Deming Hospital Corp. v. National Labor Relations Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 21, 2011 Decided December 20, 2011

No. 11-1064

DEMING HOSPITAL CORPORATION, DOING BUSINESS AS

MIMBRES MEMORIAL HOSPITAL,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

Consolidated with 11-1095

On Petition for Review and Cross-Application for

Enforcement of an Order of the National Labor Relations

Board

Kaitlin Kaseta argued the cause for petitioner. On the

briefs was Bryan T. Carmody.

Milakshmi V. Rajapakse, Attorney, National Labor

Relations Board, argued the cause for respondent. With her

on the brief were John H. Ferguson, Associate General

Counsel, Linda Dreeben, Deputy Associate General Counsel,

and Robert J. Englehart, Supervisory Attorney. Julie B.

Broido, Supervisory Attorney, entered an appearance.

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Before: BROWN and GRIFFITH, Circuit Judges, and

EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge: Deming Hospital Corporation

operates Mimbres Memorial Hospital (the “Hospital”) in New

Mexico. In 2004, the National Labor Relations Board found

the Hospital had acted unlawfully by unilaterally reducing the

hours of its full-time respiratory department employees from

40 per week to between 32 and 36 per week. The Board

ordered the Hospital to rescind the hours reduction, bargain

with the labor union representing the affected employees (the

“Union”), and “make whole any employee for any loss of

earnings and other benefits suffered.” Cmty. Health Servs.,

Inc., 342 N.L.R.B. 398, 404 (2004) (the “2004 Order”). The

Tenth Circuit enforced the 2004 Order in full. NLRB v. Cmty.

Health Servs., Inc., 483 F.3d 683, 684 (10th Cir. 2007).

An administrative law judge subsequently determined the

Hospital owed 13 current and former employees roughly

$105,000 in backpay to compensate them for the unlawful

hours reduction. In reaching this conclusion, the ALJ held,

among other things, that the backpay due each employee

should not be reduced by any interim earnings the employees

may have made from other employment during the backpay

period; that employees hired after the unlawful hours

reduction were entitled to a remedy under the 2004 Order; and

that the Hospital’s backpay liability should not be tolled as of

the date when it attempted to bargain with the Union, or when

the Union assertedly waived bargaining by failing to respond.

In 2011, the Board adopted the ALJ’s findings without

elaboration and ordered the Hospital to pay up. Cmty. Health

Servs., Inc., 356 N.L.R.B. No. 103 (2011) (the “2011 Order”).

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The Hospital now petitions for review of the 2011 Order,

while the Board cross-applies for enforcement. We grant in

part the Board’s cross-application for enforcement with

respect to all issues except the matter relating to interim

earnings. The Board did not err in applying a backpay

remedy to those employees hired into the bargaining unit after

the Hospital unlawfully reduced the employees’ hours; and

the Board correctly held the Union’s failure to communicate

with the Hospital did not toll the employer’s liability, because

the Hospital had not rescinded the unlawful unilateral

reduction in hours when it sought to negotiate with the Union.

However, the Board did not adequately explain its failure to

consider interim earnings when calculating the backpay

award. Therefore, we vacate the Board’s backpay

computation and remand the case so the Board may amplify

its position on interim earnings.

I

The narrow question before us is whether the Board

calculated backpay in the 2011 Order in accordance with the

2004 Order and relevant precedents. The Hospital contends

the answer is no because the Board erroneously: (1) deemed

interim earnings irrelevant to the backpay calculation; (2)

awarded backpay to employees hired after the unlawful hours

reduction; and (3) found the backpay period had not been

tolled by the Hospital’s unreciprocated efforts to bargain with

the Union. We address those arguments in turn.

A

The 2004 Order directs the Board to calculate backpay

“as prescribed in Ogle Protection Service, 183 NLRB 682

(1970).” Cmty. Health Servs., Inc., 342 N.L.R.B. at 404. In

the 2011 Order, the Board found Ogle barred its normal

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practice of reducing a backpay award to account for “interim

earnings”—amounts affected employees made from other

jobs during the backpay period. See Cmty. Health Servs., 356

N.L.R.B. No. 103, at *16. The Board’s explanation for that

ruling is a non sequitur.

First, a bit of history. Before 1950, the Board calculated

backpay by subtracting what an employee actually earned

during the entire backpay period from what she would have

earned during that period had the unlawful action not

occurred. See Bufco Corp. v. NLRB, 147 F.3d 964, 970 (D.C.

