Respondents Brief — Ford Motor Co. (Chicago Stamping Plant) v. NLRB

‘Supreme Court, U. &

FILED

JAN 16 1979

IN THE MICHAEL RODAK, JR., CLERK

Supreme Court of the United States

OCTCBER TERM, 1977

No. 77-1806

ForRD MOTOR COMPANY

(CHICAGO STAMPING PLANT)

7 Petitioner,

NATIONAL LABOR RELATIONS BOARD,

and

LOCAL 588, UNITED AUTOMOBILE, AER@SPACE AND

AGRICULTURAL IMPLEMENT WORKERS

OF AMERICA (UAW),

Respondents.

On Writ of Certiorari to the United States Court of Appeals

for the Seventh Circuit

BRIEF OF RESPONDENT, UAW LOCAL 588

IRVING M. FRIEDMAN JOHN A. FILLION

JEROME SCHUR General Counsel

KATZ, FRIEDMAN, SCHUR &

M. JAY WHITMAN

EAGLE, P.C. A - Genseet ,

7 South Dearborn Street ssosiate Coneres Counss

Chicago, Illinois 60603 LEONARD R. PAGE

Assistant General Counsel

International Union, UAW

8000 East Jefferson Avenue

Detroit, Michigan 48214

Counsel for UAW Local 588

WILSON - EPES PRINTING Co.,. INC. - 789-0096 - WasHINGYON. D.C. 20001

>

TABLE OF CONTENTS

Page

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II

INDEX OF AUTHORITIES

Cases Page

Allied Chemical & Alkali Workers of America,

Local Union No. 1 v. Pittsburgh Plate Glass Co.,

Ge GUD etcenecnercerenssssteneseremmesrrenniepemens 9,13 .

Anheuser-Busch, Inc. v. IBT Local 633, 511 F.2d

1097 (1st Cir. 1975) cert. den. 423 U.S. 975

SID Sdissusubtntscnamintssdannndaainaiieetiniionntnabintaancasenil 19

Fibreboard Paper Products Corp. v. NLRB, 322

F. 2d 411 (D.C. Cir. 1963) (per Burger, J.) 116

U.S. App. D.C. 198, aff’d 379 U.S. 203 (1964)... 7,9,

11-13, 15, 18

H. K. Porter Company v. NLRB, 397 U.S. 99

REED SES SEES SE ne ae 8, 9, 15-17, 20

IBT Local 24 v. Oliver, 358 U.S. 283 (1959) ........ 9, 12,13

Inland Steel Co. v. NLRB, 170 F. 2d 247 (7th Cir.

1948) cert. den. 336 U.S. 960 (1949) 0000. 16

Marshall v. Barlow’s Inc., —— U.S. —— (1978),

EES ees ea nan aR D ETE 16

Miree v. DeKalb County, 433 U.S. 33 (1977) _........ 3

NLRB v. American National Insurance Co., 343

8 ee ant oer eS 20

NLRB v. Borz-Warner Corp., 365 U.S. 342

Nn a ee ee 9, 11, 20

NLRB v. Ford Motor Co., 571 F. 2d 993 (7th Cir.

at acaaa canis nner icaiattacaierciinnad 6

NLRB v. Washington Aluminum Co., 370 U.S. 9

IIIT shai actateaeecethieh iat tihictiiat imitated tetiacadl 6, 13, 14, 17

Sears Roebuck & Co. v. The San Diego Co. Dist.

Carpenters, —— U.S. —— (1978), 98 S. Ct.

SI idles ntcecsheticlainaccehcenhdeeabeeeindeiiaahbataiabdetdbdeeciadiia aden 16

Ill

INDEX OF AUTHORITIES—Continued

Statutes Page

National Labor Relations Act,as amended (NLRA)

RR Ere passim

Section 2(2), 29 U.S.C. § 152 (2) ....................... 10

Section 2(3), 29 U.S.C. § 125 (3)........................ 11

Section 8(a) (5), 29 U.S.C. § 158 (a) (5) —......... 6

Section 8(d), 29 U.S.C. § 158(d) ............... 7,13,14,17

Section 10, 29 U.S.C. § 160 _............ RS AE 17

Rules

Supreme Court Rule 40(d) (2) -............------------2-00--+ 2

RE EATS aaae en eee nee eee 2

Other Authorities

A. Cox, The Duty to Bargain in Good Faith, 71

ke Sl ULL Fe 18

COLLECTIVE BARGAINING NEGOTIATIONS AND CON-

gS eee 18

LEGISLATIVE HISTORY OF THE LABOR-MANAGEMENT

RELATIONS AcT OF 1947 (G.P.O. 1948) ................. 9,10

Shulman, OPINIONS OF THE UMPIRE (FoRD MOTOR

Co.), Opinion A-117 (1944) 0... eee eee eee 20

IN THE

Supreme Court of the United States

OCTOBER TERM, 1977

No. 77-1806

ForD MoTorR COMPANY

(CHICAGO STAMPING PLANT)

Petitioner,

Vv.

NATIONAL LABOR RELATIONS BOARD,

and

LOCAL 588, UNITED AUTOMOBILE, AEROSPACE AND

AGRICULTURAL IMPLEMENT WORKERS

OF AMERICA (UAW),

Respondents.

On Writ of Certiorari to the United States Court of Appeals

for the Seventh Circuit

BRIEF OF RESPONDENT, UAW LOCAL 588

COUNTERSTATEMENT OF

THE QUESTION PRESENTED

Whether nourishment during the workday, and its °

various aspects, including food services and prices, are

“physical dimensions” of the employer/employee relation-

2

ship, and therefore “terms and conditions of employment”

within §8(d) of the National Labor Relations Act, as

amended, 29 U.S.C. § 158(d)?

STATEMENT OF THE CASE

Ford operates a stamping plant in Chicago Heights,

an industrial suburb of Chicago. The plant stamps in-

termediate and large auto parts from sheet metal. It

employs about 3,600 production workers, represented by

the UAW and its Local 588. (Pet. A. 2).

The plant works around the clock on three shifts. All

employees have a 30-minute lunch break and two 22-

minute rest periods. (Pet. A. 20, 33-34). The latter

are used in part for snacking. Employees may not leave

the plant during the 22-minute rest periods, and it is

not feasible for them to leave during their lunch period.

In consequence, almost no one can leave at lunch—about

12 of 3,600 do so.* (Pet. A. 20). Ford does not permit

food vending trucks on plant property. (Pet. A. 2, 20).

Employees are permitted to bring their own food into

the plant, but it may be eaten only in the cafeterias or

vending machine areas. Food brought in “brown bags”

may only be stored in locker rooms, which are merely

ventilated. They are not air-conditioned. Employees

have no refrigeration facilities. In the summer the

lockers become very ‘hot and sticky and smelly.” Tem-

peratures frequently range from 80 to 100 degrees and

1 Page references are to the Appendix to the Petition (Pet. A. 1),

to the Appendix (A. 2), and to Ford’s Brief. (Ford Br. 3).

? Ford, in challenging the Circuit Court's finding that workers

lacked any alternative to in-plant food, argues that workers could go

outside the plant for lunch during the 30-minute lunch period. ( Ford

Br. 32). However, the Seventh Circuit found that: “All parties

agreed that it was not feasible for employees to leave the plant

during their food breaks.” (Pet. A. 2). Ford did not seek certiorari

on this issue. Under this Court’s Rule 40(d)(2) and F.R. Civ. Pro.

