Opposition Brief — U. S. Marine Corp. v. National Labor Relations Board

Suprems Court us.

FILED

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No. 91:1006 FEB 21 1992

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In the Supreme Court of the United States

OCTOBER TERM, 1991

U.S. MARINE CORPORATION, ET AL., PETITIONERS

VU.

NATIONAL LABOR RELATIONS BOARD, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE

NATIONAL LABOR RELATIONS BOARD

IN OPPOSITION

KENNETH W. STARR

Solicitor General

Department of Justice

JERRY M. HUNTER Washington, D.C. 20580

General Counsel (202) 514-2217

D. RANDALL FRYE

Acting Deputy General Counsel

NORTON J. COME

Deputy Associate General Counsel

LINDA SHER

Assistant General Counsel

National Labor Relations Board

Washington, D.C. 20570

QUESTIONS PRESENTED

1. Whether the National Labor Relations Board,

upon finding that a successor employer has unlaw-

fully refused to hire 34 of the predecessor’s employ-

ees in order to evade a bargaining obligation with

the union, may order as a remedy the reinstatement

of the predecessor’s terms and conditions of employ-

ment until the successor bargains in good faith with

the union to agreement or impasse.

2. Whether substantial evidence supports. the

Board’s finding that the successor employer violated

Section 8(a) (3) of the National Labor Relations Act

by refusing to hire 34 of the predecessor’s employees

in order to evade a bargaining obligation with the

union.

(1)

TABLE OF CONTENTS

J Page

I hc iidamamunnaegaianeasonocesseicoesueii 1

I re Cee reevemademecinnatiains 1

Ee SE SER core 2

ee es aapmiewaaseniduainminanneel 11

NISRA LL AT ATES ESCA OTRAS 22

TABLE OF AUTHORITIES

Cases:

American Press, Inc., 280 N.L.R.B. 937 (1986),

enforced, 833 F.2d 621 (6th Cir. 1987) .............. 13

American Press, Inc. V. NLRB, 833 F.2d 621 (6th

a saeniiesievvrneaiins 12

Detroit Edison Co. v. NLRB, 440 U.S. 301 (1979)... 18

Fall River Dyeing & Finishing Corp. v. NLRB, 482

Ss eneeecemnidonnn 4,6, 11

Hernandez Vv. New York, 111 S. Ct. 1859 (1991)... 3

Hola-Krome Co. v. NLRB, 947 F.2d 588 (2d Cir.

a od crn sacl daleaiaadevaiveeoabane 20

Holo-Krome Co. Vv. NLRB, Nos. 91-4061 & 91-4085

a I Sl acaaecedn eaemieaneinaswnaneynisbé 21

Howard Johnson Co. V. Detroit Local Joint Exec.

OE OE Te ee ee CC 6

INS vy. Zacarias, No. 90-1342 (Jan. 22, 1992) ........ 14

International Ass’n of Machinists v. NLRB, 595

F.2d 664 (D.C. Cir. 1978), cert. denied, 439 U.S.

a ne ce sess a ascinrcitatenieahiaisanineee 16

International Ladies’ Garment Workers v. Quality

Ree DEP ey, a): | 18

Kallman v. NLRB, 640 F.2d 1094 (9th Cir. 1981).. 12

NLRB v. Bachrodt Chevrolet Co., 468 F.2d 963

(7th Cir. 1972), vacated, 411 U.S. 912 (1973).... 17

NLRB v. Burns Int’l Sec. Services, Inc., 406 U.S.

ae cunsaad 4,6, 7,9, 11, 12

NLRB V. Gissel Packing Co., 395 U.S. 575 (1969).. 14

NLRB Vv. Spruce Up Corp., 529 F.2d 516 (4th Cir.

|) Uae lle A Renee Nein eet ID 16

IV

Cases—Continued : Page

NLRB Vv. Transportation Management Corp., 462

ie a 18, 20

Nazareth Regional High School v. NLRB, 549 F.2d

A On a eaectiieaeeauee’ 15, 16

Phelps Dodge Corp. V. NLRB, 313 U.*.177 (1941)... 13

Saks & Co. v. NLRB, 634 F.2d 681 (2d Cir. 1980).. 16

Shattuck Denn Mining Co. v. NLRB, 362 F.2d 466

I a enesndenins 20

Shepard v. NLRB, 459 U.S. 344 (1983) -........00....... 14

Spruce Up Corp., 209 N.L.R.B. 194 (1974), en-

forced, 529 F.2d 516 (4th Cir. 1975) 2.000000. 9,10, 12

Systems Management, Inc. v. NLRB, 901 F.2d 297

Are a) a ees 12

Szabo v. U.S. Marine Corp., 819 F.2d 714 (7th Cir.

I a a re 5

United States Postal Service Board of Governors V.

Mian, 4E0 UB. TEL CIGGB) ncccn cna nccesesecnceeoce ss 22

Virginia Elec. & Power Co. v. NLRB, 319 U.S. 533

7 RS SE Eni RUE i ie” PEN AM Se ee 14

Woelke & Romero Freming, Inc. V. NLRB, 454 U.S.