Cir. 1998). The Board came to realize, however, that

computing backpay in that manner encouraged employers to

delay reinstating wrongfully terminated employees: if the

employer waited long enough, the employee could start

earning more at her new job than she would have earned at

her old job, decreasing the employer’s total backpay liability.

See id. To eliminate this perverse incentive, the Board

announced a new approach in F.W. Woolworth, 90 N.L.R.B.

289 (1950), under which it subtracted what an employee

actually made from what she would have made on a quarterly

basis, with the condition that “[e]arnings in one particular

quarter . . . ha[d] no effect upon the back-pay liability for any

other quarter.” Id. at 293. Thanks to the Woolworth

approach, an employer no longer benefitted if a wrongfully

terminated employee eventually started making more money

at her new job than she would have made at her old job—

those additional earnings did not offset what the employer

owed in backpay for any previous quarters.

In Ogle, the Board carved out an exception to the

Woolworth approach. Quarterly computation of backpay was

deemed “unnecessary and unwarranted” when backpay

liability “result[ed] from [an employer’s] repudiation and

failure to apply the terms of a collective-bargaining

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agreement, a violation of the [National Labor Relations] Act

which does not involve cessation of employment status or

interim earnings that would in the course of time reduce

backpay.” 183 N.L.R.B. at 683. The Board appeared to

assume that an employee who had not been terminated would

not seek another job (and thus would not generate interim

earnings). And if the employee did not generate any interim

earnings, an employer would have no incentive to delay

taking corrective action.

We have noted that Woolworth and Ogle, taken together,

establish a clear framework for the calculation of backpay

awards: “In the event unit employees were laid off or

terminated [Woolworth applies]. . . . In the event that unit

employees . . . were neither laid off nor terminated [Ogle

applies].” Bufco, 147 F.3d at 970. Here, the Board followed

that framework in the 2004 Order by ordering backpay

calculated in accordance with Ogle. But in the subsequent

proceeding to calculate backpay, the Hospital submitted an

offer of proof that—contrary to the Board’s assumption in

Ogle—two of the affected employees had in fact taken on

additional work at other hospitals to offset the unlawful hours

reduction. As a result, the Board had to decide how to

calculate backpay under Ogle when affected employees had

generated interim earnings.

In the 2011 Order, the Board chose to ignore interim

earnings. It based its decision on the “clear language” of

Ogle, and its concern that accounting for interim earnings

“would have the effect of imposing a duty on employee

victims . . . to moonlight in order to minimize the impact of

the unlawful conduct for the benefit of the wrongdoer.”

Cmty. Health Servs., 356 N.L.R.B. No. 103, at *16. Neither

rationale withstands our scrutiny.

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The “clear language” of Ogle does not address the current

situation. Ogle simply states that if the employer’s unlawful

action “does not involve . . . interim earnings,” then the Board

should not calculate backpay on a quarterly basis. 183

N.L.R.B. at 683. Ogle does not state the converse

proposition—that if the Board cannot calculate backpay on a

quarterly basis, then it should not consider interim earnings—

and the Board’s inference of that proposition from Ogle is a

logical fallacy. See Nat’l Treasury Emp. Union v. United

States, 101 F.3d 1423, 1428 n.1 (D.C. Cir. 1996) (noting the

converse of a proposition is not necessarily true).

Nor are we swayed by the Board’s fear of imposing a

“duty to moonlight.” The Board’s position seems to conflate,

and thus confuse, an employee’s duty to mitigate with rules

governing when backpay should be reduced by interim

earnings. Employees who have been unlawfully discharged

or laid off from their jobs have a duty to mitigate. See NLRB

v. Madison Courier, Inc., 472 F.2d 1307, 1323 (D.C. Cir.

1972) (noting that an employee who has been “improperly

deprived” of his position must at least make reasonable efforts

to find new employment which is substantially equivalent to

the position he has lost). Victims of unfair labor practices

who have not lost their jobs have no such duty. See 88

Transit Lines, Inc., 314 N.L.R.B. 324, 325 (1994) (holding

the duty to mitigate “makes sense only with respect to

employees who have been unlawfully discharged”), enforced,

55 F.3d 823 (3d Cir. 1995). Neither the Board nor the

Hospital suggest otherwise. But even when there is no duty to

mitigate, the Board might in some circumstances be obliged

to consider interim earnings to ensure that employees who did

choose to find other work do not receive windfalls. See

Grondorf, Field, Black & Co. v. NLRB, 107 F.3d 882, 888

(D.C. Cir. 1997) (remanding to allow employers to

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demonstrate how their contributions to a union benefit fund

had to be reduced to avoid improper windfall to the fund).