52, Ford is precluded from attacking these fact determinations.

cause food spoilage. Ford has occasionally employed ex-

terminator services because of unsanitary conditions in

the locker area.*

The Parties’ Agreement Concerning Food Services

Since at least 1967, Ford and Local 588 have bargained

and agreed on various aspects of in-plant food services.

(Pet. A. 4).

Since June 1974, the Local Agreement has provided

as follows: * There is to be in-plant cafeteria service with

a selection of hot entrees, salads and desserts. This selec-

tion, plus a sandwich service, will be available during

regular lunch periods. Cafeteria supervision is to be

available during all lunch periods to insure the parties

that employees are served in a reasonable length of time,

given adequate service, and supplied with condiments and

utensils. In addition, vending machines will be main-

tained, offering a variety of selections. If a vending ma-

chine breaks down, it will receive prompt servicing. The

vending machine areas are to be enclosed and air-

conditioned.

* Ford argues that testimony on the food spoilage was technically

hearsay. (Ford Br. 32-33). Since this evidentiary claim was not

raised either to the Board or the Court of Appeals, it cannot

be raised here. See, e.g., Miree v. DeKalb County, 433 U.S. 25,

34 (1977); United States v. Lovasco, 431 U.S. 783, 788 n.7 (1977).

In any event, there was direct testimony, based on first-hand

observation, that lockers where food was stored became hot, sticky,

smelly, and that exterminators had to be used occasionally to deal

with cockroaches, rats, and mice. A. 45-49, 55, 60. General Counsel

Ex. No. 2, reproduced in the addendum to this Brief, at Ad 1-5.

*The UAW-Ford National Agreement, covers matters common

to all plants in the UAW-Ford national bargaining unit (e.g.,

grievance procedure, pensions, arbitration, no-strike/no lockout).

The National Agreement is supplemented by a Local Agreement

which concerns only the given plant. Like other plants, this one is

covered by both the National Agreement and its own Local Agree-

ment. (Pet. A. 36).

4

To implement these provisions, and those of the 1970

Local Agreement, Ford’s plant has the following food

service facilities: There are two air-conditioned cafete-

rias and five vending machine areas. The larger cafeteria

serves hot food from steam tables, and houses vending

machines which dispense beverages, hot and cold food,

pastry, and candy. This cafeteria seats between 400 and

500 persons. It is open for breakfast between 5 a.m. and

8 a.m., and during lunch periods. The area is open during

shift changes, allowing access to the vending machines.

The second cafeteria accommodates 50 to 100 persons.

It is open for two of the three lunch periods on the

day and evening shifts. This cafeteria does not have a

steam table or cafeteria service. It has only 12 vending

machines. On the plant’s work floor, there are five en-

closed vending machine areas, which are open during

meal and rest periods. Four of these “cribs” accommodate

40 to 50 persons, and the fifth between 75 and 100. The

vending machines dispense the same food items available

in the smaller cafeteria. (Pet. A. 34).

Ford’s Performance Through Providers

Since at least 1967 Ford has turned over performance

of its contractual responsibilities to an outside provider

—an industrial catering operation. In 1967, the provider

was Al Green Enterprises and in 1970 it became ARA

Services, Inc.*

Under the contract with its provider, Ford allows use

of the necessary plant space, and supplies its plant with

the needed equipment, utilities and maintenance (e.g.,

steam tables, refrigerators, ovens). Ford’s provider fur-

’ While Ford happens to have contracted with caterers here, Ford

provides in-plant meals to employees at other locations through its

own food operation. See: How Ford Motor Dishes up 18,000 Meals

a _—_ BUSINESS WEEK (October 27, 1975) at 48, reproduced

at Ad 7.

nishes the vending machines, food, management and labor.

(Pet. A. 3).

Ford approves its provider’s price and portion lists, as

well as quality specifications. Ford establishes stand-

ards of quality and cleanliness for all equipment. It in-

spects and enforces compliance. Ford reimburses all

direct costs, and pays its provider an allowance for ad-

ministrative costs and service fees.* If gross receipts are

less than the costs of operations plus the allowance, Ford

reimburses the provider for the difference, up to $52,000

annually." When revenues exceed costs, Ford realizes

income. When costs exceed revenues, Ford pays the dif-

ference up to that limit. In recent years Ford has subsi-

dized the food service operations. Either Ford or its

provider can cancel the contract on 60-days notice. (Pet.

A. 82-94).

The Dispute

On or about February 6, 1976, Ford informed Local

588 that the prices of certain cafeteria and vending items

would be increased, effective February 9th. There was

no previous notice, and Ford did not furnish specific in-

formation on the amount of the increases. The Local re-

quested that the increases be postponed until it could

discuss the matter with Ford, but Ford refused. The

increases went into effect on February 9th. Virtually

all food items were raised either 5 or 10 cents. By letter

of February 13th, Local 588 asked Ford to bargain con-

cerning “prices and services in cafeteria and vending

operations.” On February 19th Ford again declined, ar-

guing that “food prices and services are not a proper

* The allowance totals 9% of net receipts. (Ford Br. 6).

* ARA has publicly described this straight management fee ar-

rangement as permitting “the customer [Ford here] to contro] menu

prices.” Feeding the Big Captive Customers, BUSINESS WEEK,

(October 27, 1975), reproduced at Ad 6-8.

subject for negotiations.” (Pet. A. 39, Jt. Ex. 17 & 18,

reproduced at Ad 9-11).

Meanwhile, on February 16th, a boycott of the food

operations began. A majority of the employees observed

the boycott, and most brought their lunches during the

period. The boycott of the cafeteria was ended by Local

588’s Shop Committee on May 19, 1976, and the boy-

cott of vending machines on June 7, 1976. The onset of

hot weather, with consequent spoilage problems with

“brown bag” food, was a main cause of its termination.

Another reason was the boycott’s ineffectiveness in re-

ducing prices. (Pet. A. 40).

Local 588 filed an unfair labor practice charge on April

12, 1976. On May 16, 1976, the Board’s General Counsel

issued a complaint, alleging that Ford’s refusal to bar-

gain on food services and prices violated § 8(a) (5) of

the Act, 29 U.S.C. § 158(a) (5). The Board ordered Ford

to bargain on food services and prices, and to supply the

UAW with information it had requested in these areas.

The Seventh Circuit affirmed. NLRB v. Ford Motor Co.,

571 F.2d 993 (7th Cir. 1978).

ARGUMENT

I

When an employer hires someone, brings that person

onto its property to labor for 8 to 10 hours, certain ques-

tions are unavoidable: Is the facility habitably warm in

the winter? NLRB v. Washington Aluminum Co., 370

U.S. 9, 15-16 (1962). Is it dry? Is the air in the building

fit to breathe? Is there enough light to work? Are those

on the property safe from physical injury? And—at

issue here—how is one to stay properly nourished, and

able to perform work? These are not arcane or surpris-

ing issues. They must be faced by every employer who

opens its doors, and by every employee who walks

7

through them. They are posed by the realities of human

physiology. They are, as Mr. Justice Stewart put it,

the “physical dimensions” of work. Fibreboard Paper

Products Corp. v. NLRB, 379 U.S. 203 (1964) * (Stew-

art, J. concurring 93

In common parlance, the conditions of a person’s

employment are most obviously the various physical

dimensions of his working environment. What one’s

hours are to be, what amount of work is expected

during these hours, what periods of relief are avail-

able, what safety practices are observed, would all

9 conditions of one’s employment. [379 U.S. at

Nourishment, like other physical dimensions of work,

is “most obviously” a condition of one’s employment. As

the Court below observed:

The food one must pay for and eat as a captive cus-

tomer within the employer’s plant can be viewed as a

physical dimension of one’s working environment.

