Petition for Writ of Certiorari — Banknote Corp. of America v. National Labor Relations Board

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Supreme Court, U.s.

rFiL sg D

206 OCT 3 0 1996

No. _ OFFICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1996

BANKNOTE CORPORATION OF AMERICA, INC.,

Petitioner,

NATIONAL LABOR RELATIONS BOARD,

Respondent.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Second Circuit

PETITION FOR WRIT OF CERTIORARI

Of Counsel: J. RicHarp HAMMETT

JoHN D. FiscHEeR

Brown McCarroii & Oaks

HARTLINE

2727 Allen Parkway,

Suite 1300

Houston, TX 77019

(713) 529-3110

(713) 525-6295 (Fax)

Counsel of Record For

Petitioner

Lewis B. GARDNER

BROowN McCarroit & Oaks

HARTLINE

2727 Allen Parkway,

Suite 1300

Houston, TX 77019

(713) 529-3110

(713) 525-6295 (Fax)

October 1996

COCKLE LAW BRIEF

CO., (800) 225-6964

PRINTING

OR CALL COLLECT (402) 342-2831

aR i

ee - - 2 ee RTE OED, BED VOT pe eo

QUESTIONS PRESENTED

1. Does a successor that hires a “substantial and

representative complement” of its employees from the

predecessor’s workforce within a few days after the clos-

ing of the predecessor’s operation commit an unfair labor

practice by unilaterally implementing employment terms

and conditions when it is not a “perfectly clear” successor

and the predecessor’s unions have made no bargaining

demands?

2. If so, did the National Labor Relations Board act

in excess of its statutory authority by ordering a remedy

that effectively binds the successor to its predecessor's

collective bargaining agreements despite the successor’s

explicit rejection of those agreements and its pre-hiring

announcement that it would implement new and differ-

ent terms and conditions of employment?

iii ii yt ue

LIST OF ALL PARTIES

Banknote Corporation of America, Inc. and the

National Labor Relations Board were the only parties in i

the proceeding before the United States Court of Appeals

for the Second Circuit. Banknote Corporation of America,

Inc. is a subsidiary of Francois-Charles Oberthur

Fiduciaire, a French corporation that is privately owned

and has no publicly traded shares. Banknote Corporation

of America, Inc. has no subsidiaries.

TABLE OF CONTENTS

Page

OPINIONS. BELOW «......6cccccvccecccceverees 1

THE BASIS FOR JURISDICTION ............-- 1

STATUTORY PROVISIONS..........-.000-+5: 2

STATEMENT OF THE CASE ..............---:- 3

REASONS FOR GRANTING THE PETITION .. 9

A. The Second Circuit’s holding that a bargain-

ing demand is unnecessary in a “rapid tran-

sition” case conflicts with the established

caselaw of this Court, other federal courts

of appeals, and the Board itself........... 11

1. Supreme Court, circuit court, and Board

caselaw require a bargaining demand to

hold an ordinary successor liable under

§ 8(a)(5) for unilateral implementation

of employment terms .............+++- 11

2. The Second Circuit’s new rule for “rapid

transition” successors conflicts with

established federal labor law precedents

SEE Vs eR AED EIN RAID EE ee 15

3. Supreme Court review is necessary to

prevent lower court confusion over the

difference between the existence of a

bargaining duty and a successor’s

breach of that duty that results in

4. Supreme Court review is necessary to

prevent this case from disturbing the

long-established expectations of

employers and unions.............---- 21

TABLE OF CONTENTS — Continued

Page

5. Supreme Court review is necessary to

prevent protracted, arbitrary and expen-

sive line-drawing in future cases...... 23

B. The Second Circuit’s decision to enforce the

Board’s Order violates § 8(d) of the NLRA

and conflicts with holdings of this Court

and other federal courts of appeals that a

successor cannot be bound to the terms of

its predecessor’s collective bargaining

ASTECMICNES. 2.6. c ec ceserescceccovcerences 24

Vi. CO RNIN cA cd ecaunesshseetarseectansieas 29

APPENDIX:

Banknote Corporation of America, Inc. v. NLRB, 84

Pk OSs £208 CE PROOD. ove cbcuccongeoeeveves App. 1

In the Matter of Banknote Corporation of America

and Graphic Communications International

Union, Local 119B-43B, and New York Lithogra-

phers & Photo Engravers Union, #1-P, G.C.I.U.

and District 15, International Association of

Machinists & Aerospace Workers, 2-CA-24304,

2-CA-23371, and 2-CA-24500, 315 NLRB No. 155

SOE oon Vek ek cae aan wach des Koa ede eee App. 35

Decision of the Administrative Law Judge (as

included in the National Labor Relations

Board’s Decision and Opinion)............... App. 56

Order Denying Petition for Rehearing with Sug-

gestion for En Banc (unreported) ............ App. 75

Excerpts of National Labor Relations Board’s Brief

to the United States Court of Appeals for the

SOHN SPC i rs cnn s vs neh chcesehecabeas as App. 77

TABLE OF AUTHORITIES

Page

Cases

Banknote Corporation of America, Inc. v. NLRB, 84

BO OG7: Ca CO, BOG i i sae s Sa wenn pelea ieees sen 1

Briggs Plumbingware, Inc. v. NLRB, 877 F.2d 1282

Ot as Be ha caus vane Mace hawan Khas each eben. es 11

Cooper Thermometer v. NLRB, 376 F.2d 684 (2d Cir.