ED 6 Se Re a cee 17, 18

Wright Line, 251 N.L.R.B. 1083 (1980) ................. 20

Statutes:

National Labor Relations Act, 29 U.S.C. 151 et

seq.:

yk Fe SAE Rae ee eee er Renee 4

§ 8(a) (1), 29 U.S.C. 158 (a) (1) ........ eateries 4,9

§ 8(a) (3), 29 U.S.C. 158 (a) (8) .......2200 2... 5, 6, 15

§ 8(a) (5), 29 U.S.C. 158 (a) (5) -..000000.... 4,5, 6,9, 15

Roll) ftp ke | | SE cee mnnas 17, 18

SIO CS PEP U.S.C. TGOCG) a0. -nncacscerccceesveenerens 5

Iu the Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-1006

U.S. MARINE CORPORATION, ET AL., PETITIONERS

v.

NATIONAL LABOR RELATIONS BOARD, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF FOR THE

NATIONAL LABOR RELATIONS BOARD

IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals, sitting en

bane, Pet. App. la-60a, is reported at 944 F.2d 1305.

The decision and order of the National Labor Rela-

tions Board, Pet. App. 61la-159a, which includes the

decision of the administrative law judge, is reported

at 293 N.L.R.B. 669.

JURISDICTION

The judgment of the court of appeals was entered

on September 25, 1991. The petition for a writ of

certiorari was filed on December 23, 1991. The juris-

diction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

2

STATEMENT

1. This case grows out of the acquisition by peti-

tioner U.S. Marine Corp. of the Hartford, Wisconsin,

manufacturing plant that was previously owned by

Chrysler Marine Corporation (Chrysler), a subsid-

iary of Chrysler Corporation.’ From 1965 until 1984,

Chrysler used the Hartford plant to manufacture

marine and industrial engines. During that time, the

plant’s production and maintenance employees were

represented by the Allied Industrial Workers of

America (Union). In 1983, Chrysler agreed to sell

the plant to U.S. Marine. U.S. Marine assigned

James Hoag to be general manager of the plant with

responsibility for hiring employees. Pet. App. 3a-4a.

During negotiations for the sale of the Hartford

plant, U.S. Marine stated to Chrysler that it would

neither recognize the Union nor follow the terms of

the existing collective bargaining agreement.’ In-

stead, U.S. Marine intended to apply its own wage

plan and working conditions to the employees, al-

though it intended to encourage former Chrysler

employees to apply and anticipated hiring at least

85% of them. U.S. Marine also said to Union repre-

sentatives that it “had no intention of recognizing the

union,” “wanted no part of the [collective bargain-

ing] contract,” and was “too busy” to meet with the

Union. Pet. App. 4a.

1The transaction was negotiated between petitioner Bay-

liner Marine Corp. and Chrysler; U.S. Marine was then or-

ganized, with the same owners and officers as Bayliner, as the

vehicle for acquiring the plant. Pet. App. 3a & n.2. In this

opposition, we will refer to both petitioners as “U.S. Marine.”

2 The most recent collective bargaining agreement between

the Union and Chrysler was in effect from July 1, 1983, to

June 30, 1984. Pet. App. 4a n.3.

3

After the sale was consummated in January 1984,

Chrysler laid off its former work force of 262 pro-

duction and maintenance employees. Nearly all of

them applied to U.S. Marine. U.S. Marine’s account-

ing department concluded that the plant would need

396 employees by June. Because U.S. Marine de-

sired to resume operations promptly, it reopened on

January 23 with 219 employees, all of whom were

former Chrysler employees. By January 25, U.S.

Marine had hired 231 employees, 222 of whom were

former Chrysler employees. By January 30, the last

day on which U.S. Marine hired a former Chrysler

employee, it had hired 261 production and mainte-

nance employees, 223 of whom were former Chrysler

employees. Pet. App. 6a-7a & n.4.

Thirty-four of the former Chrysler employees who

had applied to U.S. Marine were not hired. Those

employees were skilled and versatile in working in

various jobs in the plant, had years of experience,

and had work records comparable to the former

Chrysler employees who were hired. U.S. Marine

never informed those applicants why they were not

hired, but continued tw hire other employees, eventu-

ally attaining total employment of about 323 employ-

ees. Pet. App. 7a, 22a.

On January 25, two days after the plant reopened,

the Union requested recognition. At that time, 222

of U.S. Marine’s 231 employees were former Chrysler

employees. U.S. Marine did not immediately respond

to the Union’s request. Several days later, however,

James Hoag personally increased the projected com-

plement of employees to be hired to 460 workers.

This increase was purportedly required by greater

production quotas for May and June, the basis for

which Hoag was never able to explain, and by higher

4

assumed absentee rates, which reflected vacation al-

lowances that the Chrysler employees (but not the

U.S. Marine employees) would have had. Using the

inflated projection, the number of former Chrysler

employees that U.S. Marine had hired constituted

less than a majority of the employees that U.S. Ma-

rine anticipated hiring. The increased projection

therefore served to support a sham claim by U.S.