{[Pet. A. 12; 571 F.2d 993, 1000 (7th Cir. 1978) ]

Nourishment is one of the factors in the employment

situation which directly controls physical well-being on

the job. Such factors are, in fact, the most obvious of

the “terms and conditions of employment.” §8(d) of

the Act, 29 U.S.C. §158(d). Whether we are “within

the literal meaning of the phrase” is, of course, the issue.

Fibreboard, 379 U.S. at 210. Nourishment fits easily

8 Affirming 322 F.2d 411 (D.C. Cir. 1963) (per Burger, J.), 116

U.S. App. D.C. 198.

* Section 8(d) of the National Labor Relations Act, as amended,

29 U.S.C. § 158(d), 61 Stat. 136, provides, i levant part: “... to

bargain collectively is the performance of mutual obligation

of the employer and the representative of the employees to meet at

reasonable times and confer in good faith with respect to wages,

hours, and other terms and conditions of employment...” The full

TT are reproduced in the Appendix to Ford’s Brief at

8

and comfortably within the statutory definition, and so

is a mandatory subject.

Like most aspects of the employment relationship,

nourishment comes with tangled sub-issues which, in turn,

are entangled with well-established mandatory subjects

of collective bargaining. When will employees eat? How

much time will they have? Will the employer pay for

that time? Where will the employees eat? If they must

leave the plant to seek restaurants, how will the logistics

of the exodus and entry be handled? Are there sufficient

restaurants, given the time? If employees have to eat

in the plant, as here, will they have to bring their own

lunches? Where will the “brown bags” be kept? Can

they be stored out of the reach of vermin? Will the

food spoil in the heat of summer? Will the employer

provide in-plant food services, as Ford did here? What

will those services be? What will be served? Will the

portions, quality, cleanliness and efficiency be adequate?

How much will it cost the employee and/or employer to

have this portion, of that quality, served with a given,

clean efficiency?

Ford urges this Court to put the judicial and ad-

ministrative resources of the United States into the busi-

ness of perpetually sorting out and weighing these

threads. The Court is asked to hold that § 8(d)’s defini-

tion requires the litigative isolation of such a thread—

say, the price of in-plant food—followed by judicial de-

termination of whether that item has a “significant or

material effect on employees’ terms and conditions of

employment.” (Ford Br. 11). Aside from the imprac-

ticality of such an enterprise, it is premised on a mis-

take about the purpose of the Act. As the Court re-

iterated in H. K. Porter Co. v. NLRB, 397 U.S. 99

(1970) :

Thus a general process was established that would

ensure that employees as a group could express their

9

opinions and exert their combined influence over the

terms and conditions of their employment. The Board

would act to see that the process worked.

The object of this Act was not to allow governmental

regulation of the terms and conditions of employ-

ment, but rather to ensure that employers and their

employees could work together to establish mutually

satisfactory conditions. The basic theme of the

Act was that through collective bargaining the pas-

sions, arguments, and struggles of prior years would

be channeled into constructive, open discussions

leading, it was hoped, to mutual agreement. [397

U.S. at 103)

This “basic theme” of the Act is well settled: NLRB v.

Borg-Warner Corp., 356 U.S. 342, 349 (1958); J.B.T.

Local 24 v. Oliver, 358 U.S. 283, 295-6 (1959); Fibre-

board Paper Products Corp. v. NLRB, 322 F.2d 411,

414 (D.C. Cir. 1963) (per Burger, J.), 116 U.S. App.

D.C. 198, affd 379 U.S. 203, 210-211 (1964); Allied

Chemical & Alkali Workers v. Pittsburgh Plate Glass

Co., 404 U.S. 157, 163-4 (1971).

% Section 9(a) of the original Wagner Act contained the phrase

“rates of pay, wages, hours of employment, or other conditions of

employment.” 49 Stat. 453 (1935). When the Taft-Hartley Act was

being considered in 1947, a House amendment would have rede-

fined both the scope of the duty, and the test for “good faith.” An

objective test for “good faith” was proposed, based principally on

the number of times the parties met. As to the scope of the duty, the

proposal was to limit bargaining to five subject areas. I LEGISLATIVE

HISTORY OF THE LABOR-MANAGEMENT RELATIONS ACT OF 1947,

(G.P.O. 1948) at 163-167, 312-314, 867. The Senate, however, re-

jected both House proposals, leaving the Wagner Act’s definition of

both scope and “good faith” intact.

Senate opposition was based on the argument that the scope of

bargaining “cannot and should not be strait-jacketed by legislative

enactment.” I Lec. Hist. at 362, 812; II Lec. Hist. at 1339.

Ford quotes selectively from the Conference Report for the propo-

sition that, despite the Senate action, “the intent of Congress was

to retain the restrictive approach of the House bill.” (Ford Br. 22).

[Footnote continued on page 10)

10

Ford’s approach to §8(d) demands a program in-

evitably increasing “governmental regulation.” How else,

as industrial life evolves, can one determine whether

there is a “significant or material effect” for each minutia

which falls into dispute between union and employer.

As we shall see, there is a place for the “vital impact”

test. Pittsburgh Plate Glass, 404 U.S. at 178-82. It

cannot govern all cases, or even all “third party” cases,

“involving individuals outside the employment relation-

ship.” Pittsburgh Plate Glass, 404 U.S. at 178-9. It

is routine for an employer to use a third party to de-

liver services or provisions to its work force. Blue Cross

delivers health insurance. The bank provides trustee and

investment services for the pension plan. The landlord

may supply heat; or, as here, a third party may supply

nourishment during the workday. That is, the employer

may perform its side indirectly, through a surrogate,

i.e., a provider. Use of a surrogate-provider does not

make the employer any less an “employer” under the

Act." Nor does surrogate provision excuse any of the

employer’s (or union’s) statutory duties. It could not

be otherwise.

The other third-party cases, those not involving a

surrogate-provider, are the ones amenable to the “vital

impact” analysis. In some such cases, the third party is

»” [Continued]

The ful! statement shows this reference dealt only with the House’s

proposed definition of “good faith”—not the scope of bargaining:

Hence, the Senate amendment, while it did not prescribe a

purely objective test of what constituted collective bargaining,

as did the House bill, had to a very substantial extent the

same effect as the House bill in this regard, since it rejected,

as a factor in determining good faith, the test of making a con-

cession and thus prevented the Board from determining the

merits of the positions of the parties. [1 Lec. Hist. at 538,

italicized portion omitted by Ford].

41 The definition, § 2(2), 29 U.S.C. § 152(2), provides: “The term

‘employer’ includes any person acting as an agent of an employer,

directly or indirectly .. .”

11

only servicing the entrepreneur (e.g. product advertis-

ing), and is not, even indirectly, provisioning the em-

ployees. In others, delivery to third parties (e.g. re-

tirees) does not involve delivery to the bargaining unit,

since they are not “employees” within § 2(3), 29 U.S.C.

§ 152(3). Pittsburgh Plate Glass, 404 U.S. at 176.

