E.I. Du Pont De Nemours & Co. v. National Labor Relations Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 19, 2011 Decided June 8, 2012

No. 10-1300

E.I. DU PONT DE NEMOURS AND COMPANY,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

UNITED STEEL, PAPER AND FORESTRY, RUBBER,

MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE

WORKERS INTERNATIONAL UNION,

INTERVENOR

Consolidated with 10-1301, 10-1353, 10-1355

On Petitions for Review and Cross-Applications for

Enforcement

of Orders of the National Labor Relations Board

Steven W. Suflas, argued the cause for petitioner. With

him on the briefs were Denise M. Keyser, Mark L. Keenan,

and Brennan W. Bolt. Donna D. Page entered an appearance.

MacKenzie Fillow, Attorney, National Labor Relations

Board, argued the cause for respondent. With her on the brief

2

were John H. Ferguson, Associate General Counsel, Linda

Dreeben, Deputy Associate General Counsel, and Robert J.

Englehart, Supervisory Attorney. Daniel A. Blitz, Attorney,

entered an appearance.

Matthew J. Ginsburg, argued the cause for intervenor.

On the brief were Richard J. Brean, Daniel M. Kovalik, and

James B. Coppess. Mariana L. Padias entered an appearance.

Before: GINSBURG, * Circuit Judge, and EDWARDS and

RANDOLPH, Senior Circuit Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

Opinion concurring in part and concurring in the

judgment filed by Senior Circuit Judge RANDOLPH.

GINSBURG, Circuit Judge: The National Labor

Relations Board held E.I. Du Pont de Nemours & Co.

engaged in an unfair labor practice by unilaterally

implementing changes to its employee benefits program while

it was between collective bargaining agreements with two

local unions. Because the Board departed, without giving a

reasoned justification, from its precedent allowing an

employer unilaterally to change wages, hours, or working

conditions when doing so is in keeping with the employer’s

past practice, we grant Du Pont’s petitions for review of the

Board’s order and deny the Board’s cross-applications for

enforcement.

*

As of the date the opinion was published, Judge Ginsburg

had taken senior status.

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I. Background

Du Pont offers its employees a package of benefits it

calls Beneflex, of which the Beneflex Medical component has

an open enrollment period each Autumn. The plan documents

for Beneflex and for Beneflex Medical contain the following

reservation of rights clause:

The Company reserves the sole right to change or

discontinue this Plan in its discretion provided,

however, that any change in price or level of coverage

shall be announced at the time of annual enrollment

and shall not be changed during a Plan Year unless

coverage provided by an independent, third-party

provider is significantly curtailed or decreased during

the Plan Year.

Du Pont has made changes to Beneflex at the time of

enrollment each year since at least 1996. Changes to the

program have included increases in the premiums for medical,

life, vision, and dental insurance, changes in coverage, and

the addition and elimination of plan options. These changes

to Beneflex applied to employees at all Du Pont facilities, to

union and non-union employees alike.

Du Pont had collective bargaining agreements (CBAs)

with the local unions at the Company’s production facilities in

Louisville, Kentucky and Edgemoor, Delaware. Each CBA

provided for employees to participate in Beneflex “subject to

all terms and conditions” of the plan. The Beneflex plan

documents, in turn, contained the reservation of rights clause.

Until the CBAs at the two locations expired in 2002 and 2004

respectively, Du Pont had made annual changes to Beneflex

without bargaining and without objection from the unions.

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When the CBAs expired, Du Pont and the unions were

negotiating successor labor contracts but had not reached an

agreement at either facility. Du Pont then implemented

changes to Beneflex in anticipation of the annual enrollment

period, as it had done in previous years.

The Board held Du Pont violated Sections 8(a)(1) and

8(a)(5) of the National Labor Relations Act by making

unilateral changes to Beneflex during ongoing negotiations

with the unions. It found Du Pont had never before made

changes to Beneflex between the expiration of one and the

negotiation of another CBA, and therefore had not established

a past practice justifying its unilateral changes to Beneflex

during such a hiatus. Du Pont petitioned for review of the

Order and the Board cross-applied for enforcement.