Moreover, the Board can consider interim earnings

without imposing a duty to seek additional employment.

Under that approach, a non-terminated employee who seeks

out interim earnings after an unlawful hours or wage

reduction would have his backpay award reduced by those

earnings, but would have the potential to earn more money

overall. Meanwhile, a non-terminated employee who chooses

not to seek interim earnings would receive his full backpay

award (because he had no duty to find additional work), but

would forego the potential to make even more money through

additional employment. Both outcomes are consonant with

the Board’s obligations “to ensure that its remedies are

compensatory and not punitive, and to guard against windfall

awards that bear no reasonable relation to the injury

sustained.” Oil Capitol Sheet Metal, Inc., 349 N.L.R.B. No.

118, at *8 (2007).

The Board’s concern about imposing a duty to mitigate is

also belied by its willingness to account for interim earnings

in other cases involving relatively small reductions in hours or

wages. The Board has ordered make-whole relief “less any

net interim earnings” when employees suffered an unlawful

30- to 45-cent decrease in hourly wages, Atlantis Health Care

Grp., 356 N.L.R.B. No. 26, at *1 (2010), and when they

suffered an unlawful reduction in work hours from 40 to 32

per week, Amerigas Propane L.P., 1997 WL 33315927 (Feb.

12, 1997). In neither case did the Board fret about imposing a

“duty to moonlight” on employees who had not been

terminated.

The Board now claims its refusal to consider interim

earnings is “consistent with well-established precedent,”

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Respondent’s Br. 19, and cites 88 Transit Lines, where it

chose not to consider interim earnings in a case “involving a

violation other than discharge from employment.” 314

N.L.R.B. at 325. But in its decision enforcing the Board’s

order in that case, the Third Circuit included the caveat that it

did “not read the [order] to mean that reduction for interim

earnings is never appropriate in a nondischarge case,” and

limited its “holding to approval of the Board’s rejection of the

need to reduce backpay by interim earnings in this case,

where the employees continued to work for the same

company and there was no showing that they would not have

absorbed the hours stipulated to have been lost by the unfair

labor practice.” 88 Transit Lines, 55 F.3d at 827 n.2. That

narrow holding does not support the Board’s ruling here.

To be clear, we do not hold the Board must consider

interim earnings in this case. And because interim earnings

“are earnings from employment that is a substitute for

employment taken away as a result of unlawful conduct,” we

do not mean to suggest the Board should consider earnings

that did not stem from an employer’s unlawful labor practice.

88 Transit Lines, 314 N.LR.B. at 325. Our holding regarding

interim earnings is limited and simple: the Board’s

explanation for its refusal to consider interim earnings is

inadequate, therefore we remand for a more thorough analysis

of the issue. See Bufco, 147 F.3d at 971 (“vacat[ing] the

Board’s back pay computation and remand[ing] the case for

reconsideration and a more adequate explanation” when the

Board’s rationale for its decision was unpersuasive). Should

the Board choose to consider interim earnings on remand, we

also leave to it the task of deciding how to accommodate the

various commands of Ogle, Woolworth, and their progeny.

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B

The Hospital next claims the Board exceeded its

authority by awarding backpay to employees hired into the

respiratory department after the unlawful hours reduction took

effect. We disagree.

In the 2011 Order, the Board found the “standard

remedial action required in cases of this kind applies to

individuals employed in the affected unit until Respondent

rescinds its unlawful change and bargains with the Union

about any future changes.” Cmty. Health Servs., 356

N.L.R.B. No. 103, at *14. Because the Hospital still had not

rescinded the unlawful hours reduction, the “reimbursement

remedy continue[d] to apply to each subsequently-hired

employee.” Id.

The Hospital argues this case is akin to NLRB v.

Dodson’s Market, Inc., 553 F.2d 617 (9th Cir. 1977), and

Chauffeurs Local Union No. 171 v. NLRB, 425 F.2d 157 (4th

Cir. 1970), in which the courts rejected backpay for

subsequently hired employees. But those cases are

distinguishable. In Dodson’s Market, the employer

improperly reduced the work hours of two employees in

retaliation for their decision to sign union representation

cards. 553 F.2d at 618. The Ninth Circuit found the Board

erred in awarding backpay to a third employee, who was hired

for part-time work ten months after the retaliatory action,

because there was no evidence the employer offered the new

employee part-time employment instead of full-time

employment for reasons relating to the prior unlawful act. Id.

at 619–20. Similarly, in Local Union No. 171, a successor

company repudiated the collective bargaining agreement the

preceding company had in place with its employees. 425 F.2d

at 158. The Board found that conduct improper because

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employees were entitled to “some protection . . . from a

sudden change in the employment relationship.” Id. at 159.