Such situations do not, as a definitional matter, in-

volve “terms and conditions of employment,” since they

do not “settle an aspect of the relationship between the

employer and employees.” Pittsburgh Plate Glass, 404

U.S. at 178-9; NLRB v. Borg-Warner Corp., 356 U.S.

342, 350 (1958).

Yet this Court has held that, even in this area, there

may be a bargaining duty in the unusual case—where

there is a vital impact on the terms and conditions of

employment of the active employees. The Court’s dis-

cussion of the “vital impact” issue in Pittsburgh Plate

Glass is in these terms, addressed arguendo to an alter-

native holding of the Board.” 404 U.S. at 176-82. The

Board’s use of the standard, like the Court’s critical re-

view of that use, presupposes that, since retirees are not

“employees,” “* the case fell beyond “the relationship

between the employer and employees.” 404 U.S. at 178-

9. There was no issue, as there is here, of the employer

using a surrogate-provider to deliver to its employees.

Instead, the discussion of “vital impact” in Pittsburgh

Plate Glass, including its treatment of Fibreboard, is

% The primary issue was, of course, definitional: Are retirees

“employees” within § 2(3) of the Act, 29 U.S.C. § 152(3)? Against

the possible loss of the definitional issue, the Board had gone on to

hold, in the alternative, that there was a vital impact on active

employees. 404 U.S. at 176-7.

18 For the Board, this was an arguendo presupposition. For the

Covrt, it was not.

12

occasioned by a distinct (and more difficult) sort of

third-party situation—benefits for third-party non-em-

ployees, and third-party service to the entrepreneur. This

is not the situation presented here. It was, however, the

situation presented in Fibreboard and Oliver, the two

eases used in the “vital impact” analysis in Pittsburgh

Plate Glass, 404 U.S. at 178-82. The third-party con-

tractor in Fibreboard fell beyond the employer /employee

relationship, since it only supplied production to Fibre-

board. 379 U.S. at 224 (Stewart, J., concurring). Never-

theless, the Court held that, for the particular type of

“contracting out” involved,** there was a sufficiently ser-

ious effect on the bargaining unit, relying on Oliver.

379 U.S. at 212-15. Oliver itself involved a third-party

owner-driver,*” whose rental rates, if inadequate, would

have subverted the wage structure for employed drivers.

358 U.S. at 294. Mr. Oliver was not supplying the em-

ployees anything. On the contrary, he was supplying

the employer at the bargaining unit’s expense. The

Court in Pittsburgh Plate Glass was quite correct in

limiting “the principle of Oliver and Fibreboard,” i.e.,

the “vital impact” test, to the unusual case where:

. . . the question is not whether the third-party con-

cern is antagonistic to or compatible with the in-

terests of the bargaining unit employees, but whether

it vitally affects the ‘terms and conditions’ of their

employment. [404 U.S. at 179]

* Tantamount to “the replacement of employees in the existing

bargaining unit with those of an independent contractor to do the

same work under similar conditions of employement. . .” 379 U.S.

at 215.

** Mr. Justice Whittaker would have held that owner-drivers are

not “employees,” without reaching the “impact” issue. 358 U.S. at

297-8. The majority in Oliver did not reach the definitional issue.

404 U.S. at 178. Pittsburgh Plate Glass discusses Oliver on the clear

assumption that Justice Whittaker was right about the definitional

issue. The presence of a “vital impact” in Oliver nevertheless re-

— the Court to venture further than Justice Whittaker pre-

e ;

13

Pittsburgh Plate Glass is that sort of third-party case,

but this case, as it involves a surrogate-provider to the

employees, is not. Of course, despite the relevance of the

Oliver and Fibreboard principle to Pittsburgh Plate

Glass, the Court concludes that the asserted impacts are

“too speculative.” 404 U.S. at 182.

Here, in the nature of the case, there is no need to

reach, disentangle, or weigh the “impact” issue. Much

less, should the Court embark on a general program of

doing so. This case is simple by comparison to this

Court’s earlier cases, as it involves only the “physical

dimensions” of work. Washington Aluminum controls

here. There is no occasion to expand the “vital impact”

analysis to the entirety of § 8(d), as Ford urges. That

principle was born to handle the unrelated and more

difficult problems presented by Oliver, Fibreboard, and

(arguendo) Pittsburgh Plate Glass. Its use in the sur-

rogate-provider context would spawn nothing but more

litigation and regulation. At least where, as here, the

issue is the “physical dimensions” of the employer /

employee relationship, those problems should be left

where Congress intended—at the bargaining table.

II

The interment of Ford’s remaining arguments follows

directly:

Ford does not begin at the beginning. The first ques-

tion is whether nourishment, and its sub-issues, are “phy-

sical dimensions” of work, and so within the statutory

wording of §8(d). Ford skips this issue, and begins

with a logically secondary issue—if nourishment is not

a term or condition, is there enough “vital impact”

under Fibreboard and Pittsburgh Plate Glass to make the

subject mandatory? Beginning with the secondary issue

is wrong for several reasons: It begs, rather than an-

swers, the issue before the Court: the logically prior issue,

14

whether nourishment is a “physical dimension” of work,

and within § 8(d). And, as we have seen, through a mis-

reading of prior cases, it commits the Court to extending

the “vital impact” analysis to the entirety of § 8(d),

moving the debate from the bargaining table to the

courtroom.

The existence of ARA here is irrelevant because, as

the record makes obvious, ARA is only a surrogate, 1.¢.,

a third party through which Ford is delivering a “phy-

sical dimension” of the working environment in its Chi-

cago plant. It is as if, in Washington Aluminum, the

company had contracted to buy steam heat from a third

party, rather than operating its own boiler. This Court’s

holding that heat is a term and condition of employment

cannot be dependent on how the employer chooses to sup-

ply the heat, whether directly or through a surrogate.

Surrogate-provider arrangements are as common to

industry as are daffodils to a springtime park. Virtually

all benefits are provided through such arrangements,

e.g., medical, disability, life, dental, vision, drug, and

(now even) legal insurance. Guard agencies provide se-

curity. Others handle maintenance or sanitation. Utili-

ties supply heat and light. Banks provide fiduciary serv-

ices for pension and welfare benefits. Surrogate pro-

vision is as essential as it is common. Without such

“mass” provision, with its economies of scale, most of the

benefits now enjoyed by our population would be im-

possible.

Yet this is the first time that it has ever been sug-

gested to this Court that, because a surrogate-provider

is chosen, what is provided (in some sense) ceases to be

a term and condition of employment. This is a disquiet-

ing and even revolutionary suggestion. Forty years of

collective bargaining, and several provider industries,

have been built on the contrary assumption.

15

Ford complains that, having chosen ARA as its sur-

rogate, it lacks enough control over nourishment to meet

a bargaining duty. This overstates the burden of that

duty. It is only a duty to bargain, not to agree. H. K

Porter, 397 U.S. at 106, and cases cited. A prudent

party will not agree to something it cannot deliver. To

compel agreement is beyond the Board’ i

the Act’s intent: en

(I]t is ‘clear that the Board may not, either direct]

or indirectly, compel concessions or otherwise sit in

judgment upon the substantive terms of collective

bargaining agreements.’ [H. K. Porter, 397 U.S. at

106, quoting NLRB v. Am. Nat. Ins.