BOGS Bintan i eal swe 994.wd hb ped Ueke pene NOkEHICE Es 27

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

RE BF RPO PECs od cad ie 04 Rdg eee Re 9, passim

H.K. Porter Co. v. NLRB, 397 U.S. 99 (1970)... 26, 27, 28

Litton Financial Printing v. NLRB, 501 U.S. 190

ERAS cic whc.c.u 4 Rig RA 6Sa $5409 7 her Me eebAbhekreneness tS 6

NLRB v. Burns International Security Systems, Inc.,

GD Ts GFE CAVFET voces nansredvossbanvoctens 9, passim

NLRB v. Columbian Enameling & Stamping Co., Inc.,

ee Nia Re MATE 6 bag tn cad esdecnwirseesa cs -y 2s

NLRB v. Dent, 534 F.2d 844 (9th Cir. 1976)....... 26, 27

NLRB v. Houston Building Service, Inc., 936 F.2d

178 (5th Cir. 1991), cert. denied, 502 U.S. 1090

po 4 POPPE EE PEE PPE Te Nee CTR Dy Peay ye 13, 15, 20

NLRB v. Wayne Convalescent Center, Inc., 465 F.2d

SOS TO Che, FIFE is Sees ves cass 13, 15, 20, 2

Nephi Rubber Products Corp. v. NLRB, 976 F.2d 1361

CPO SAS: SOE creavitran dks vemaans on os oe eke 11

Ogle Protection Service, 183 NLRB 682 (1970)....6, 7, 24

Premium Foods, Inc. v. NLRB, 260 NLRB 708 (1982),

cus d, 709. 2.28 GIS (908 Cie. 19RD) ook oo cee cease 16

TABLE OF AUTHORITIES - Continued

Page

Royal Midtown Chrysler Plymouth, Inc., 296 NLRB

SOD CMG caek bo 64d «Rani nord ev anadeeeces 12, 13,15

Royal Vending Services, 275 NLRB 1222 (1985)......... 5

Steel City Transport, Inc. v. NLRB, 389 F.2d 735 (3rd

CMe, SGD os i. conve seneew tun edeak eT weeesdeetees 22

Washington Service Contractors Coalition v. District

of Columbia, 54 F.3d 811 (D.C. Cir. 1995), cert.

giiad, 36 o. Ce. TUS CRO wide casa anv ebenee ee 16

Williams Enterprises, Inc. v. NLRB, 956 F.2d 1226

et ae se Sper rer te Peer er pry eT? 11

STATUTES

We She Acs Ue RAPED soko sod 9605) kOe bo dascusseehens 2

PATS Oe EOD «6 03 sone s vats daeneany es 2, & & oe ©

29 FIBA. DT) 6.0 5 5c os cncnnc rss He senwaneas passim

SP Race A TEE ocd endian seven suenua 2, 10, 26, 27, 28

SETI Oe oie hieivil ae encs Bg es i 3

29 AI BAS. TD NNN sb PEAT RAIN 3

BSF Ae SI goss bonnet eecgneeyesyeanes kaa 3

FEDERAL RULES

ee ° & SS Serr ry Pere r rT rey evry 2

ethe 40; FAB s ik vs aves hee Gidea eevee 2

LEGISLATIVE History

H.R. Rep. No. 245, 80th Cong. Ist Sess., 19-20

I. OPINIONS BELOW

On March 3, 1992, Barry J. Morris, Administrative

Law Judge (“ALJ”) for the National Labor Relations

Board (the “Board”), issued its decision and recom-

mended order against Petitioner. The ALJ’s decision, as it

was included in the Board’s Decision and Order, is repro-

duced in the Appendix at 56.

On December 16, 1994, the Board issued its Decision

and Order, In the Matter of Banknote Corporation of

America and Graphic Communications International

Union, Local 119B-43B, and New York Lithographers &

Photo Engravers Union, #1-P, G.C.LU. and District 15,

International Association of Machinists & Aerospace

Workers, 2-CA-24304, 2-CA-23371, and 2-CA-24500

adopting the ALJ’s opinion. The Board’s decision, 315

NLRB No. 155, is reproduced in the Appendix at 35.

On May 29, 1996, the United States Court of Appeals

for the Second Circuit issued its decision in Banknote

Corporation of America, Inc. v. NLRB, 84 F.3d 637 (2d Cir.

1996). The Second Circuit’s decision enforcing the Board’s

Order is reproduced in the Appendix at 1.

The Second Circuit’s denial of Petitioner’s Petition

for Rehearing with Suggestion for En Banc was entered

on August 1, 1996 and is reproduced in the Appendix at

75.

Il. THE BASIS FOR JURISDICTION

The United States Court of Appeals for the Second

Circuit issued its decision on May 29, 1996. On July 11,

1996, Petitioner timely filed a Petition for Rehearing With

Suggestion for En Banc (“Petition for Rehearing”) pur-

suant to Federal Rules of Appellate Procedure 40 and 35.

The Second Circuit denied that petition on August 1,

1996. Petitioner now files this Petition for Writ of Cer-

tiorari with the Clerk of this Court within ninety days of

the Second Circuit’s denial of the Petition for Rehearing.

This Court has jurisdiction under 28 U.S.C. § 1254(1).

Ill. STATUTORY PROVISIONS

TITLE 29, UNITED STATES CODE:

§ 158 Unfair Labor Practices

(a) It shall be an unfair labor practice for an

employer —

(1) to interfere with, restrain, or coerce

employees in the exercise of the rights guaran-

teed in section 157 of this title;

(5) to refuse to bargain collectively with the

representatives of his employees, subject to the

provisions of section 159(a) of this title.

—— Oe —. =

(d) For the purposes of this section, to bargain

collectively is the performance of the mutual

obligation of the employer and the representa-

tive of the employees to meet at reasonable

times and confer in good faith . . . but such

obligation does not compel either party to agree

to a proposal or require the making of a conces-

IV. STATEMENT OF THE CASE

The Board had jurisdiction under 29 U.S.C. §§ 160(a)

& (b) to issue a Complaint under §§ 8(a)(1) & (5) of the

National Labor Relations Act (“NLRA”) and to try this

case before the ALJ. The Second Circuit had jurisdiction

under 29 U.S.C. § 160(e) to review and enforce the

Board’s Decision and Order.

Prior to 1990, there were only two major American

high-security printing companies!: American Bank Note

Company (“ABN”) and United States Banknote Company

(“USBN”). In mid-1989, USBN initiated a tender offer for

the stock of ABN’s parent company, and the Justice

Department's Antitrust Division conditioned approval of

the deal upon establishment of a viable competitor. Peti-

tioner Banknote Corporation of America, Inc. (“BCA”)

was formed as an American subsidiary of Francois-

Charles Oberthur Fiduciaire, a French security printing

firm, to become USBN’s competitor. To begin operations,

BCA purchased assets from ABN and assumed ABN’s

lease obligations for a plant in Suffern, New York (the

“Ramapo plant”).

Under ABN’s operation, eleven unions represented

just 102 employees at the Ramapo plant. Job duties were

limited along strict craft lines in accordance with

decades-old traditions antedating significant technologi-

cal changes in the printing industry. Before hiring any of

1 High-security printing companies produce documents

that have intrinsic value or require counterfeit protection. Such

documents include stock and bond certificates, government

visas, title certificates, food stamps, and postage stamps.

its predecessor’s employees, BCA told applicants they

would be asked to perform a greater variety of tasks in an

effort to improve productivity. Consistent with such

advance notice and in accordance with its decision to

operate with a much smaller workforce, BCA verbally

and in writing rejected ABN’s collective bargaining

agreements and explicitly announced that it would oper-

ate under new terms and conditions of employment. BCA

hired approximately half of ABN’s employees and began

limited operations six days after ABN’s shut-down of the

Ramapo plant. Just four days later, on April 23, 1990,

BCA distributed its specific terms and conditions of

employment.