Marine that it was not obligated to recognize the

Union. Pet. App. 8a-9a, 14a, 23a-25a.°

2. By February 2, 1984, U.S. Marine had still

failed to respond to the Union’s request for recogni-

tion. The Union therefore filed an untair labor prac-

tice charge with the Board, alleging that U.S. Ma-

rine had unlawfully refused to bargain with the

Union, in violation of Section 8(a)(5) and (1) of

the National Labor Relations Act, 29 U.S.C. 158(a)

(5) and (1).* A complaint issued and the Board

sought a temporary injunction in district court pur-

’ When a successor firm continues substantially the same

business as its predecessor and when a majority of the staff

hired by the new employer formerly worked for the predeces-

sor, the successor has a duty to recognize and bargain with the

union that represented those employees. NLRB v. Burns Int'l

Security Services, Inc., 406 U.S. 272, 281 (1972); Fall River

Dyeing & Finishing Corp. V. NLRB, 482 U.S. 27, 36-41 (1987).

The successor’s obligation to bargain is determined at the time

that it has hired a “substantial and representative” comple-

ment of its anticipated workforce. Fall River, 482 U.S. at

47-52.

4 Section 8(a) (5), 29 U.S.C. 158(a) (5), makes it an unfair

labor practice for an employer “to refuse to bargain collec-

tively with the representatives of his employees.” Section

8(a) (1), 29 U.S.C. 158 (a) (1), makes it an unfair labor prac-

tice for an employer to “interfere with, restrain, or coerce”

the exercise of rights protected by Section 7 of the Act, 29

U.S.C. 157.

5

suant to Section 10(j) of the Act, 29 U.S.C. 160(j),

requiring U.S. Marine to fulfill its bargaining obli-

gations. Pet. App. 9a.

U.S. Marine defended against the Section 10(j)

action by denying that it had any obligation to recog-

nize the Union; it asserted that, because its full com-

plement of employees would consist of 460 workers,

the former Chrysler employees would not constitute a

majority of its work force. Rejecting that contention,

the district court granted an injunction ordering U.S.

Marine to recognize and bargain with the Union, and

to furnish it with requested information. Pet. App.

9a-10a. Nevertheless, U.S. Marine continued to meet

with a committee of employees to discuss working

conditions without the Union, an action for which it

was held in contempt of the injunction. See Szabo v.

U.S. Marine Corp., 819 F.2d 714 (7th Cir. 1987).

U.S. Marine also frustrated negotiations with the

Union by declaring, after about six months of nego-

tiations, that the parties were at an impasse even

though U.S. Marine had made only a single contract

proposal to the Union, which the Union had rejected

while requesting further talks. In January 1985, U.S.

Marine unilaterally implemented the contract that

the Union had rejected. Pet. App. 10a.

3. The administrative law judge (ALJ) deter-

mined that U.S. Marine had violated Section 8(a) (5)

by refusing to recognize the Union, furnish it with

information, and bargain in good faith; by unilater-

ally implementing changes in employment terms with-

out good faith bargaining; and by bargaining with

the employees without the Union. Pet. App. 11a,

153a. The ALJ rejected the charge that U.S. Marine

had violated Section 8(a)(3) of the Act, 29 U.S.C.

158(a)(3), by discriminatorily refusing to hire 34

6

of the former Chrysler employees.’ Pet. App. lla-

12a, 126a-133a.

The Board affirmed the ALJ’s finding of a violation

of Section 8(a) (5). Pet. App. 62a. The Board, how-

ever, also determined that U.S. Marine had violated

Section 8(a)(2) in discriminatorily failing to hire

the 34 Chrysler employees. The Board found that

Hoag had falsely inflated the employment projections

at U.S. Marine to 460 employees for the purpose of

evading U.S. Marine’s bargaining obligation,’ and

that it was “integral” to U.S. Marine’s scheme to

avoid its bargaining obligation that Hoag failed to

hire the 34 Chrysler employees. Pet. App. 69a. The

Board explained that U.S. Marine intended to rely

on Hoag’s falsified employment projection to justify

a claim that its former Chrysler employees did not

constitute a majority of its work force; if the 34

additional former employees had been hired, U.S.

Marine would have been unable to sustain its claim

5 Section 8(a) (3) makes it an unfair labor practice for an

employer to engage in “discrimination in regard to hire or

tenure of employment or any term or condition of employ-

ment to encourage or discourage membership in any labor

organization.” 29 U.S.C. 158(a) (3). It is well settled that,

although a new employer is not obligated to rehire the existing

work force, the employer violates Section 8(a) (3) when it re-

fuses to hire the former employees in order to avoid having

to recognize the union that represented them. Fall River, 482

U.S. at 40-41; Howard Johnson Co. Vv. Detroit Local Joint

Exec. Bd., 417 U.S. 249, 262 n.8 (1974) ; Burns, 406 U.S. at

280 n.5.

6“For reasons fully supported by the record, the judge

found that this 460 figure was false and misleading, and had

been developed by Hoag shortly after January 31 to furnish

a mathematical basis for a defense to the Union’s bargaining

claim.” Pet. App. 64a.

cc

7

under its sham estimate of the total work force.’ The

Board concluded that the General Counsel had estab-

lished a “strong prima facie case” that the failure to

hire the 34 employees was discriminatorily motivated,

and that U.S. Marine failed to carry its burden to

prove that it would not have hired those employees

apart from its scheme to avoid bargaining with the

Union.® Pet. App. 66a.

The Board then turned to the issue of remedy.

Under NLEB v. Burns Int'l Security Services, Inc.