395, 404 (1952) ] ere

In any event, on this record, Ford’s worries are con-

trived. Since 1967, Ford has bargained, agreed and

(through its surrogate) delivered on virtually all as-

pects of nourishment, save prices.

If, in other cases, there were evidence of “lack of

control” or “futility,” there would also be a place to

make the argument—at the bargaining table. Though

important, these arguments go to relative bargaining

strength, not to the propriety of bargaining. They are

good arguments, if sound, for not agreeing to impos-

sibility. But they are no substitute for the discussion

essential to determining whether that problem exists, or

can somehow be avoided. “Futility” arguments, if im-

munized from the adversary process, are notoriously

speculative.

The Board and the courts have no place in weighing

relative bargaining strength, even indirectly. H. K.

Porter, 397 U.S. at 106. If the government somehow

gets entangled in that enterprise, “futility” is nothing

more than a remedial issue. It does not go to the ex-

istence of statutory duty. Thus, for instance, in Fibre-

board, the employer argued that it was an undue burden

16

for the Board to require termination of the agreement

with the maintenance contractor. That contract was

terminable on 60-days notice, exactly as is ARA’s here.

379 U.S. at 216 n.10. This Court saw no difficulties with

the remedy, 379 U.S. at 216-217. Here, of course, the

Board is not requiring termination of the Ford/ARA

contract, only that Ford and the UAW bargain after the

fact about matters which may be encompassed in it. This

ease is a fortiori.”

Ford’s argument,” even posed properly as a remedial

issue, offends the purpose of the Act. Ford wants

indirect governmental regulation of the bargaining

16 Ford says it is bereft of guidance as to the scope of the Board's

order here. (Ford Br. 35-6). But Ford failed to raise the specificity

of the order as an issue before the Board, the Court of Appeals, or

in its petition for certiorari. At the Board and the Court of Appeals,

Ford argued only that its refusal was limited to prices. (Pet. A. 24).

1t Ford takes some perplexing positions. If Ford is right, and

these matters are not mandatory subjects, then Ford stands in

danger of losing up to $52,000 a year on the food operation. If that

loss is caused by consumer dissatisfaction, one would think it in

Ford’s self-interest to be able to bargain with those consumers, and

mitigate the loss. Yet, if this area is permissive rather than manda-

tory, the Union can refuse to talk about the problems. The bargain-

ing duty is mutual. If Ford has no duty, the Union has no duty.

There is nothing Ford could do to make the Union bargain on a

permissive subject. It is ironic that this helplessness, a corollary of

Ford’s own position, could subject it to a $52,000 annual loss.

Ford also argues that the remedy for price increases should

be wage bargaining. (Ford Br. 15, 21, 26). This is a strange posi-

tion, as it disproves Ford’s case. It acknowledges, by implication,

that nourishment issues come within the statutory definition of

“wages.” §8(d), 29 U.S.C. §158(d). Inland Steel Co. v. NLRB,

170 F.2d 247, 251 (7th Cir. 1948), cert. den. 336 U.S. 960 (1949).

That aside, since most fringe benefits “have their price,” ‘.¢.,

can »e privately purchased, such an approach would eliminate fringe

benefits as mandatory subjects of bargaining.

Ford’s “lack of control” argument oddly infers that it has little

control over its property, and those who enter on it. Contrast:

Marshall v. Barlow's Inc.. —— U.S. —— (1978), 98 S.Ct. 1816;

Sears Roebuck & Co. v. The San Diego Co. Dist. Carpenters, ——

U.S. —— (1978), 98 S.Ct. 1745.

17

strength of the parties, under the guise of assaying

“control” or “futility.” Even remedial regulation of

bargaining strength is beyond the pale. This Court, in

H. K. Porter, reversed the Board and the D.C. Circuit

for a comparable attempt:

It is implicit in the entire structure of the Act that

the Board acts to oversee and referee the process of

collective bargaining, leaving the results of the con-

test to the bargaining strengths of the parties. It

would be anomalous indeed to hold that while § 8(d)

prohibits the Board from relying on a refusal to

agree as the sole evidence of bad-faith bargaining,

the Act permits the Board to compel agreement in

that same dispute. The Board’s remedial powers

under § 10 of the Act are broad, but they are limited

to carrying out the policies of the Act itself. [397

U.S. at 106-8, footnote omitted]

The courts are, of course, similarly limited to the policies

of the Act.

Ill

Ford correctly observes that industrial peace is a

central goal of the Act. A bargaining duty, we are told,

will disrupt that peace by imposing the chaos of perpetual

ae on trifles. These are but trepidations of

counsel.,**

Since 1967, Ford has come to bargain about and live

with every aspect of the nourishment issue, except prices.

* Ford theorizes that, in a multi-union context, bargaining on

nourishment is “all the more infeasible.” (Ford Br. 14, 34). “But

this has never been a material issue where other “physical dimen-

sions” are involved. Presumably, if it is 15° F. in the workplace,

the affected employees have a right to bargain, regardless of the

number of labor organizations. NLRB v. Washington Aluminum Co.,

370 U.S. 9 (1962). To excuse the duty to bargain about “physical

dimensions” on this ground would fundamentally restructure the

Act. In any event, this record only involves one employer, and one

union, at one plant.

18

There is no “chaos” or “perpetual bargaining” in the

record.”

On the contrary, this record ~hows exactly what Con-

gress intended—the “mediatory influence” of institution-

alization, arrived at by bargaining:

One of the primary purposes of the Act is to pro

mote the peaceful settlement of industrial dispute by

subjecting labor-management controversies to the me-

diatory influence of negotiation. The Act was framed

with an awareness that refusals to confer and nego-

tiate had been one of the most prolific causes of

industrial strife. [Fibreboard, 379 U.S. at 211, foot-

note omitted]

Negotiated methods and procedures are particularly ef-

fective ways to handle the disputes of industrial life.

Creation of “industrial self-government,” as the Chief

Justice has observed, is the key to the Act’s success: *

1® The UAW conducted a survey of the 101 separate units covered

by Local Agreements within the UAW-Ford national bargaining

unit. Responses were received from 50. Forty-one indicated that

their Local Agreements contain provisions dealing with some aspect

of nourishment, normally food services.

Ford claims that labor agreements are “uniformly silent with

respect to in-plant food prices” (Ford Br. 13). The support is its

review of “many” sample agreements in the BNA’s loose-leaf

service, COLLECTIVE BARGAINING NEGOTIATIONS AND CONTRACTS §§ 20-

30. (Ford Br. 29). This service, in fact, contains only nine labor

agreements. Eight of these labor agreements are so-called “master”

or “national” contracts. By their nature, such master or national

agreements do not deal with items of purely local focus, such as

food. These areas are left for the local agreement, as here.

2° See: Fibreboard, 379 U.S. at 214: “[A]lthough it is not possible

to say whether a satisfactory solution could be reached, national

labor policy is founded upon the Congressional determination that

the chances are good enough to warrant subjecting such issues to the

process of collective negotiation.” See also. A. Cox, The Duty to

Bargain in Good Faith, 71 Harv. L. Rev. 1401, 1412 (1958): “Par-

ticipation in debate often produces changes in a seemingly fixed

position either because new facts are brought to light or because

the strengths and weaknesses of the several arguments become

19

The purpose of imposing legal duties upon employers

to meet and bargain with the representatives of em-

ployees is to create a structure of industrial self-

government for a particular plant arrived at by con-

sensual agreement between management and em-

ployees within the framework of the statute. See:

United Steelworkers v. Warrior & Gulf Nav. Co.,

363 U.S. 574, 580-81 (1960). By guaranteeing em-

ployee participation in decisions relating to wages,

hours, terms and conditions of employment, Congress

made a determination that this would create an en-

vironment conducive to industrial harmony and elim-

inate costly industrial strife which interrupts com-

merce. [Fibreboard, below, 322 F.2d 411, 414 (D.C.