The three unions involved in this case (the “Unions”)

filed unfair labor practice charges against BCA alleging

that BCA refused to bargain with them. Not one of the

Unions had made a demand upon BCA for recognition or

bargaining before filing its unfair labor practice charge.

The Board issued a consolidated complaint on

November 21, 1990 claiming that BCA violated §§ 8(a)(1)

& (5) of the NLRA. The parties tried the case before the

ALJ on April 15-19, 1991. The ALJ found that BCA was a

successor employer to ABN and that BCA had violated

§§ 8(a)(1) & (5) by “refusing to negotiate” with the

Unions when it implemented its specific terms and condi-

- tions on April 23, 1990. [A-68]. The ALJ did not address

whether the Unions were required to make a bargaining

demand as a condition precedent to holding BCA liable

for its actions on April 23, 1990.

BCA filed exceptions to the ALJ’s decision with the

Board, which issued a Decision and Order on December

16, 1994 adopting the ALJ’s recommended order.2 The

Board found that BCA had effectively announced its

intention not to assume ABN’s collective bargaining

agreements and had announced certain new terms and

conditions of employment simultaneously with its stated

desire to retain some of ABN’s workforce. [A-37, 43]. The

Board therefore ruled that BCA was not a “perfectly

clear” successor; that its obligation to bargain with the

Charging Parties “attached” on April 19, 1990 when BCA

hired its employees; and that BCA therefore necessarily

violated §§ 8(a)(1) & (5) by unilaterally distributing its

specific terms and conditions of employment on April 23.

[A-43, 48-49].

The premise of the Board’s ruling was the ALJ’s

finding that BCA had announced only two of its terms

and conditions of employment when it offered jobs to

ABN’s workforce on April 19.4 The Board upheld the

2 The Board’s Decision and Order was divided, with

member Stephens dissenting.

3 For the sake of clarity, successors like BCA that are not

“perfectly clear” successors are referred to hereinafter as

“ordinary” successors.

4 The two specifically announced terms were: (1) that BCA

would introduce greater job flexibility, and (2) that ABN’s health

benefits would remain in effect for sixty days after employment

with BCA began. [A-37-38]. The Board agreed with the ALJ that

Royal Vending Services, 275 NLRB 1222, 1222-28 (1985) justified a

finding that BCA violated §§ 8(a)(1) & (5). [A-40]. Neither the ALJ

nor the Board, however, addressed the fact that Royal Vending

Services dealt only with a perfectly clear successor. By definition,

a perfectly clear successor has a duty to bargain over initial terms

and conditions of employment. As both the ALJ and the Board

acknowledged, BCA had no such duty.

EY Te Ee

ALJ’s finding because BCA did not announce the remain-

der of its employment terms until four days later. Like the

ALJ, the Board failed to address whether the Unions were

required to make a bargaining demand before BCA could

be held liable for an unlawful refusal to bargain. Accord-

ingly, the Board adopted the ALJ’s recommended order,

which states in relevant part that BCA must

restore the status quo by rescinding, on request

from the Unions, those unilateral changes put

into effect on April 23, 1990, which were not

previously announced; and to make all affected

unit employees whole for losses they incurred

by virtue of its unilateral changes in accordance

with Ogle Protection Service, 183 NLRB 682

(1970). . . . [A-69].

Although its Decision and Order does not say so

explicitly, the Board argued to the Second Circuit, in effect,

that the “status quo” for purposes of “make whole” relief

should be established by reference to the rejected ABN

collective bargaining agreements. [A-77]. In support of this

argument, the Board relied upon the general principle that

“[w]here an employer remains in business, but its contract

with a union expires, most contractual terms and condi-

tions of employment survive, not by virtue of the contract,

but by operation of law. . . . ” [A-77] (citing Litton Financial

Printing v. NLRB, 501 U.S. 190, 199 (1991)). In other words,

according to the Board’s interpretation of its “make

whole” remedy, BCA is bound to the terms of the very

collective bargaining agreements that BCA specifically

rejected.5

BCA timely filed a Petition for Review of the Board’s

Decision and Order with the United States Court of

Appeals for the Second Circuit. The Second Circuit

denied BCA’s Petition and enforced the Board’s Order on

May 29, 1996. The court of appeals acknowledged that the

Supreme Court, federal courts of appeals and the Board

uniformly have required both a bargaining demand by a

union and the hiring of a “substantial and representative

complement” of employees as conditions precedent to an

ordinary successor’s liability for refusal to bargain with

its predecessor’s unions. [A-15-16]. Nevertheless, the Sec-

ond Circuit decided to enforce the Board’s Order and

held that BCA unlawfully refused to bargain despite the

fact that the Unions had made no bargaining demands.

The Second Circuit's rationale for this departure from

long-established labor law precedent was grounded in a

novel and insupportable distinction between successors

who achieve successorship status through “rapid transi-

tion” and those who engage in “gradual hiring” of their

predecessor’s employees. [A-18-21]. The Second Circuit

reasoned that an employer who gradually hires its prede-

cessor’s employees might have “considerable doubt” as

> The ALJ’s recommended order included a make whole

remedy to be calculated in accordance with Ogle Protection

Service, 183 NLRB 682 (1970). [A-69]. In Ogle, the Board found

that a make whole remedy was justified by an employer’s

refusal to execute a contract it had already negotiated with its

unions. By its own terms, therefore, Ogle has no application to a

successor like BCA that lawfully refuses to assume collective

bargaining agreements negotiated by its predecessor.

to the incumbent unions’ continuing majority status,

whereas the employer in a “rapid transition” can “easily

discern its obligation to presume” whether or not the

unions continue to have majority support. [A-18]. Thus,

according to the Second Circuit, although a bargaining

demand is necessary in the “gradual hiring” context for

the purpose of giving the successor employer “additional

certainty” concerning its legal obligations, a demand is

superfluous in a so-called “rapid transition” because the

successor is already sufficiently certain of its duty to

bargain. Id.