406 U.S. 272 (1972), the Board recognized that “a

successor employer is ordinarily free to set initial

employment terms, without preliminary bargaining

with the incumbent union.” Pet. App. 70a. But when

“it is perfectly clear that the new employer plans to

retain all of the employees in the unit,’ the successor

must consult the union before altering the terms and

conditions of employment.” Jd. at 70a-7la, quoting

Burns, 406 U.S. at 294-295. Because U.S. Marine

had refused to hire the 34 employees based on its

7 “Hoag’s fabrication of the 460 employment projection fig-

ure made it imperative that U.S. Marine hire no more than

230 Chrysler employees,” Pet. App. 69a, and the remaining

34 Chrysler employees fell victim to that need, because U.S.

Marine had already hired 223 former Chrysler employees.

Ibid.

8“The record clearly establishes [U.S. Marine’s] animus

and discriminatory intent, which appeared even before [U.S.

Marine] assumed the Chrysler operations and continued

through the bargaining that followed as a result of the dis-

trict court’s injunction. * * * In addition, [U.S. Marine has]

advanced no legitimate reasons for the refusal to hire the

34 former Chrysler employees. The record shows that all the

employees who were not hired were good employees, had ex-

emplary work records, and were versatile and skilled in vari-

ous jobs in the plant.” Pet. App. 67a-68a.

8

discriminatory motive to avoid a bargaining obliga-

tion, the Board concluded that “absent the[] unlaw-

ful purpose, [U.S Marine] would have retained sub-

stantially all of the predecessor’s employees.” Pet.

App. 7la. Accordingly, the Board found that U.S.

Marine was not entitled to set initial terms without

first consulting the Union. Jd. at 72a. As a remedy,

the Board required U.S. Marine to restore the prede-

cessor’s terms and conditions of employment. Jd. at

70a.° In so doing, the Board relied on the established

principle that “in cases involving discriminatory con-

duct, the restoration of the status quo ante is a nec-

essary remedy as it is the Board’s policy, that the

wrongdoer, rather than the innocent victim, should

bear the hardships of the unlawful action.” Jd. at

72a.”

® Specifically, the Board ordered that U.S. Marine:

On request of the Union, rescind any departures from

terms and conditions of employment that existed im-

mediately before [U.S. Marine’s] takeover from Chrysler

* * * of the Hartford * * * operations, retroactively re-

storing preexisting terms and conditions of employment,

including wage rates and benefit plans, and make the

employees whole by remitting all wages and benefits that

would have been paid absent such unilateral changes from

January 23, 1984, until [U.S. Marine] negotiate[s] in

good faith with the Union to agreement or to impasse.

Pet. App. 77a. The order does not require, however, “rescis-

sion of any wage increase or other benefits that previously

have been granted the unit employees.” Jd. at 70a n.6.

10 The Board’s order also required U.S. Marine to recognize

and bargain with the Union; to offer immediate reinstatement

to the discriminatees ; tec ma’e employees whole for any losses

suffered by reason of the discrimination; and to post a Board-

prescribed notice at the plant describing U.S. Marine’s obli-

gations. Pet. App. 76a-79a.

9

4. The court of appeals, sitting en banc, enforced

the Board’s order. Because U.S. Marine did not con-

test that it had violated Section 8(a) (5) and (1) by

failing to bargain, the court summarily enforced that

aspect of the Board’s order. Pet. App. 17a-18a. The

court of appeals also unanimously enforced the

Board’s order that U.S. Marine had engaged in un-

lawful discrimination, in violation of Section

8(a) (3), in refusing to hire the 34 former Chrysler

employees. Pet. App. 19a-29a.

On the issue of remedy, the court of appeals en-

forced the Board’s order by a 6-5 vote. The majority

concluded that the Board had properly ordered U.S.

Marine to reinstate the conditions of employment in

effect under Chrysler, “in order to restore the situa-

tion to what it would have been absent U.S. Marine’s

unlawful conduct.” Pet. App. 33a. The court of ap-

peals explained that “[b]ut for its unlawful conduct,

U.S. Marine would have hired substantially all of

Chrysler’s employees and therefore would have been

obligated to consult with the Union before setting the

terms and conditions of employment.” Jbid., quoting

Burns, 406 U.S. at 294-295. The court rejected U.S.

Marine’s arguments (1) that it was never “perfectly

clear” that, absent discrimination, U.S. Marine would

have hired the entire former Chrysler work force

(Pet. App. 34a); (2) that, even if U.S. Marine had

intended to hire the entire work force, it was never-

theless entitled unilaterally to impose its own terms

under Spruce Up Corp., 209 N.L.R.B. 194 (1974),

enforced, 529 F.2d 516 (4th Cir. 1975) (Table) (Pet.

App. 34a-35a) ;"' (3) and that the Board’s order was

"In Spruce Up, the Board considered the situation in which

the successor employer, before or at the same time as it offered

10

punitive rather than remedial (id. at 36a-39a).”

Judge Easterbrook, writing for the dissent, agreed

with the majority that “[s]ubstantial evidence sup-

_ ports the Board’s conclusion that U.S. Marine did

what it thought expedient to evade its obligation to

bargain collectively with its workers.” Pet. App. 5la.