Cir. 1963), 116 U.S.App.D.C. 198]

Where the stakes are small, as Ford urges they are here,

a refusal to talk is all the more uncivil.

It cannot be denied that, in absolute terms, many

aspects of industrial life are picayune. This is so from

both the management and the employee points of view.”

apparent. Sometimes the parties hit upon some novel compromise of

an issue which has been thrashed over and over. Much is gained

even by giving each side a better picture of the strength of the

other’s convictions. The cost is so slight that the potential gains

easily justify legal compulsion to engage in the discussion.”

21 Management’s right to discipline typically extends to very minor

matters, e.g., dropping bolts, leaving hand tools around, making a

little too much scrap, not cleaning up your area promptly, or being

slow about obeying directions. In Anheuser-Busch Inc. vy. IBT Local

633, 511 F. 2d 1097 (1st Cir. 1975), cert. den. 423 U.S. 875 (1975),

the employer promulgated a rule forbidding the employees from

wearing “tank-tops” in large areas of the plant. The Company was

worried that members of the public, touring the plant, would be

offended by the “beer bellies” exposed to view by that attire. There

was a work stoppage, and, in reviewing the injunction, the First

Circuit was moved to observe that “[t]his tempest has been brewed

in a very small teapot.” 511 F. 2d at 1098. Yet no one suggested

that, because the dispute was minor (and perhaps silly), it fell be-

yond the parties’ bargaining duty. Indeed, the First Circuit quite

sensibly thought bargaining and arbitration was a much better

forum than the federal courts. Any experienced labor lawyer,

20

Like more serious matters, these are resolved by negotia-

tion and arbitration. The parties’ settled procedures can

categorize and solve the issue on the plant floor, without

involving higher management or labor representatives.

Contractual agreement most often forecloses reopening of

the substantive issue for the term of the labor contract,

generally three years. The agreement may establish a

procedure, or set a progression of changes occurring over

its term. Triviality, where it exists, argues for more

bargaining and “self-government,” not less. For, if it is

not handled by the parties, the alternative will be govern-

mental regulation. If, as a matter of law, triviality

destroys the bargaining duty, industrial relations, espe-

cially in the area of discipline, will be radically altered.

But let us assume the worst. Assume arguendo that

the parties are petty, and fall into economic warfare over

the smallest matters. The Act contemplates economic

combat, and does not allow governmental intervention on

that ground alone.” As this Court taught in H. K. Porter,

reversing the D.C. Circuit’s intervention:

But the Act as presently drawn does not contemplate

that unions will always be secure and able to achieve

agreement even when their economic position is

weak, or that strikes and lockouts will never result

from a bargaining impasse. It cannot be said that

whether on the management or union side, has had innumerable

picayune problems resolved by bargaining, without burdening the

courts. Can men be naked to the waist in a St. Louis assembly plant

in the summer, or must they wear “T-shirts” for modesty’s sake?

Does it offend propriety for women employees to clean the men’s

bathroom, or vice versa? How long can hair be worn? Ford itself

once disciplined a woman employee for wearing red slacks. The

arbitrator, Dean Shulman of Yale, had to decide whether that color

constituted a production hazard because of its asserted tendency to

distract male employees. Shulman, OPINIONS oF THE UMPIRE (ForD

Motor Co.), Opinion A-117 (1944).

2? See: Harlan, J., concurring, in NLRB v. Borg-Warner, 356 U.S.

342, 358 (1958); and NLRB v. Am. Nat. Ins. Co., 343 U.S. 395,

408-9 (1952).

21

the Act forbids the employer or a union to rely ul-

timately on its economic strength to try to secure

what it cannot obtain through bargaining. It may

well be true, as the Court of Appeals felt, that the

present remedial powers of the Board are insuf-

ficiently broad to cope with important labor prob-

lems. But it is the job of Congress, not the Board

or the courts, to decide when and if it is necessary to

allow governmental review of proposals for collective-

bargaining agreements and compulsory submissions

to one side’s demands. The present Act does not en-

vision such a process. [397 U.S. at 109]

Industrial self-government may fail, even over small mat-

ters. But parties foolish enough to let that happen, as

the Act now stands, only embroil themselves—not the

Board and the courts. Even in the worst case, the Act

does not contemplate judicial intervention to instruct

the combatants about what is (and is not) trivial. The

Act only requires that the battle occur within the

boundries of the statutory definition.

CONCLUSION

For the foregoing reasons, the judgment of the Court

of Appeals should be affirmed.

Respectfully submitted,

IRVING M. FRIEDMAN JOHN A. FILLION

JEROME SCHUR General Counsel

Kars, Fumpean, Scuun & M. Jay WHITMAN

EAGLE, P.C. A ete Gannenl !

7 South Dearborn Street ssociate General Counse

Chicago, Illinois 60603 LEONARD R. PAGE

Assistant General Counsel

International Union, UAW

8000 East Jefferson Avenue

Detroit, Michigan 48214

Counsel for UAW Local 588

January 16, 1979

;

;

A

‘a

Ad 1

ADDENDUM

General Counsel Exhibit 2

Survey taken August 27, 1973, between the hours of 2:30 P.M.

and 7:30 P.M.

Temperature from Chicago Temperature outside Plant

2P.M. 95 40% H. 2 P.M. 96

4P.M. 95 4P.M. 95

5 P.M. 94 40% H. 5 P.M. 95

T.H.I. formula

THI = 0.4 of temp. & humid + 15

70 = most people comfortable

75 = \% people satisfied

80 = most people un-comfortable

Ex: Temp 98 Humid 65% = 80.2

Location Temp. Humid. Factors

1.1 94 65% Aisle

13 95 Chute

1.5 95 Chute

2.1 95 Not running Aisle

2.3 95 Not running

2 line gap 96 Not running

3.1 97 10% Aisle

3.3 98 Chute

3.5 97

3.8 98

4.1 97 Aisle

4.6 97

5.1 98 Not running

5.3 100 Chute Not running

5.5 102 Chute

5.6 98

6.1 98 Aisle

6.3 100 Chute

6.6 101 Chute

6.7 98

71 98 65% Aisle Not running

7.4 99

7.5 98

7.6 100 Chute

OOD wi OD et . Vena eae Get Aen. 2 Od Oe eee

Ad 2

General Counsel Exhibit 2—Continued

Location Temp. Humid. Factors

8.1 98 Aisle Not running

8.3 98 Not running

8 gap 98 68%

9.2 100 Chute

9 Loading 99

10.3 98

10 gap 98

58.4 99

58 Loading 98

11.1 98 Aisle

11.2 102 Chute

11.3 99

12.5 99

12.5 99

13 Loading 100

13.1 98

13.4 99

13 gap 99

14.1 98 65% Aisle

14.4 98

15.1 98 Aisle

15.2 101 Chute

15.4 100 Chute

16.1 98 Aisle Not running

16.3 99

16 gap 98 Not running

17.1 98 Aisle Not running

17.2 100 70% Chute Not running

17.3 98

18.1 97 Aisle Not running

18.4 99 Chute Not running

63.1 97 Not running

63.4 97

63.5 97

19.1 97 Aisle Not running

19.4 98

19.6 98

19 Loading 97

20.2 QS

20.3 99

20.5 99

20 Line weld. 100

21.1 97 Not running

213 98

21.5 98

General Counsel Exhibit 2—Continued

Location

a

2

?