II. Analysis

We will uphold a decision of the Board unless it relied

upon findings that are not supported by substantial evidence,

failed to apply the proper legal standard, or departed from its

precedent without providing a reasoned justification for doing

so. S & F Mkt. St. Healthcare LLC v. NLRB, 570 F.3d 354,

358 (D.C. Cir. 2009). Section 8(a)(5) of the Act makes it an

unfair labor practice for an employer to “refuse to bargain

collectively with the representatives of his employees,” 29

U.S.C. § 158(a)(5). An “employer’s unilateral change in

conditions of employment under negotiation is ... a violation

of § 8(a)(5), for it is a circumvention of the duty to negotiate

which frustrates the objectives of § 8(a)(5) much as does a flat

refusal” to bargain. NLRB v. Katz, 369 U.S. 736, 743 (1962);

see Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 198

(1991) (“it is difficult to bargain if, during negotiations, an

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employer is free to alter the very terms and conditions that are

the subject of those negotiations”).

Under Katz, an employer unilaterally may implement

changes “in line with [its] long-standing practice” because

such changes amount to “a mere continuation of the status

quo.” 369 U.S. at 746; see Courier-Journal, 342 N.L.R.B.

1093, 1094 (2004) (“a unilateral change made pursuant to a

longstanding practice is essentially a continuation of the status

quo – not a violation of Section (a)(5)”). The purpose of

prohibiting unilateral changes is not advanced by freezing in

place the terms of employment when doing so disrupts the

established practice for making changes. For this reason, an

employer may lawfully change the terms of employment

pursuant to such an established practice. There are, however,

limits to the scope of the unilateral changes an employer may

lawfully make during negotiations. More specifically, the Act

does not permit a unilateral change “informed by a large

measure of discretion” because “[t]here simply is no way in

such [a] case ... to know whether or not there has been a

substantial departure from past practice.” Katz, 369 U.S. at

746.

The Board has previously approved extensive unilateral

changes to health care benefit programs during a hiatus

between CBAs when doing so was the established practice

and the changes were within an acceptable degree of

discretion. Thus, in Post-Tribune Co., the Board held it was

not unlawful for an employer unilaterally to increase

employees’ required contributions to health care premiums

because the employer “had a consistent, established past

practice of allocating health insurance premiums” between

itself and its employees at a fixed ratio. 337 N.L.R.B. 1279,

1280 (2002). In Courier-Journal, the Board again approved

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an increase in the health insurance premium to be paid by

employees together with “a number of more far-reaching

changes in the healthcare insurance benefits.” 342 N.L.R.B.

at 1093. There the expired CBA contained a clause providing

the employer “reserves the right to modify or terminate any

(or all) benefits ... at any time.” Id. at 1093. After the CBA

expired, the employer

changed the amount of employee contributions to

healthcare premiums; modified the framework for

determining employee contribution levels; switched

from an insurance ‘plan year’ starting on July 1 to a

plan year starting on January 1; introduced separate

vision and dental coverage plans; terminated the

bonuses paid to employees who chose to waive the

[employer’s] healthcare insurance; and substituted two

plans with [one insurer] for the plans the [employer]

had previously offered with [other insurers].

Id. at 1099. Under the Board’s precedent, therefore, even

making broad changes to a benefits package can qualify as “a

well-established past practice” that an employer may lawfully

continue during a hiatus period. Id. at 1094.

Du Pont first argues the unilateral changes it made to

Beneflex while negotiating with the unions were lawful

because they were in line with the Company’s established

practice. The Board responds that the Company’s practice

arose pursuant to a management rights clause in the expired

contracts, and therefore does not justify the unilateral changes

Du Pont made after the expiration of those contracts. Du Pont

also argues the changes were “covered by” the expired CBAs,

a position the Board rejects on the ground the “covered by

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contract” doctrine applies only if the contract is in effect when

the employer makes a change.