He concluded, however, that the remedy in this case

was punitive. Judge Easterbrook stated that because

U.S. Marine would have been entitled to set its own

initial terms even if it had avowedly set out to hire

all of Chrysler’s employees, the Board may not impose

a remedy that denies U.S. Marine that right merely

upon a finding that U.S. Marine had discriminated

against certain employees to avoid incurring a later

bargaining obligation. Pet. App. 52a-60a."

jobs to the predecessor’s work force, announces that the offet

is made on new terms. In that setting, the Board found, it is

not “perfectly clear’ that the successor will hire all of the

prior work force (as some or all may refuse the new terms),

and, accordingly, there is no duty to consult with the union

before the employer sets those terms. 209 N.L.R.B. at 195.

The court of appeals explained that Spruce Up is inapplicable

here because U.S. Mairne had discriminatorily “‘refuse[d] un-

lawfully to hire its predecessor’s employees in order to avoid

having to recognize and bargain with the union.” Pet. App.

35a.

12 The court explained that it is well settled that the remedy

for discrimination is restoration of the status quo ante; the

difficulty in this case is in determining what the situation

would have been had U.S. Marine not relied on a discrimina-

tory scheme to avoid an obligation to bargain with the Union.

That uncertainty should be resolved against U.S. Marine, since

it was “the employer’s conduct [that] has confused the situa-

tion.” Pet. App. 38a-39a.

13 The court of appeals and Justice Stevens denied peti-

tioners’ request for a stay pending the filing of a certiorari

11

ARGUMENT

1. Petitioners contend (Pet. 16-27) that the court

of appeals’ decision requiring U.S. Marine to restore

Chrysler’s terms and conditions of employment is in-

consistent with this Court’s decision in Burns, con-

flicts with the decision of other circuits, and repre-

sents an impediment to the takeover of failing busi-

nesses. Those contentions lack merit.

a. In Burns, this Court held that a successor is

ordinarily free to establish its initial terms and con-

ditions of employment without bargaining with the

union. The rule reflects the fact that, in the usual

case, it will not be known whether the new company

will hire a majority of its employee complement from

the predecessor’s work force until the employees are

actually retained. The Court indicated, however, that

an exception to that rule may exist in cases when “it

is perfectly clear that the new employer plans to re-

tain all of the employees in the unit”; in that setting,

it may “‘be appropriate to have him initially consult

with the employees’ bargaining representative before

he fixes terms.” 406 U.S. at 294-295; Fall River

Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 47

n.14 (1987).

The Court did not have occasion to explain in

Burns the situations in which the “perfectly clear”

exception would apply. Since then, the Board and the

courts have sought to develop rules for applying the

petition. See App. B to Application to Stay the Judgment

Pending Certiorari, filed by petitioners in this Court, No.

A-382 (denied Dec. 10, 1991) (Stevens, J., in chambers). The

court of appeals stated that “after thorough en banc considera-

tion, [the court] has determined that there is no division

among the circuits on the issue appellants intend to present in

their petition.” Jd. at 2.

#

12

Burns exception. This case, however, does not in-

volve the application of the Burns rule or its excep-

tion. Here, the Board faced the quite different issue

of what remedy is appropriate when a successor has

discriminatorily refused to hire employees in order to

evade a bargaining obligation. That issue is distinct

from the question of what rights a new employer

would have in the absence of discriminatory refusals

to hire in order to evade a bargaining obligation.

The courts of appeals have consistently upheld the

Board’s position that, when a firm has engaged in dis-

crimination to avoid its successorship obligation, the

Board may appropriately remedy that violation by re-

quiring the successor to reinstate the predecessor’s

terms and conditions of employment. See Pet. App.

3la-34a; Systems Management, Inc. v. NLRB, 901

F.2d 297, 306-307 (3d Cir. 1990); American Press,

Inc. v. NLRB, 833 F.2d 621, 624-625 (6th Cir. 1987) ;

Kallmann v. NLRB, 640 F.2d 1094, 1102-1103 (9th

Cir. 1981).’* The purpose of such a remedy is not a

punitive one, but is to restore the situation, to the

extent possible, to the one that would have prevailed

but for the violation. Phelps Dodge Corp. v. NLRB,

313 U.S. 177, 194 (1941).

14 For example, the Board’s Spruce Up rule (see note 11,

supra) reflects one aspect of the Board’s interpretation of

the Burns exception. That rule, however, does not address the

situation presented here, involving discriminatory refusals to

hire.

15 In Kallmann, the court agreed with the Board that “the

employer should not be permitted to benefit from his illegal

conduct” and therefore may be required retroactively to apply

the predecessor’s terms. It disagreed only with the “extent”

of the remedy ordered Trthat case. 640 F.2d at 1103 (holding

that the prior terms should not apply “beyond a period allow-

ing for a reasonable time of bargaining”). Petitioners have

never made such a claim in this case.

13

When an employer has sought to circumvent bar-

gaining by discriminatorily refusing to hire the

former company’s employees, the employer has made

it impossible to determine precisely what terms and

conditions would have been established had the em-

ployer bargained with the union. The Board’s re-

sponse to the discrimination is to restore, as the status

quo ante, the predecessor’s terms and conditions in

order to set a base line for the award of back pay and

other make-whole relief, and to enable the future bar-

gaining to occur under conditions which approximate

those that would have existed had there been no dis-

crimination and the old work force, through its union,

had commenced negotiations with the employer.

While the Board’s make-whole remedy must estimate

the situation that would have occurred without unlaw-

ful conduct, “any uncertainty about what [the new

employer] would have done absent its unlawful pur-

pose must be resolved against [it], because it cannot

be permitted to benefit from its unlawful conduct.”

