelevant to an assessment of the

employer’s doubt, but only that such evidence has

no tendency to show a decline in union support fol-

lowing the election.

Even so, election results can give the employer

an indication of the extent to which union support

needs to erode before there is any uncertainty as to

whether it continues to possess majority support.

Surely the Board would not dispute that an

employer needs more substantial evidence of a de-

cline in support before it refuses to bargain with a

union that had recently been certified by a margin

of 99 to 1, than it does if the union only won by a

measure of 51 to 49. Substantial evidence does

support, however, the Board’s determination that

there was not a notable absence of union activity at

the plant.

8