We hold Du Pont, by making unilateral changes to

Beneflex after the expiration of the CBAs, maintained the

status quo expressed in the Company’s past practice; those

changes were therefore lawful under Courier-Journal. While

the CBAs were in effect, Du Pont annually made unilateral

changes to the package of benefits offered under Beneflex,

including changes to the premiums the employees paid and to

the benefits they received. Du Pont made the unilateral

changes in dispute here after the CBAs had expired, but those

changes were similar in scope to those it had made in prior

years. Du Pont’s discretion in making those changes was

limited by the terms of the reservation of rights clause in the

Beneflex plan documents, which permitted changes during —

and only during — the annual enrollment period. Moreover,

here as in Courier-Journal, the employer was obligated under

its past practice to “treat the [union] employees exactly the

same as [the non-union] employees,” and so the employer’s

“discretion was limited” because it “did not have the freedom

to grant [non-union] employees a benefit and deny same to

[union] employees.” 342 N.L.R.B. at 1094. Under the

Board’s precedent, therefore, Du Pont’s making annual

changes to Beneflex became a term and condition of

employment the Company could lawfully continue during the

annual enrollment period, irrespective of whether negotiations

for successor contracts were then on-going.

The Board concluded Du Pont violated the Act because it

failed to show “relevant past practice under the Courier-

Journal cases - annual unilateral changes during hiatus

periods.” E.I. Du Pont De Nemours, Louisville Works, 355

N.L.R.B. No. 176, at 2 (Aug. 27, 2010). The Board

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distinguished Courier-Journal on the ground that the

employer there had “established a past practice of making

[health care premium] changes both during periods when the

contract was in effect and during hiatus periods” whereas Du

Pont has made uncontested unilateral changes to Beneflex

only while CBAs were in effect. Id. The Board emphasized

the importance of this “factual distinction” as follows:

Extending the Courier-Journal decisions to the

situation presented here would conflict with settled

law that a management-rights clause does not survive

the expiration of the contract ... and does not constitute

a term and condition of employment that the employer

must continue following contract expiration.

Id.

Be that as it may, whether a management-rights clause

survives the expiration of the contract is beside the point Du

Pont is making. The Board has previously recognized that the

lawfulness of a change in working conditions made after the

CBA has expired depends not upon “whether a contractual

waiver of the right to bargain survives the expiration of the

contract” but rather upon whether the change “is grounded in

past practice, and the continuance thereof.” Courier-Journal,

342 N.L.R.B. at 1095. The Sixth Circuit captured the point

precisely in Beverly Health and Rehabilitation Services, Inc.

v. NLRB, 297 F.3d 468, 481 (2002): “[I]t is the actual past

practice of unilateral activity under the management-rights

clause of the CBA, and not the existence of the management-

rights clause itself, that allows the employer's past practice of

unilateral change to survive the termination of the contract.”

A subsequent Board decision unambiguously incorporates

that teaching: “[T]he mere fact that the past practice was

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developed under a now-expired contract does not gainsay the

existence of the past practice.” Capitol Ford, 343 N.L.R.B.

1058, 1058 n.3 (2004). Therefore, although the employer

“cannot rely upon the management rights clause of that

contract to justify unilateral action,” the “past practice is not

dependent on the continued existence of the [expired]

collective-bargaining agreement.” Id.

Because an employer may make unilateral changes

insofar as doing so is but a continuation of its past practice,

we see no reason it should matter whether that past practice

first arose under a CBA that has since expired. Nor did the

Board in Capitol Ford, where it upheld as lawful the

employer’s unilateral changes to employee compensation and

paid holidays on the basis of an established practice even

though the employer (and its predecessor) had never before

made such changes when a CBA was not in force. 343

N.L.R.B. at 1058. The Board has not offered any reason

whatsoever for thinking a unilateral action being taken during

a hiatus period, although expressly deemed immaterial in

Capitol Ford, should be dispositive in this case. Indeed, the

Board did not so much as cite Capitol Ford or Beverly Health

& Rehabilitation Services, Inc., 346 N.L.R.B. 1319 (2006),

where the Board again said that “without regard to whether

the management-rights clause survived, the [employer] would

be privileged to have made the unilateral changes at issue if

[its] conduct was consistent with a pattern of frequent

exercise of its right to make unilateral changes during the

term of the contract,” id. at 319 n.5. Although the Board had

in several earlier cases held unilateral changes made pursuant

to a past practice developed under an expired management-

rights clause were unlawful, see Beverly Health & Rehab.