Accordingly, the Fourth Circuit affirmed the denial of

backpay to employees hired after the takeover because they

had not experienced any “sudden change in the employment

relationship.” Id.

By contrast, the Hospital’s “permanent, department-wide

reduction in the hours of work each week” limited the work

(and pay) of those hired into the department after the

reduction took effect. Cmty. Health Servs., 356 N.L.R.B. No.

103, at *15. In that regard, this case more closely resembles

88 Transit Lines. There, the employer improperly reduced the

number of transit runs available to employees in a certain

department. 55 F.3d at 825. Because the employees hired

into that department after the unlawful schedule change

“suffered the same disadvantage of not being able to bid on

[the transit runs] as did the other unit employees,” 88 Transit

Lines, 314 N.L.R.B. at 325, the Third Circuit approved the

Board’s award of backpay to those subsequently hired

employees. 55 F.3d at 826. That logic applies here: because

the Hospital’s hours reduction denied newly hired employees

a full work schedule, those employees suffered a “loss of

earnings . . . as a result of [the Hospital’s] unlawful actions,”

and deserve backpay under the 2004 Order. Cmty. Health

Servs., 342 N.L.R.B. at 404.

C

During the administrative hearing, the Hospital submitted

an offer of proof claiming it had attempted to negotiate with

the Union about the unlawful hours reduction, but the Union

had failed to respond. The Hospital argued its backpay

liability should be tolled as of August 28, 2007, the date on

which it had “complied with its duty to bargain with the

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Union” through its unreciprocated attempts to negotiate.

Hospital’s Br. 28. The Board held the Union only had an

obligation to negotiate if the Hospital had “restored the status

quo ante.” Cmty. Health Servs., 356 N.L.R.B. No. 103, at *5.

The Board thus found that, because the Hospital had not

rescinded its unlawful action before it attempted to negotiate,

the Union had no duty to bargain. Id. The Hospital now

takes issue with the Board’s ruling, but we find the Board’s

reasoning to be sound.

Employers must rescind their unlawful actions before

attempting bargaining so they cannot “tak[e] advantage of

[their] wrongdoing to the detriment of the employees.” U.S.

Marine Corp. v. NLRB, 944 F.2d 1305, 1322 (7th Cir. 1991).

Employers cannot force unions to come to the bargaining

table in a position of weakness. That is why, “in cases

involving unlawful unilateral changes, the Board’s normal

remedy is to order restoration of the status quo ante as a

means to ensure meaningful bargaining,” a policy that “has

been approved by the Supreme Court.” Porta-King Bldg.

Sys., 310 N.L.R.B. 539, 539 (1993) (citing Fibreboard Paper

Prods. Corp. v. NLRB, 379 U.S. 203, 216 (1964)), enforced,

14 F.3d 1258 (8th Cir. 1994). Accordingly, an employer’s

attempt to negotiate without first rescinding the unlawful

action “does not toll . . . backpay liability.” Porta-King Bldg.

Sys., 310 N.L.R.B. at 540.

The Hospital asserts its situation is different because the

Union “has decided to eschew the entire collective bargaining

process,” and “backpay [should] not continue to run into

eternity.” Hospital’s Reply Br. 9–10. The Hospital has not

provided any evidence the Union has abandoned collective

bargaining. And even if the Union has done so, the Hospital

can simply rescind the hours reduction, and when its

subsequent attempts to negotiate with the Union fail, it can

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toll its backpay obligation by showing the bargaining process

has reached a “lawful impasse.” NLRB v. Cauthorne, 691

F.2d 1023, 1026 (D.C. Cir. 1982).

Finally, the Hospital cannot claim its backpay obligation

has been tolled because the Union has waived its right to

negotiate. The Board found such a waiver in American

Diamond Tool, Inc., 306 N.L.R.B. 570 (1992), but there, the

union had met with the employer shortly after the layoffs in

question, had not requested bargaining about that issue, and

had “expressly signaled its willingness to permit such conduct

in the future” by proposing a process for laying off additional

employees. Id. at 570–71. The Union’s conduct here does

not approach that level of acquiescence.

II

Because the Board did not adequately explain its refusal

to consider interim earnings when calculating the backpay

award, we grant the Hospital’s petition in relation to that

issue, grant the Board’s cross-application for enforcement in

all other respects, and remand for further consideration of the

interim earnings question.

So ordered.