American Press, Inc., 280 N.L.R.B. 937, 938 (1986),

enforced, 833 F.2d 621 (6th Cir. 1987).

The dissenting opinion in the court of appeals ac-

knowledged that “the Board could resolve against

U.S. Marine all factual ambiguities created by its

illegal conduct.” Pet. App. 55a. The dissent simply

helieved that, on the facts of this case, it was clear

that U.S. Marine’s employees would not have been

offered Chrysler’s terms of employment even if U.S.

Marine had acted lawfully and had not discriminated

against former Chrysler employees. The Board, how-

ever, made no such finding, nor is there evidence in

the record that would compel such a finding.” Cf.

16 Judge Easterbrook claimed that, even if U.S. Marine had

not discriminated, the initial terms of employment “still would

have been those U.S. Marine set, not those Chrysler set”; and

14

INS v. Zacarias, No. 90-1342 (Jan. 22, 1992), slip.

op. 3, 6 (substantial evidence inquiry means that an

agency decision cannot be set aside unless the evi-

dence is “so compelling that no reasonable factfinder

could fail to find” facts other than those found by the

agency). In light of the Board’s broad discretion to

draw inferences from the record and to fashion rem-

edies for unfair labor practices, there is no basis for

overturning its general approach in this class of cases.

See Virginia Elec. & Power Co. v. NLRB, 319 U.S.

533, 539-540 (1943) (fashioning of remedies is “for

the Board not the courts to determine” and Board’s

order must stand unless it represents “‘a patent at-

tempt to achieve ends other than those which can

fairly be said to effectuate the policies of the Act’’) ;

Shepard v. NLRB, 459 U.S. 344, 349 (1983); NLRB

v. Gissel Packing Co., 395 U.S. 575, 612 n.32

(1969)."

even with bargaining, “‘[i]t is unimaginable that U.S. Marine

would have agreed to use [Chrysler’s] terms.” Pet. App. 58a.

The Board, however, had to select some terms of employment

to apply in framing a retrospective remedy, and it was not

required to speculate that, even if U.S. Marine had recognized

its bargaining obligation, it would have set the same initial

terms for the former Chrysler employees as it did in reliance

on its discriminatory scheme. Nor was the Board required to

invent a hypothetical set of compromise terms that would have

been adopted if U.S. Marine had not violated the law. Instead,

the Board reasonably resolved the uncertainty against the em-

ployer in order “to prevent U.S. Marine from taking advan-

tage of its wrongdoing to the detriment of the employees.” /d.

at 38a.

17 Judge Easterbrook thought that the Board’s statement

that U.S. Marine had “forfeited any right [it] may have had

as a successor to impose initial terms,” Pet. App. 72a, revealed

that the Board’s make-whole order was actually a “penalty,”

rather than a “remedy.” Jd. at 57a. The Board’s statement,

15

b. The cases cited by petitioners (Pet. 18-26) do

not conflict with the Board’s approach in discrimina-

tion cases because petitioners’ cases do not involve

employers who engaged in discrimination in order to

evade a duty to recognize the union. For example, in

Nazareth Regional High School v. NLRB, 549 F.2d

873, 881 (2d Cir. 1977), the Board found an unlaw-

ful failure to bargain under Section 8(a)(5). The

court of appeals determined that, because the succes-

sor in that case had never “promised re-employment

on the existing terms,” there was no duty to bargain

over initial terms; the court accordingty found that

the employer had not violated Section 8(a)(5) in

unilaterally imposing initial terms of employment.

Unlike petitioners, however, the employer in Naza-

reth had not set initial terms while simultaneously

engaging in a discriminatory scheme designed to

evade recognition of the union, and was not subject

to a remedy for that violation of Section 8(a) (3).

Nazareth, therefore, did not address the issue pre-

sented here.**

however, simply meant that since U.S. Marine’s unlawful con-

duct had made it impossible to determine what terms would

have been offered to the Chryler employees if U.S. Marine had

not practiced an illegal scheme to avoid a bargaining obli-

gation with the Union, it was necessary to return to the status

quo ante and send the parties to the bargaining table. This is

the way the majority understood the Board’s approach. /d.

at 38a (“[R]estoration of the previously existing employment

terms, the status quo ante, is an appropriate remedy,” although

“imprecise because it must estimate to some degree the situa-

tion that would have occurred if there had been no discrimina-

tion. * * * A return to the status quo ante at least allows the

bargaining process to get underway.’’).

18 Petitioners misleadingly suggest (Pet. 23 n.9) that

Nazareth involved a claim of discrimination which makes it

similar to this case. In Nazareth, the court of appeals rejected

16

The same is true of the Second Circuit’s later deci-

sion in Saks & Co. v. NLRB, 634 F.2d 681, 687

(1980). That case refined the court’s analysis of

when the Burns “perfectly clear” exception can ap-

ply, but, as the court of appeals in this case noted,

in Saks, as in Nazareth, the Board did not “find that

the employer had discriminated against former em-

ployees because of their union membership.” Pet.

App. 35a-37a n.22.

In NLRB v. Spruce Up Corp., 529 F.2d 516 (4th

Cir. 1975) (Table), and International Ass’n of Ma-

chinists v. NLRB, 595 F.2d 664, 672-676 (D.C. Cir.