Servs., 335 N.L.R.B. 635, 636-37 (2001); Guard Publ’g Co.,

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339 N.L.R.B. 353, 355-56 (2003), the Board clearly took a

different position in its more recent decisions.

Accordingly, we hold the Board failed to give a reasoned

justification for departing from its precedent. On remand, the

Board must either conform to its precedent in Capitol Ford

and in the 2006 iteration of Beverly Health Services or explain

its return to the rule it followed in its earlier decisions. See

Manhattan Ctr. Studios, Inc. v. NLRB, 452 F.3d 813, 816

(D.C. Cir. 2010) (“If we conclude that the Board misapplied

or deviated from its precedent, we often remand with

instructions to remedy the misapplication [or] deviation”). *

III. Conclusion

For the reason set out above, Du Pont’s petitions for

review are granted and the Board’s cross-applications for

enforcement are denied. We remand the case to the Board for

further proceedings consistent with this opinion.

So ordered.

*

Because we grant the petitions for review on this ground, we

do not reach Du Pont’s alternative argument that the changes were

“covered by” the expired CBAs.

RANDOLPH, Senior Circuit Judge, concurring in part and

concurring in the judgment: When the National Labor Relations

Board deviates from precedent without “offer[ing] any reason

whatsoever for” doing so, Maj. Op. at 9, its action is “arbitrary

and capricious” under § 706(2) of the Administrative Procedure

Act, 5 U.S.C. § 706(2).1 In such cases, the APA instructs

reviewing courts to “hold unlawful and set aside” such “agency

action.” Id. (emphasis added). Despite this command, many of

our NLRB decisions simply remand to the Board for further

proceedings without requiring anything to be “set aside.” See,

e.g., Manhattan Ctr. Studios, Inc. v. NLRB, 452 F.3d 813, 821

(D.C. Cir. 2006) (per curiam); LeMoyne-Owen Coll. v. NLRB,

357 F.3d 55, 61 (D.C. Cir. 2004); Randell Warehouse, 252 F.3d

at 448-49; Brusco Tug & Barge Co. v. NLRB, 247 F.3d 273, 278

(D.C. Cir. 2001); Lee Lumber & Bldg. Material Corp. v. NLRB,

1

Although we did not decide whether the APA applies to

judicial review of Board orders in Diamond Walnut Growers, Inc. v.

NLRB, 113 F.3d 1259, 1266 (D.C. Cir. 1997) (en banc), later cases

make clear that it does. See, e.g., NLRB v. Ky. River Cmty. Care, Inc.,

532 U.S. 706, 712 (2001); Allentown Mack Sales & Serv., Inc. v.

NLRB, 522 U.S. 359, 374 (1998); Pirlott v. NLRB, 522 F.3d 423, 432

(D.C. Cir. 2008); W & M Props. of Conn., Inc. v. NLRB, 514 F.3d

1341, 1348 (D.C. Cir. 2008); Tasty Baking Co. v. NLRB, 254 F.3d

114, 123 (D.C. Cir. 2001); Randell Warehouse of Ariz., Inc. v. NLRB,

252 F.3d 445, 449 (D.C. Cir. 2001); Willamette Indus., Inc. v. NLRB,

144 F.3d 877, 880 (D.C. Cir. 1998); see also NLRB v. Curtin

Matheson Scientific, Inc., 494 U.S. 775, 803-04 (1990) (Scalia, J.,

dissenting). This makes sense given that the APA applies to final

agency actions “except to the extent that statutes preclude judicial

review, or agency action is committed to agency discretion by law.”