Relying upon its own newly created “rapid transi-

tion” exception to the requirement of a bargaining

demand, the Second Circuit concluded that BCA’s bar-

gaining duty “attached” when it hired ABN’s employees

on April 19, 1990. [A-21]. As a result, according to the

court below, BCA was no longer free at that point to

unilaterally implement terms and conditions of employ-

ment. Thus, under the Second Circuit’s unprecedented

holding, an ordinary successor can unlawfully refuse to

bargain even when the union has not requested it to do

so. [A-21-22].© The Second Circuit enforced the Board’s

entire Order, including a “make whole” remedy that the

Board had argued must be calculated by reference to the

very terms of the ABN collective bargaining agreements

that BCA had specifically rejected. In effect, the Second

6 The Second Circuit also held that the employment terms

and conditions announced by BCA four days after hiring the

former ABN employees were not “initial” ones and that BCA’s

implementation of those terms was accordingly unlawful.

[A-21-22].

Circuit bound BCA to the ABN agreements despite BCA’s

rejection of those agreements and its pre-hiring notice to

former ABN employees that it would implement new and

different employment terms and conditions.

V. REASONS FOR GRANTING THE PETITION

The Second Circuit’s decision ignores decades of

Supreme Court and Board caselaw holding that an

employer is required to bargain only when a union makes

a bargaining demand and that an employer cannot be

compelled to agree to a union’s proposal during collec-

tive bargaining. The decision below specifically violates

this Court’s holdings in Fall River Dyeing & Finishing

Corp. v. NLRB, 482 U.S. 27 (1987) (“Fall River Dyeing”) and

NLRB v. Burns International Security Systems, Inc., 406 U.S.

272 (1972) (“Burns”). It also directly conflicts with deci-

sions of the Fifth and Sixth Circuits and even with deci-

sions of the Board.

In holding that a so-called “rapid transition” suc-

cessor violates § 8(a)(5) when the predecessor’s union has

not even made a bargaining demand, the Second Circuit

seriously misconstrued Fall River Dyeing in defiance of

the time-honored rule of labor law that a bargaining

demand is a prerequisite to an employer’s liability under

§ 8(a)(5). Left unreviewed by this Court, the Second Cir-

cuit’s decision to excuse the requirement of a bargaining

demand will upset nearly sixty years of labor relations

practice grounded in the precedent of this Court. It will

also result in unnecessary litigation over arbitrary line-

drawing in future cases. Excusing the requirement of a

bargaining demand relieves a union of a burden that is

easy to satisfy and needlessly requires the successor to

presume the union’s desire for continuing representation.

This will encourage new employers to delay the hiring of

a “substantial and representative complement” of

employees in the successorship context, a result that

adversely affects employees and is antithetical to the

NLRA’s underlying purpose of promoting stability in

labor-management relations.

In addition, effectively binding BCA to the terms of

its predecessor’s collective bargaining agreements is con-

trary to Burns and its progeny and violates the explicit

command of § 8(d), 29 U.S.C. § 158(d), that nothing in the

NLRA compels an employer to agree to a union’s pro-

posal during collective bargaining. The Second Circuit's

decision, which requires BCA to accept the results of

another employer’s bargaining, is also squarely at odds

with a decision of the Ninth Circuit. A successor has the

right to negotiate its own bargain based on its own eco-

nomic situation and operational concerns. The result

achieved through the give-and-take of bargaining

between the employees’ representative and their current

employer is crucial to the NLRA’s policy of labor stability.

This Court has not addressed successorship issues of

the kind raised in this case since 1987. Supreme Court

review is particularly necessary to clarify uncertainties

among the circuits over the meaning and implications of

both Burns and Fall River Dyeing.

A. The Second Circuit's holding that a bargaining

demand is unnecessary in a “rapid transition”

case conflicts with the established caselaw of

this Court, other federal courts of appeals, and

the Board itself.

1. Supreme Court, circuit court, and Board

caselaw require a bargaining demand to

hold an ordinary successor liable under

§ 8(a)(5) for unilateral implementation of

employment terms.

For nearly sixty years, the law of this Court has been

that a bargaining demand is a prerequisite to an

employer’s § 8(a)(5) duty to bargain with a union. NLRB

v. Columbian Enameling & Stamping Co., Inc., 306 U.S. 292,

297 (1939) (“[T]here can be no breach of the [§ 8(a)(5)]

statutory duty by the employer . . . without some indica-

tion given to him by [the employees] or their representa-

tive of their desire or willingness to bargain.”). In the

successorship context, this Court has held that an ordi-

nary successor is obligated to bargain with its prede-

cessor’s unions only when two things coincide: (1) the

employer has hired a majority of its employees from its

predecesso. 's unionized workforce at the “substantial

and representative complement” date, and (2) the union

has made a bargaining demand. Burns, 406 U.S. at 278;

Fall River Dyeing, 482 U.S. at 47, 54. Until the Second

Circuit’s decision in this case, the circuit courts and the

Board uniformly followed suit.”

7 See, e.g., Briggs Plumbingware, Inc. v. NLRB, 877 F.2d 1282,

1286-87 (6th Cir. 1989); Nephi Rubber Products Corp. v. NLRB, 976

F.2d 1361, 1365 n.6 (10th Cir. 1992); Williams Enterprises, Inc. v.

In Burns, the successor hired its predecessor’s union-

ized employees over a period of weeks in late June, 1967

and began operations on July 1, 1967 with new terms and

conditions of employment. The Court held that the suc-

cessor’s bargaining duty “matured” in late June, but the

successor did not “refuse to bargain” with the union until

it failed to bargain in response to the union’s July 12, 1967

bargaining demand. Burns, 406 U.S. at 54. Thus, under

Burns, an employer can unilaterally establish terms and

conditions of employment without violating § 8(a)(5),

even though it is a successor with a “duty to bargain,” if

it has not received a bargaining demand. See also Fall

River Dyeing, 482 U.S. at 39. Fall River Dyeing extended

Burns by holding that a union could make an effective

bargaining demand before the successor hired its “sub-

stantial and representative complement” of workers. In

so holding, this Court stated that “[o]nce the employer

has concluded that it has reached the appropriate com-

plement, then, in order to determine whether its duty to

bargain will be triggered, it has only to see whether the

union already has made a demand for bargaining.” Id. at

54 (emphasis added).

On facts materially indistinguishable from the cir-

cumstances of this case, both the Fifth and Sixth Circuits

have interpreted this Court’s caselaw in a straightforward

fashion to mean that an ordinary successor cannot violate

§ 8(a)(5) in the absence of a bargaining demand by the

predecessor’s union. Significantly, both the Fifth and

Sixth Circuit cases involved ordinary successors of the

NLRB, 956 F.2d 1226, 1232 (D.C. Cir. 1992); Royal Midtown

Chrysler Plymouth, Inc., 296 NLRB 1039, 1040 (1989).