1978), cert. denied, 439 U.S. 1070 (1979), the

courts upheld the Board’s conclusion that the succes-

sor firms, having offered jobs to the old company’s

employees while indicating that terms of employment

would be different, were not required to bargain over

those initial terms and had acted lawfully in not do-

ing so. Obviously, those cases did not require the

Board to formulate a remedy for discriminatory re-

fusals to hire. In sum, the courts that have consid-

ered the Board’s remedial approach in discrimination

cases have unanimously upheld it; the cases cited by

petitioners did not address the issue.

ce. Petitioners’ claim (Pet. 24-27) that the Board’s

approach in this case will inhibit business transfers

is unfounded. Contrary to petitioners’ contention

as “time-barred” a discrimination claim involving only a single

employee, who was refused employment because of his union

activity, and not, as here, to affect the union’s majority status.

549 F.2d at 882. Moreover, the discrimination finding in

Nazareth had not been the basis for the Board’s remedy.

Herve, in contrast, the court of appeals unanimously upheld

the finding of unlawful discrimination to avoid bargaining,

and it was that finding that served as the linchpin for the

Board’s remedial order.

17

(Pet. 26), the Board’s approach does not ignore the

great ‘“‘public benefit in preserving the successor’s

ability to make immediate operating changes,” NLRB

v. Bachrodt Chevrolet Co., 468 F.2d 963, 973 (7th

Cir. 1972) (Stevens, J., dissenting), vacated, 411

U.S. 912 (1973), or unduly burden the process of

reviving a failing business. A new employer is free

to offer its new employees such initial terms as it

chooses and to hire whomever it chooses, so long as

its hiring decisions are not motivated by antiunion

considerations. Only where, as here, the employer

unlawfully discriminates against its predecessor’s em-

ployees does the remedy at issue in this case apply.

The holding below does not imperil lawful business

transfers; it simply addresses the unique remedial

problems raised when an employer, such as U.S.

Marine, embarks on a calculated scheme to evade

bargaining through discrminatory refusals to hire.

d. Finally, review is not warranted because peti-

tioners’ remedial claim is jurisdictionally barred. Al-

though petitioners raised that claim in the court of

appeals, petitioners never raised it before the Board.

Section 10(e) of the Act, 29 U.S.C. 160(e), provides

that “[n]o objection that has not been urged before

the Board * * * shall be considered by the court, un-

less the failure or neglect to urge such objection shall

be excused because of extraordinary circumstances.”

Petitioners have shown no “extraordinary circum-

stances” here.

While the Board’s remedy in this case granted re-

lief that had not been ordered by the ALJ, petitioners

never filed a motion for reconsideration to challenge

the Board’s decision. That failure constitutes a juris-

dictional bar to their current claim. See Woelke &

Romero Framing, Inc. v. NLRB, 454 U.S. 645, 665-

666 (1982) (finding court of appeals to be “without

easement nit

18

jurisdiction” to consider an issue not raised before

the Board by the filing of a “petition for reconsidera-

tion” or otherwise); International Ladies’ Garment

Workers v. Quality Mfg. Co., 420 U.S. 276, 281 n.3

(1975) (Section 10(e) barred company’s challenge

because the company had “failed to file a petition for

reconsideration” after the Board rendered an unex-

pected decision) .”°

2. Petitioners contend (Pet. 27-30) that the court

of appeals erred in upholding the Board’s finding

that U.S. Marine engaged in unlawful discrimination.

Specifically, they argue that the Board improperly

placed the burden on U.S. Marine to show a “con-

vincing rationale” for failing to hire 34 of the former

Chrysler employees. That contention, which the

court of appeals unanimously rejected, misconceives

the burden of proof allocation approved in NLRB v.

Transportation Management Corp., 462 U.S. 393

(1983), and ignores the substantial evidence that

supports the Board’s finding of unlawful discrimi-

nation.

In Transportation Management, the Court held

that, under the Act, the General Counsel of the Board

bears the burden of proving by a preponderance of

the credible evidence that an employee’s union mem-

bership or activity was a substantial or motivating

19 The court of appeals held that Section 10(e) did not apply

here because the remedy issue was presented to the Board by

the Board’s General Counsel and the Union and because there

was no danger of repetitious appeals. Pet. App. 30a n.17. The

court of appeals’ functional approach to waiving the strict

jurisdictional requirement of Section 10(e) conflicts with the

mandatory language of the statute and with this Court’s un-

yielding enforcement of it. See Detroit Edison Co. v. NLRB,

440 U.S. 301, 311 & n.10 (1979).

19

factor in the employer’s adverse employment decision.

After the General Counsel has made such a showing,

however, the employer can avoid liability by showing

it would have taken the same action regardless of the

forbidden motivation. 462 U.S. at 401. The court of

appeals correctly concluded that “[t]here is substan-

tial evidence, both direct and circumstantial, from

which the Board could infer that thirty-four of the

applicants were not hired because they were union

members who formerly had worked for Chrysler.”

Pet. App. 28a.