5 U.S.C. § 701(a)(1) & (2); see also ATTORNEY GENERAL’S MANUAL

ON THE ADMINISTRATIVE PROCEDURE ACT 9 (1947) (“The

Administrative Procedure Act applies, with certain exceptions [not

relevant here], to every agency and authority of the Government.”

(emphasis added)); id. at 15, 98 (indicating that the APA applies to

Board orders). There are no such limitations in the National Labor

Relations Act.

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117 F.3d 1454, 1460 (D.C. Cir. 1997) (per curiam); Gen.

Electric Co. v. NLRB, 117 F.3d 627, 636 (D.C. Cir. 1997).

It is easy to see why we remand: to give the Board another

chance to explain “apparent departures from precedent.” Gen.

Electric, 117 F.3d at 636. Less clear is why remand-only is a

proper disposition in view of § 706(2)’s command that the court

“set aside” the unlawful agency action. One explanation is that

the court simply has not given any particular thought to this

remedial wrinkle. There is some evidence to support this theory.

In other failure-to-explain cases, we have vacated the Board’s

order in addition to remanding. See, e.g., Trump Plaza Assocs.

v. NLRB, No. 10-1412, 2012 WL 1654939, at *3, 7 (D.C. Cir.

May 11, 2012); Nathan Katz Realty, LLC v. NLRB, 251 F.3d

981, 993 (D.C. Cir. 2001); Bufco Corp. v. NLRB, 147 F.3d 964,

971 (D.C. Cir. 1998); Teamsters Local Union Nos. 822 & 592

v. NLRB, 956 F.2d 317, 321 (D.C. Cir. 1992); see also Pirlott,

522 F.3d at 432. Yet there is no difference between these

decisions and those in which the court seems to order only a

remand. No opinion of our court has ever tried to reconcile the

two lines of cases or even recognized the split.

I explained in Comcast Corp. v. FCC, 579 F.3d 1, 10 (D.C.

Cir. 2009) (Randolph, J., concurring), and Checkosky v. SEC, 23

F.3d 452, 491 (D.C. Cir. 1994) (separate opinion of Randolph,

J.), why courts holding an administrative rule or order unlawful

must vacate the offending agency action in light of APA §

706(2). But orders of the National Labor Relations Board are

somewhat unique. Unlike the orders of other administrative

agencies, Board orders are not self-executing. “A party can . .

. violate the order with impunity. To put teeth into one of its

orders the Board must persuade a court of appeals to enforce the

order – in effect, to issue an injunction commanding obedience

. . ..” NLRB v. Thill, Inc., 980 F.2d 1137, 1142 (7th Cir. 1992);

see also Mitchellace, Inc. v. NLRB, 90 F.3d 1150, 1159 (6th Cir.

3

1996); NLRB v. Long Island Coll. Hosp., 20 F.3d 76, 82 (2d Cir.

1994); ROBERT A. GORMAN & MATTHEW W. FINKIN, BASIC

TEXT ON LABOR LAW 14 (2d ed. 2004). One may therefore say

that when a court grants a petition for review and denies the

Board’s cross-application for enforcement of its order (its

“agency action”), there effectively is nothing left to set aside.

There is no agency action that commands, dictates, or requires.

Unlike a remand-only disposition in other areas of the law, no

party is required to comply with the unlawful order while the

Board reconsiders the matter on remand. The court’s judgment

enforcing the Board’s order, and only that judgment, mandates

obedience. In the limited universe of the National Labor

Relations Act, therefore, the grant of a petition for review and

the denial of a cross-application for enforcement may be viewed

as the equivalent of setting aside the Board’s order. Or one may

say that in such cases the court’s failure to vacate the Board’s

order constitutes harmless error.

Still, it is more tidy and certainly more in keeping with the

APA to vacate unlawful orders when we remand cases to the

Board. I therefore would vacate the Board’s order before

remanding.