—— oT

kind that the Second Circuit in this case subsequently

categorized as “rapid transition” successors. In NLRB v.

Wayne Convalescent Center, Inc., 465 F.2d 1039, 1042 (6th

Cir. 1972) (“Wayne Convalescent Center”), where the ordi-

nary successor achieved a so-called “rapid transition” by

continuing its predecessor’s business without interrup-

tion and with no substantial changes in operation or

personnel, the Sixth Circuit held that although the ordi-

nary successor had a “duty to bargain” with incumbent

unions when it hired its employees, it was free to make

“unilateral changes in conditions of employment” prior

to receiving a bargaining demand. In NLRB v. Houston

Building Service, Inc., 936 F.2d 178 (5th Cir. 1991), cert.

denied, 502 U.S. 1090 (1992) (“Houston Building Service”), a

case in which the successor immediately hired all its

predecessor’s employees when it took over the prede-

cessor’s janitorial contract, the Fifth Circuit stated that

““lo|nce a representative workforce is achieved . . . the

successor has an obligation to bargain with the union that

represented those employees,’ assuming that the union

made a bargaining demand” (quoting Fall River Dyeing, 482

U.S. at 47) (emphasis added).

Similarly, in Royal Midtown Chrysler Plymouth, Inc.,

296 NLRB 1039 (1989) (“Royal Midtown”) - which the

Second Circuit conceded to be a “rapid transition” case

[A-19-20] — the Board stated that “[t]he fact that the union

represents a majority of the successor’s employees in an

appropriate unit [does not] operate alone to invoke the

bargaining obligation; and this is so even when the suc-

cessor has attained a ‘substantial and representative com-

plement’ of employees.” Royal Midtown, 296 NLRB at

1040. It is not surprising, therefore, that the Board itself

did not argue before the Second Circuit for a distinction

between “gradual hire” and “rapid transition” suc-

cessors. Instead, the Board argued that BCA became a

perfectly clear successor when it reached the “substantial

and representative complement” date. [A-21 n. 4, 77]. The

Second Circuit rejected that argument, noting that

[tlo apply [the perfectly clear] label to BCA on

the theory that an employer can “ripen” into a

perfectly clear successor is to ignore the legal

significance that has attached to that term: a

perfectly clear successor, unlike an ordinary suc-

cessor, acquires a duty to bargain prior to hiring

its predecessor’s employees.

[A-21 n.4]. The Second Circuit then stated:

.. . [W]e take the General Counsel’s point to be

that, once it is plain to an employer that a major-

ity of the employees in a bargaining unit are

former employees of the predecessor, the

employer is required to presume that a union’s

majority status continues, regardless of whether

the union has made a bargaining demand.

Where, as here, there is a rapid transition from

one employer to another and the predecessor’s

employees are rehired almost immediately, we

agree.

Id. As this language reveals, despite rejecting the Board’s

plainly meritless argument that BCA “ripened” into a

“perfectly clear” successor, the Second Circuit, by creat-

ing its own two categories of “rapid transition” and

“gradual hire” ordinary successors, eliminated as a prac-

tical matter the legal significance between ordinary and

“perfectly clear” successors.

2. The Second Circuit’s new rule for “rapid

transition” successors conflicts with estab-

lished federal labor law precedents.

The Second Circuit’s holding that a “rapid transition”

successor is obligated to bargain with its predecessor’s

union even when there is no bargaining demand not only

violates Burns and Fall River Dyeing, it creates a split

among the circuits. Its decision cannot be reconciled with

the better reasoned decisions of the Fifth Circuit in

Houston Building Service and the Sixth Circuit in Wayne

Convalescent Center. In addition, the Second Circuit's

rationale must have surprised even the Board itself

because it implicitly overrules the Board’s own holding in

Royal Midtown that reaching a “substantial and represen-

tative complement” of employees does not alone operate

to “invoke” the bargaining obligation and thus subject a

successor to § 8(a)(5) liability.

Fall River Dyeing set forth a two-pronged test requir-

ing both a “substantial and representative complement”

and a bargaining demand as prerequisites to a successor’s

liability for unlawful refusal to bargain. The Second Cir-

cuit held that the “broadly stated” requirement of a bar-

gaining demand is inapplicable to this case because that

requirement developed within the specific factual context

of a “start-up” period involving a “gradual hiring” of

employees. [A-18]. This distinction by the court below

between “rapid transition” and “gradual hiring” rests

upon a faulty premise.

The Second Circuit stated that a union is not required

in a “rapid transition” case to make a bargaining demand

because it is “immediately clear” to the ordinary suc-

cessor that a majority of its employees in the relevant

bargaining unit worked for the predecessor, whereas

there may be “considerable doubt” of the union’s con-

tinuing majority status in cases involving “gradual hir-

ing” or a hiatus in operations. Id. The court below then

incorrectly reasoned that the “rapid transition” made it

easy for BCA to “discern its obligation to presume that the

representatives of ABN’s employees continued to enjoy

majority status.” Id. (emphasis added). The error in this

rationale is the Second Circuit’s failure to distinguish

between a rule of law and an employer’s obligation.