The record shows that U.S. Marine told both the

Union and Chrysler, before finalizing the sale, that

it had no intention of dealing with the Union. It

further shows that U.S. Marine falsely inflated the

work force figures in order to obtain a basis for

claiming that the 223 Chrysler employees already

hired did not constitute a majority (and thus there

was no obligation to bargain with the Union). The

record also shows that, under the falsely inflated

work force projection, it was necessary for U.S. Ma-

rine to avoid hiring the 34 employees to prevent a

bargaining obligation from accruing under the false

projection.” Finally, U.S. Marine failed to advance

any legitimate reasons for its refusal to hire the

additional 34 Chrysler employees, who were good

employees, were versatile and skilled in various jobs

at the plant, had worked at the plant a minimum of

ten years, and had work-related characteristics com-

2° As the Board explained, petitioners’ “fabrication of the

460 employment projection figure made it imperative that U.S.

Marine hire no more than 230 Chrysler employees”; if the 34

discriminatees had been hired, petitioners would have overshot

the majority mark. Pet. App. 69a.

eae

20

parable to the 223 Chrysler employees who were

hired.”

There is no merit to petitioners’ contention (Pet.

28) that the Board improperly shifted the burden of

proof by considering the inadequacy of U.S. Marine’s

reasons for failing to hire the 34 Chrysler employees

“as an element of the General Counsel’s prima facie

case of antiunion discrimination.” Nothing in Trans-

portation Management supports the view that unlaw-

ful motivation must be established solely by inde-

pendent evidence before the weakness of the employ-

er’s explanation can be considered. Indeed, in its

Wright Line decision, 251 N.L.R.B. 10838 (1980),

which enunciated the burden-shifting analysis ap-

proved in Transportation Management, the Board

specifically noted that “[t]he absence of any legiti-

mate basis for an action, of course, may form part

of the proof of the General Counsel’s case.” Jd. at

1089 n.12, citing Shattuck Denn Mining Company

v. NLRB, 362 F.2d 466 (9th Cir. 1966).

Petitioner’s reliance (Pet. 28-29) on Holo-Krome

Co. v. NLRB, 947 F.2d 588 (2d Cir. 1991), is un-

availing. The panel decision did state that the Board

improperly “considered the weakness of rebuttal evi-

dence * * * to find that the General Counsel estab-

lished a prima facie case.” Jd. at 592. On the

Board’s petition for rehearing, however, the panel

21 Relying on the ALJ’s statement that there is “no sub-

stantive evidence of why one person was hired and one was

not,” petitioners suggest (Pet. 27-28) that there can be no

determination that U.S. Marine discriminated against the 34

applicants because they were union members who formerly

worked for Chrysler. As the court of appeals explained, how-

ever, U.S. Marine’s “unlawful scheme to avoid a bargaining

obligation was furthered by the refusal to hire some of the

former Chrysler employees, not by the refusal to hire those

specific applicants.” Pet. App. 23a n.11.

21

issued a supplementary opinion recognizing that

“Tt]o the extent that our opinion faulted the Board

for considering the employer’s explanation in the

assessment of the prima facie case, it was thus a

shade too broad.” Holo-Krome Co. v. NLRB, Nos.

91-4061, 91-4085 (2d Cir. Jan. 17, 1992), slip op.

14.” After an extensive review of the Board’s alloca-

tion of the burden of proof in discrimination cases,

the court of appeals explained that:

The Board wants the ALJ to make an initial

determination as to whether the General Counsel

has proved that protected activity was part of

the motivation of the employer’s conduct. In

making that determination, the ALJ may use all

of the record evidence. This clearly includes

whatever explanation the employer gave to the

employees during the episode, and, it apparently

also includes the explanation that the employer

presented at the hearing. Where the Board

draws the line, however, is in the consideration

of the employer’s affirmative defense [that it

would have taken the same action without re-

gard to the improper motive]. That defense is

not to be considered until the ALJ has deter-

mined that the General Counsel has presented a

prima facie case. Thus, the employer’s explana-

tion for the action it took can be assessed in de-

termining whether a prima facie case has been

shown, but the employer’s affirmative defense as

to the action it would have taken if no improper

motivation had existed cannot be assessed until

the prima facie case has been proven.

Slip op. 10. The court of appeals then disavowed any

suggestion that the Board errs when it considers “the

22 We have lodged copies of the opinion on rehearing in

Holo-Krome with the Clerk of this Court.

22

employer’s explanation as elicited by the General

Counsel” in determining whether the employer was

motivated by an anti-union purpose. The court also

made clear that “if the employer elects to offer evi-

dence rebutting the General Counsel’s prima facie

case (whether or not framed as an affirmative de-

fense), the ALJ is entitled to assess the entire record

in determining whether the prima facie case remains

proven.” Jd. at 11-12.” In light of the clarifying

opinion in Holo-Krome, it is readily apparent that

there is no conflict in the circuits on this issue.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

JERRY M. HUNTER

General Counsel

D. RANDALL FRYE

Acting Deputy General Counsel

NORTON J. COME

Deputy Associate General Counsel

LINDA SHER

Assistant General Counsel

National Labor Relations Board

FEBRUARY 1992

23 The factfinder’s consideration of the entire record, includ-

ing the employer’s explanation when offered, is the normal

procedure in resolving claims of unlawful discrimination. See

United States Postal Service Board of Governors Vv. Aikens,

460 U.S. 711, 715 (1983) ; Hernandez v. New York, 111 S. Ct.

1859, 1866 (1991) (plurality opinion).

WoW. S. GOVERNMENT PRINTING OFFICE; 1992 312324 45332