Humid.

ey

2)

pFADDD

AWAD An

-wore Oa

~

:

RARARRLAARA Rh

ne BeBe BeBe BeBe Bade)

DAI DD On mm OO pe

Barwrwane io @

SSISSISLSZ SRRRSSS SSSSSSSeseesesesesssevocse

10%

60%

65%

70%

Aisle

Aisle

Aisle

Chute

Aisle

Ad4

General Counsel Exhibit 2—Continued

Location Temp. Humid. Factors

S.P. 8.7 97

Auto. Blankers SP 96

51.1 97 70% Aisle

51.3 97

52.2 98

52.4 98

53.2 97

53.5 97

54.1 97

54.5 97

55.1 97

55.4 97 Not running

56.2 97

57.2 98

57.4 98

57.6 98

61.1 98

61.3 98

61.4 98

62.1 98

62.3 98

62.4 98 Aisle

64.2 99

64.4 99

21 Dept. 65%

Bumper Assem.

d.b.c. Frame 98

Salvage booth 101

Weiding booth 99 Not running

Pre-tact C Frame 98

Welding booth 101

Loading area 101

Truck floor pan

Loading 99 Not running

C, Frame 99

747

#1C Frame 99

#2C Frame 98

Loading Station 98

21 Dept. Sm. Parts

Intrusion Bar 99

Fender apron 99

Running board 98

Car Door Line

+ ee ee oe

Ad 5

General Counsel Exhibit 2—Continued

Location Temp. Humid. Factors

Loading Station 95

Sandwich Station 97

# 24 Poster 98

#1C Frame 97

Cowl Top 98

Rocker Panel 96

24 Dept. 60%

Truck Door Line 60%

#2 C Frame 96

Sandwich Stat. 96

Loading Stat. 95

Hydro Press 99

Hydro Press Load. 96

Dash Pan 95

Floor Pan C Frame 96

Floor Pan Load 96

Roof sill 96

D.B. Cross member 95 N i

DP ben ot running

Loading Station 96

C Frame 97

Re Strike 96

21 Dept. Break area 97 Aisle

Crane #15 102 45%

Ship. Break Area 96

Ship. Area Y-19 95 45%

Auto Repair Shop 96 50%

Sheet metal shop 95

Die Storage Pit 95

X aisle washroom 95 70%

K aisle end of 2 line 94

Basement between 4 & 5 102 72%

North Break area 94

Basement between 8 & 9 101 68%

South Break Area 97

So. K Aisle washroom 95 70%

T&D Bay3 97

T&D Bay 2 98

Ad 6

Feeding the Big Captive Customers,

BUSINESS WEEK (October 27, 1975) at 46-54

FEEDING THE BIG CAPTIVE CUSTOMERS

The growing appetitite of factories, schools, hospitals

Soaring costs are only part of the headache for the $27

billion institutional food-service business. In the meals

they serve, schools, factories, health-care facilities, air-

lines, and other institutions deal with a captive market.

While that guarantees a continuing group of customers,

it also guarantees the same group day after day (with

the obvious exception of airlines). So there is a constant

problem of providing variety, quality—and yet holding

costs down.

It is not easy. Indeed, franchiser Ernest Renaud, presi-

dent of Long John Silver’s seafood restaurants, is build-

ing a new headquarters building—without an employee

lunchroom. “Even though we are in the restaurant busi-

ness,” says Renaud, “we are not about to cook food for

these 150 people five days a week.” Apart from the

tricky economics of serving a small group, he notes, “em-

ployees get mad if they don’t like the food, and they take

it out on the company by griping. Then if they have

other gripes, suddenly you have sagging morale. Insti-

tutional feeding can be very sensitive—whether you’re

serving employees, hospital patients, school children, or

whatever.” So Renaud is settling for vending machines.

At the same time, specialized “food management” con-

tractors have also been hit hard by the recession—mainly

because of their lopsided concentration in office and plant

feeding. With combinations of vending machines and

manual food service, contractors now account for 70%

to 75% of the $10 billion industrial market. That com-

pares with only 10% of the $6 billion health care market

and 10% to 15% of the $7 billion education market.

Ad7

Because of increasingly stiff costs and a fall-off in

industrial employment and feeding, profits have slipped

at ARA Services, Canteen, Servomation, and other lead-

ing contractors. For giant ARA Services, the biggest of

the vending and contract feeding companies ($1.2 billion

in sales last year), food service now accounts for 71% of

total volume but only 55% of earnings. Without the

volume economies available to larger contractors, many

institutions that handle their own food service are feeling

even more of a squeeze.

The commissions gambit

In industrial feeding, many contractors started off on

the wrong foot by offering fat commissions to plant and

office clients. These often ran 5% to 15% of gross

volume. “It wasn’t until contractors began analyzing

operations that they discovered they were their own worst

enemies,” says Van Myers, a senior vice-president of

Wometco Enterprises Inc., a Miami food-service company.

“They were fighting to pay the highest commissions when

profits didn’t warrant it.”

Now most of the larger contractors are cutting back

commissions, rewriting contracts with cost-of-product es-

calators, and even including cancellation clauses of 30 and

60 days. In some instances, ARA and other contractors

simply shift to straight management fees. “The client

reimburses us ror all costs—labor, food, overhead—and

pays us a management fee of a percentage of the volume,

or perhaps a flat dollar amount,” says William S. Fish-

man, ARA president. This is self-adjusting for inflation

and permits the customer to control menu prices.

In return, employee food service often goes from being

a subsidized money-loser to a break-even operation—or

even a small profit center. Macke Co., for instance, has

come up with a Pick ’N Pay counter that offers pre-

packaged meals, deli platters, sandwiches, and other fast

Ad 8

foods. In terms of sheer volume, Macke claims that Pick

’N Pay moves food twice as fast as vending machines and

three times faster than a normal cafeteria. It also cuts

labor costs, because all food is prepared in a central com-

missary. “With Pick ’N Pay,” says Joseph P. Kingrey,

group vice-president of food and vending services for

Macke, “you can take an installation from a 10% loss to

6% profit.”

Cost control, however, must be rigid. Wometco’s vend-

ing division is now so highly computerized that at the

end of each day the headquarters office knows what each

vending installation sold that day and how much food will

be needed the following day. Then each week, the divi-

sion comes up with a profit-and-loss statement that helps

cut down on theft—always a problem for vending com-

panies. “We can tell almost immediately if someone is

clipping us,” says Vice-President Jose A. Martinez. “If

we come up with a cost that is higher than 0.5% of what

we think it should be, we get that word right back to our

regional managers. And since we are computerizing 10

basic items where the gross profit ranges from 25% to

75%, you can see how closely we watch expenses.”

Amid the viscissitudes of the industrial market, many

food-service contractors are turning more and more to

the educational market. As Earl J. Rosenstein, senior

vice-president of Interstate United Corp., notes: “Schools

have a much more stable population base. And unlike

manufacturing, where layoffs have cut our revenues, we

can plan on a long-term basis how to provide for the

facility and what revenues to expect.” Right now some

25 million youngsters in 88,000 schools are participating

in federally supported school lunch programs.