While the Board presumes a union’s continuing majority

status under certain circumstances, Washington Service

Contractors Coalition v. District of Columbia, 54 F.3d 811,

816 (D.C. Cir. 1995), cert. denied, 116 S. Ct. 1015 (1996), the

successor itself has no obligation to presume anything. Nor

is there any support for the Second Circuit’s statement

that there may be “considerable doubt” of a union’s

continuing majority status in cases involving “gradual

hiring” of a majority of a predecessor’s employees. To the

contrary, precisely because the Board presumes continu-

ing majority status as soon as the new employer reaches

the “substantial and representative complement” date,

there is no potential for “considerable doubt” that would

provide a basis for distinguishing “rapid transition” from

“gradual hiring” cases.®

8 The successor can rebut the presumption of continuing

majority status only by demonstrating a good-faith doubt based

upon objective considerations that the union lacks majority

support. Premium Foods, Inc. v. NLRB, 260 NLRB 708, 714 (1982),

enf‘d, 709 F.2d 623 (9th Cir. 1983). The issue of the successor’s

Nothing in Fall River Dyeing remotely suggests that

the requirement of a bargaining demand should be condi-

tioned upon the length of time it takes the successor to

hire a “substantial and representative complement” of

employees. Indeed, this Court made just the opposite

statement: “Once the employer has concluded that it has

reached the appropriate complement, then, in order to

determine whether its duty to bargain will be triggered, it

has only to see whether the union already has made a

demand for bargaining.” Fall River Dyeing, 482 U.S. at

52-53 (emphasis added). Thus, even if “gradual hiring” or

a hiatus in operations, as such, could ever be sufficient to

create “considerable doubt” of a union’s continuing

majority status, this factor would be relevant only to the

determination of successorship status; and that deter-

mination alone is insufficient to impose liability upon the

potential “good-faith doubt” is not relevant to the question

here: it arises only where the new employer is a successor and

the union has made a bargaining demand. In fact, the factual

context in which the issue of “good faith doubt” arises

illustrates the practical problems with the Second Circuit's

reasoning. Pursuant to decades of commonly understood labor

relations practice, the successor has always communicated a

refusal to bargain grounded in “good faith” doubt as a response

to the union’s bargaining demand. Put on notice of the

employer’s basis for its refusal to bargain, the union may or

may not file an unfair labor practice charge. Under the Second

Circuit’s holding, however, when the employer with a “good

faith” doubt in a “rapid transition” case makes unilateral

changes in employment terms, the union that has failed to make

the demand could file an unfair labor practice charge anyway,

requiring the Board to investigate a charge that might not

otherwise have been filed if the union had met its simple burden

of notice to the employer.

successor for unilateral implementation of employment

terms and conditions if there has been no bargaining

demand.

Despite the Court’s two-pronged test in Fall River

Dyeing, the Second Circuit insisted that “Fall River Dyeing

itself suggests the possibility that the composition of the

successor’s work force alone may in some circumstances

be sufficient to trigger an employer’s duty to bargain... . ”

[A-20]. In support of this statement, the Second Circuit

relied upon the Supreme Court’s observation in Fall River

Dyeing, while describing the holding of Burns, that “[t]he

‘triggering’ fact for the bargaining obligation [in Burns] was

[the] composition of the successor’s work force... . ”

[A-20] (quoting Fall River Dyeing, 482 U.S. at 46) (emphasis

added). This Court’s passing characterization of Burns in

Fall River Dyeing is inapposite here. While it is true that the

composition of the successor’s work force may “trigger”

the bargaining obligation when the “substantial and repre-

sentative complement” date happens to come after the bar-

gaining demand,? Fall River Dyeing, like Burns, plainly

requires the concurrence of both events to hold a successor

liable for its implementation of unilateral changes in terms

and conditions of employment.

9 This is always the case when a union promptly takes the

one simple step necessary to satisfy its easy burden of notice to

the new employer.

LLL AMBALA ALAA LL

3. Supreme Court review is necessary to pre-

vent lower court confusion over the differ-

ence between the existence of a bargaining

duty and a successor’s breach of that duty

that results in § 8(a)(5) liability.

The two-pronged test set forth in Fall River Dyeing is

consistent with the traditional definition of a bargaining

duty: it is an obligation to bargain with the union when

the union makes a demand. Absent a demand, there cannot

be either a “triggering” of the duty as this Court has

always defined it or a breach of that duty.

In Fall River Dyeing, this Court held that a bargaining

demand made before the successor reached the “substan-

tial and representative complement” date was a “continu-

ing” one. The Second Circuit’s error lies in its apparent

4 failure to recognize that a holding to the contrary in Fall

River Dyeing would have precluded § 8(a)(5) liability:

i without a “continuing” bargaining demand there would

j have been no demand at all, and the employer’s suc-

cessorship status alone would have been insufficient to

“trigger” the duty. The very fact that this Court

addressed the “continuing” demand issue in Fall River

j Dyeing forecloses the Second Circuit’s equation of an

\ employer’s mere successorship status to § 8(a)(5) liability

. for its unilateral implementation of employment terms.

WRN ini EN EM il

The Unions in this case slept on their rights. Most

unions in successorship cases — like the one in Fall River

Dyeing — satisfy their easy burden of making a timely

bargaining demand well before the successor begins hir-

ing any employees. Because the issue arises in that typi-

cal context, it is not surprising that the Second Circuit

might confuse the “arising,” “attachment,” or “invoca-

tion” of a duty to bargain with successor’s breach of that

duty.

The mere existence of a bargaining duty, however,

should not automatically result in the imposition of

§ 8(a)(5) liability for a successor’s unilateral implementa-

tion of employment terms in the unusual case like this

one in which the union fails to make a demand.!° In

Wayne Convalescent Center, 465 F.2d at 1042-43, for exam-

ple, where an ordinary successor took over its prede-

cessor’s operations and immediately hired all of its

predecessor’s employees in May, 1970, the Sixth Circuit

held that while the successor was “under a duty to bar-

gain” at that time, it did not breach that duty by uni-

laterally imposing initial employment terms in June, 1970

because the union had not made a bargaining demand.

Thus, the Sixth Circuit did not concern itself with

whether a bargaining demand is necessary to the creation

of a duty. Rather, while acknowledging the existence of a

duty, it focused on the more relevant question of what

makes a successor liable for breach of that duty. This

approach is consistent with the two-pronged test in Fall

River Dyeing and also the holding in Burns, where the

Court spoke of a bargaining duty that “matured” before

the union made its bargaining demand.

10 In the absence of Supreme Court review, this case will no

longer be unusual. A union will be less diligent in notifying a

successor of its desire for continuing representation. It will be

free to hedge its bets. It can hold out to see what terms the

successor will implement in the absence of a demand, then file

an unfair labor practice charge and use the pendency of the

charge as bargaining leverage in future negotiations.

The Court should use this case to clarify the law in

this area in one of two ways: (1) by holding that a

bargaining duty is not created at all in the first instance

unless a union makes a bargaining demand; or (2) by

holding that an ordinary successor, even in a “rapid

transition,” cannot be held liable under § 8(a)(5) for a

breach of its duty to bargain when the union has failed to

make a bargaining demand. Under either holding, the

Court will reaffirm Burns and Fall River Dyeing in a way

that provides clear guidance to successor employers and

comports with decades of unchallenged labor law prece-

dent.

4. Supreme Court review is necessary to pre-

vent this case from disturbing the long-

established expectations of employers and

unions.

Management and labor have assumed since at least

1939 that § 8(a)(5) liability is conditioned upon the exis-

tence of a union’s bargaining demand. See Columbian

Enamel & Stamping Co., 306 U.S. at 297 (holding that a

union must demand bargaining before an employer can -

unlawfully “refuse” to bargain). An employer has no

duty to request its employees to participate in collective

bargaining and cannot unlawfully refuse to do something

it has not been requested to do. Id. This simple balance of

burdens is logical and easy for both employers and

unions to understand and follow. It also fosters stability,

requiring no guesswork by either party: a union must

make a bargaining demand, and an employer must bar-

gain with its employees’ collective bargaining representa-

tive upon that demand. The Second Circuit’s holding

disrupts this balance. With no analysis of the broader

ramifications of its ruling, the Second Circuit decision

changes a fundamental rule of federal labor law and

radically shifts traditional burdens, all to relieve a union

of its simple obligation to make a bargaining demand. In

so ruling, the Second Circuit needlessly injected guess-

work and instability into the process.

The requirement of a demand is easy to meet. A

bargaining demand need not take any specific form; it

need only give the employer notice that a demand is

being made. Steel City Transport, Inc. v. NLRB, 389 F.2d

735, 739 (3rd Cir. 1968). The demand can be made quickly

and inexpensively by letter, telegram, phone, or facsimile

transmission. In contrast to this easy task, the Second

Circuit’s decision requires a “rapid transition” employer

to presume that a demand has been made or risk violating

§ 8(a)(5). This presumption, however, may not reflect the

actual wish of either the predecessor’s employees or their

unions. The fact that a successor has hired a majority of

its predecessor’s unionized employees is immaterial if

the union no longer wants to represent the unit in the

circumstances of the new employer. In this case, for

example, BCA hired only two District 15 employees.

[A-29-30]. A union may well find it cost-prohibitive to

engage in bargaining for only two employees. This is not

uncommon; unions often walk away from representation

for a variety of business reasons. In fact, there is a sub-

stantial and well-settled body of federal labor law dealing

with the waiver of bargaining rights by unions.

There was great potential for the unions to walk

away in this case. BCA reduced by half an already small,

balkanized ABN workforce of 102 employees represented

by no fewer than eleven unions, simultaneously announc-

ing that it would require flexibility and cross-utilization

and would implement different terms and conditions of

employment. A union could easily have decided it was

not worth the trouble to represent units with only a few

employees. In fact, six of the eleven unions at ABN did

not pursue representation of BCA employees.

The Second Circuit’s decision requires a “rapid tran-

sition” successor to invite a union to bargain or remain in

limbo, waiting to implement its own terms and condi-

tions of employment while the union makes up its mind.

This requirement is unprecedented, illogical, and unnec-

essary in view of the ease with which the union can

satisfy its burden of making a demand.

5. Supreme Court review is necessary to pre-

vent protracted, arbitrary and expensive

line-drawing in future cases.

Although the Second Circuit rejected the Board’s

argument that BCA “ripened” into a perfectly clear suc-

cessor, the inevitable effect of its decision is just as bad as

a wholesale adoption of the Board’s argument. The Sec-

ond Circuit failed to define the boundary between its

newly created categories of “gradual hire” and “rapid

transition” successors. The dividing line between these

now legally distinct kinds of successors could fall any-

where between a few days and several weeks. In the

absence of Supreme Court review, the Second Circuit's

decision will spawn considerable litigation to redefine the

rights and obligations of successors and their prede-

cessors’ unions.!!

B. The Second Circuit’s decision to enforce the

Board’s Order violates § 8(d) of the NLRA and

conflicts with holdings of this Court and other

federal courts of appeals that a successor can-

not be bound to the terms of its predecessor’s

collective bargaining agreements.

The Second Circuit erroneously affirmed the Board’s

adoption of the ALJ’s recommended order in its entirety,

including a provision for “make whole” relief which

states in relevant part that BCA must

restore the status quo by rescinding, on request

from the Unions, those unilateral changes put

into effect on April 23, 1990, which were not

previously announced; and to make all affected

unit employees whole for losses they incurred

by virtue of its unilateral changes in accordance

with Ogle Protection Service, 183 NLRB 682

(1970).

[A-69]. The Board’s “make whole” remedy in this case

effectively binds BCA to the terms of its predecessor’s

collective bargaining agreements despite the Board’s own

finding that BCA repudiated ABN’s contracts and

announced its intention to operate under different terms

and conditions of employment. [A-43]. As shown below,

11 Burns itself might even have been a “rapid transition”

case because there was no hiatus in the predecessor’s

operations, and the successor hired its employees over the

course of only a few weeks after winning the contract for its

predecessor’s security services. See Burns, 406 U.S. at 275.

the Second Circuit’s enforcement of the Board’s Order

directly conflicts with Supreme Court and circuit caselaw.

The Board’s Decision and Order stating that BCA

“changed” employment terms on April 23 makes sense

only if there was something in place to begin with on

April 19.12 Because BCA itself, according to the Board,

did not establish any employment terms as of April 19

(with the exception of two previously announced terms

relating to job flexibility and health insurance benefits),

the Board’s Decision and Order necessarily implies that

“make whole” relief must be calculated by reference to

the wage scales and other terms of the ABN collective

bargaining agreements. The Board argued as much on

appeal to the Second Circuit, and the inevitable effect of

the Second Circuit’s decision to uphold the Board’s

“make whole” award is that BCA must restore the terms

and conditions of its predecessor’s contracts 4s if these

contract terms were in place on April 19.

Whatever employment conditions were in place on

April 19, the Second Circuit cannot bind BCA to ABN’s

collective bargaining agreements without enforcing an

order that exceeds the Board’s authority in violation of

12 The Second Circuit’s holding that BCA’s April 23

announcement did not establish “initial” employment terms

[A-22 n.5] conflicts with the Sixth Circuit’s holding in Wayne

Convalescent Center, 465 F.2d at 1041-42. In that case, the

successor’s bargaining duty attached in May, 1970; it

unilaterally set its employment terms in late June, 1970; and the

incumbent union made a bargaining demand on July 15, 1970.

The Sixth Circuit found that the June employment terms were

the successor’s “initial” terms, and their announcement did not

violate § 8(a)(5).

§ 8(d) of the NLRA and this Court’s holding in Burns. The

Board has authority to order a successor to bargain with a

union or to submit to compliance proceedings to deter-

mine those initial employment terms and conditions that

the successor has changed. See, e.g., H.K. Porter Co. v.