Bidding on schools

Yet because of increasingly tight budgets, school ad-

ministrators drive a hard bargain. Says one disgruntled

Ad 9

feeding contractor: “You can give the school district a

good in-stock position, furnish the exact product when

needed, deliver it frozen or whatever, and then the next

time around if you are 2¢ too high in your bid, the job

will go to somebody else who may not deliver. It can be

a lousy business.”

George R. Allin Jr., a food administrator for the

Arlington (Va.) schools, typifies today’s hard-nosed

school official. Under heavy budget pressure in the last

four years, Allin has helped switch Arlington’s schools

from on-site meal preparation to centralized kitchens.

Since then, the school system has cut its lunch-program

work force by more than half, trimmed wages by 40%,

and chopped the Arlington School Board’s lunch subsidy

from $500,000 a year to $200,000. Allin concedes that

something may have been lost in the process, citing the

switch to prepackaged meals for elementary-school chil-

dren. “Take fried chicken,” he says. “When you reheat

it, there’s steam under the foil, so it doesn’t come out

crispy. It’s a little soggy.” But he calls that a small

price to pay.

On a more limited scale, Armour Food Co. did a similar

job for a large state institution for retarded children.

The institution had two kitchens serving 900 children.

Armour experts suggested closing one kitchen, replacing

four conventional ovens with two more efficient convection

units, and putting more emphasis on convenience foods.

The result: 7,000 sq. ft. of space were turned into criti-

cally needed warehousing area, oven cooking time fell

30%, and the work force dropped 20%.

Unlike a few years ago when most contractors offered

only variations on the same standard meal packages,

many contractors now tailor entire programs to fit a

school’s needs. Edward Engoron, senior vice-president for

marketing at Mannings Inc., cites a recent contract that

Ad 10

Mannings signed with the University of Houston. Two

other food-service companies had given up on the uni-

versity’s two cafeterias after losing money. “We sat

down and asked students what they wanted to eat,” says

Engoron. “We found that they didn’t want two cafe-

terias. They wanted soups and health foods, and they

wanted McDonald’s.” So Mannings designed a Jack

Armstrong’s All-American Burger as part of a fast-food

operation, set up a counter for deli and soup offerings,

and converted a campus coffee house to a beer-and-wine

nightclub. “In the first four weeks of operation this

summer,” says Engoron, “we did twice the business per

week that the other operators did.”

No more lobster tails

Volume efficiencies are coming more slowly in the big,

lucrative health-care market—mainly because contract

specialists have only started penetrating that field. “As

labor becomes more and more the critical factor, food

management companies will take over,” says Edward A.

Hurtik, manager of food services for Hospital Affiliates

Inc., which owns or manages 65 hospitals. “But right

now, give me a good kitchen staff, and we can do the

job cheaper.”

Nor are the market’s needs as simple as some con-

tractors originally thought. John Metz, president and

founder of Custom Food Management Systems Inc., notes

that when his own company entered the health-care busi-

ness, he assumed that hospitals could lose their reputa-

tion for dull food by simply changing menus. “In the

beginning,” says Metz, “we even had lobster tails on the

menu. Since that time, we’ve had to eliminate some of

our high-cost items. We had to get practical.”

On the West Coast, where labor costs in hospital food

service runs as much as 15% higher than those in other

parts of the country, Kaiser Foundation Hospitals is

Ad 11

approaching the ultimate in elimination. Kaiser’s 11

northern California medical centers have done away with

all kitchens and most of the associated storage space and

equipment. In their place is a system of microwave

ovens for cooking flash-frozen entrees. The food is as-

sembled on meal trays at one of Marriott’s airline com-

missaries and delivered daily to each hospital, where the

trays are refrigerated until needed. “A typical 250 bed

hospital with a large cafeteria might have 40 full-time

people in food service,” says Florine Allen, Kaiser’s die-

tary consultant. “We have reduced the number to four.”

American Medicorp Inc., which owns and operates 45

hospitals, has similar ambitions. It plans to hire pro-

fessional food-service managers and hospital experts to

study all 37 of its in-house food operations, as well as

the eight hospital kitchens run by Saga Corp. and Stouf-

fer Corp. Already, Paul D. Powell, American Medicorp’s

director of purchasing, can tick off the problems: “We

should standardize menus, we haven’t gotten into con-

venience foods yet, our distribution system within the

hospitals is old-fashioned, and we prepare food in the

kitchens the same way we did many years ago.”

James Biggar, chairman and chief executive of Stouf-

fer, cites studies showing that “if you give patients

good, hot food and they are happier, they get well

quicker.” In its way, that could even serve as a prescrip-

tion of sorts for the entire food-service industry. “As

long as we deliver a good meal at a fair price and fair

return on investment,” says Allan P. Lucht, chairman

and president of Servomation, “this industry has got to

grow and prosper in the years ahead—rising costs or

not.”

How Ford Motor dishes up 18,000 meals a day

Ford Motor Co. may not be selling a lot of cars these

days, but it is selling plenty of employee meals. Every

aa Ad 18

day Ford dishes up 17,000 to 18,000 meals in 15 De- Joint Exhibit 17

troit-area locations, bringing in $5 million a year. While

this amounts to only 10% of Ford’s total employee feed- PRICE CHANGES

ing (the rest is handled by contractors), it still repre- (Effective Monday, February 9, 1976)

sents one of the largest company-operated programs in Soup (All) a

the country. Because of this, Ford watches its food serv- Milk and Orange Juice 0000000. cccesssseeeven...........

ice costs just as closely as its manufacturing costs. —, a \_—_™_™7=™7_—_—_7__ i!

As his main offensive tactic, Will O’Sullivan, Ford’s — LLL

manager of food services, has trimmed lunchtime serving a ee a aaa

hours, dropped bacon and some other pork items from the neem

menu, occasionally substitutes fish or other high-protein Bar B-Q’B (All) .........................

items for beef—and seldom hesitates to pass cost in- Bologna —_ a

creases along to customers. Ford’s biggest cost saver is ao en

its 100,000 sq. ft. central food processing center. It Cheeseburger...

handles butchering, salad preparation, baking, and other |

“pre-preparation.” Items are trucked from the center to — , Boiled saseeeesseneseneenscneneas

the various plants, where kitchen help cooks the meat, Fish Sandwich with Tartar...

mixes in the salad in ients, and puts everything on the Ham ...... a ATT

Computer help. If Ford needs 3,000 roast beef dinners Hot Dog a TT

with baked potatoes for the next day, a computer tells eg ss —

how much to order of whet ingredients, 3% Wo S055 ae Italian Sausage with Peppers...

lb. of potatoes,” says O’Sullivan, “we don’t buy more, nnn

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Ford’s objective is to break even, he says. “Even with peek aT

large, highly automated plants with few employees, it’s Polish —— with Peppers ee amaammaaae

difficult—but not impossible.” In an industry as auto Poor Boy i.

mated and efficient as the auto business, O’Sullivan Poor Girl a aT

naturally tends to feel that the level of food-service in- we

novation is lagging. Then he adds hopefully: “But there Salami... TT

are changes occurring.” ——

Sausage & Biscuit

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Ad 15

Joint Exhibit 18—Continued

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