NLRB, 397 U.S. 99, 102 (1970). In Burns, however, this

Court ruled that even though a successor has a duty to

bargain with an incumbent union, the Board cannot bind

the successor to the terms of its predecessor’s contracts

and enter a “make whole” remedy that compensates

employees for losses based on those contracts:

Although [the ordinary successor] had an oblig-

ation to bargain with the union concerning

wages and other conditions of employment

when the union requested it to do so... [iJt is

difficult to understand how [an ordinary suc-

cessor] could be said to have changed uni-

laterally any pre-existing term or condition of

employment without bargaining when it had no

previous relationship whatsoever to the bar-

gaining unit and, prior to [taking over its prede-

cessor’s operation], no outstanding terms and

conditions of employment from which a change

could be inferred.

Burns, 406 U.S. at 294 (emphasis in original).

The Second Circuit’s decision also creates a conflict

in the circuits. In NLRB v. Dent, 534 F.2d 844 (9th Cir.

1976), the Ninth Circuit followed Burns’s mandate and

held that a successor that initially paid its employees the

wages required by its predecessor’s contracts could not

be ordered by the Board to “make whole” the employees

after the successor unilaterally changed the wage scale

two weeks later. “[T]he effect of the Board’s .. . award, if

enforced, is to force the [successors] to abide by the wage

provisions of their predecessor’s contract.” Id. at 847.19

As both this Court and the Ninth Circuit pointed out,

§ 8(d) of the NLRA guarantees that no party is required

to agree to a proposal or to make a concession during

collective bargaining. By forcing a successor to abide by

its predecessor’s contracts, the Board bargains for the

parties in excess of its authority and binds a successor to

terms it has already repudiated in violation of § 8(d).

Burns, 406 U.S. at 283-84; Dent, 534 F.2d at 847.14 This

violates both the premise on which the NLRA is based,

which is “private bargaining . . . without any official

compulsion over the actual terms of the contract,” H.K.

13 Prior to its holding in this case, the Second Circuit also

followed Burns. In Cooper Thermometer v. NLRB, 376 F.2d 684 (2d

Cir. 1967), the court held that an employer that relocated its

plant and refused to reinstate employees at the new location

under the employment terms in place at the prior location could

not be forced to make backpay awards based on wage scales

negotiated in bargaining agreements that covered the original

location. If an employer like the one in Cooper Thermometer

cannot be forced to honor its own expired contracts at another

location, a successor like BCA certainly cannot be held to a

different employer’s contracts.

14 Congress enacted § 8(d) in 1947 because it felt that “the

present Board has gone very far... in setting itself up as the

judge of what concessions an employer must make and of the

proposals and counterproposals that he may or may not

make....” H.R. Rep. No. 245, 80th Cong., Ist Sess., 19-20 (1947).

Burns addressed continuing actions by the Board that violated

the purpose of § 8(d). BCA respectfully submits that the current

Board has done the same in this case by binding BCA to terms it

did not negotiate, and even clearly repudiated. Court review is

necessary to clarify the Board’s authority in this regard.

Porter Co., 397 U.S. at 108, and the essence of Burns,

which is that serious inequities stem from forcing an

ordinary successor to honor its predecessor’s contracts.

Burns, 406 U.S. at 287-88.

The Burns holding prohibits Board orders that speci-

fically bind a successor to its predecessor’s contracts. The

Board’s Decision and Order violates Burns because it

effectively requires BCA to honor ABN’s contracts.

Whether the Board does so explicitly or otherwise, it

cannot negotiate for the parties in excess of its statutory

authority, H.K. Porter Co., 397 U.S. at 102, and in violation

of the freedom of contract policy that § 8(d) was designed

to enforce in the collective bargaining context. Burns, 406

U.S. at 285-86. This is especially true when, as in this case,

the successor openly disavows any intent to honor the

predecessor’s collective bargaining agreement and

announces that it will implement new and different

employment terms. Without review, the Second Circuit's

decision in this case will undermine the policy of § 8(d)

as interpreted by this Court in Burns.

VI. CONCLUSION

For the foregoing reasons, BCA respectfully requests

the Court to issue a Writ of Certiorari to review the

judgment of the United States Court of Appeals for the

Second Circuit.

Respectfully submitted,

J. RicHarD HAMMETT

Counsel of Record For Petitioner

Lewis B. GARDNER

Brown McCarroi, & Oaks HARTLINE

2727 Allen Parkway, Suite 1300

Houston, TX 77019

(713) 529-3110

(713) 525-6295 (Fax)

App. 1

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Nos. 643,880 - August Term, 1995

(Argued: January 12, 1996 Decided: May 29, 1996)

Docket Nos. 95-4017, 95-4041

BANKNOTE CORPORATION OF AMERICA, INC.,

Petitioner — Cross-Respondent,

iS ae on

NATIONAL LABOR RELATIONS BOARD,

Respondent — Cross-Petitioner.

Before:

VAN GRAAFEILAND, MINER, and CABRANES,

Circuit Judges.

Petition for review and cross-petition for enforce-

ment of an order of the National Labor Relations Board

finding that Banknote Corporation of America, Inc.

engaged in unfair labor practices in connection with its

acquisition of a high-security printing facility in early

1990. The Board concluded that BCA was, as of April 19,

1990, a legal successor to the facility’s prior owner and

therefore assumed a duty to recognize and bargain with

App. 2

the charging party unions. Accordingly, BCA’s institution

of new terms and conditions of employment on April 23,

without providing these unions with notice or an oppor-

tunity to bargain, constituted a violation of subsections

8(a)(1) and (a)(5) of the National Labor Relations Act.

BCA contends primarily that: (1) the historical bar-

gaining units that the charging party unions sought to

represent were not “appropriate” under BCA’s opera-

tions, and BCA therefore had no duty to recognize or

bargain with the unions; and (2) its institution of terms of

and conditions of employment could not, in the absence

of outstanding bargaining demands by the charging party

unions, constitute an unlawful unilateral change in terms

and conditions.

BCA’s petition for review is denied; the NLRB’s

cross-petition for enforcement is granted.

Lewis B. Garpner, Houston, Texas (John

P. Campbell, J. Richard Hammett,

Brown McCarroll & Oaks Hartline,

Houston, Texas, of counsel), for peti-

tioner — cross-respondent.

Davip FieiscHer, Washington, D.C.

(Frederick L. Feinstein, General Coun-

sel, Linda Sher, Associate General

Counsel, Aileen A. Armstrong, Deputy

Associate General Counsel, National

Labor Relations Board, of counsel), for

respondent-cross-petitioner.

ae EN! BEE Ne ik NNR ERED

App. 3

JOSE A. CABRANES, Circuit Judge:

Banknote Corporation of America, Inc. (“BCA”) seeks

review and the National Labor Relations Board (“NLRB”

or “the Board”) cross-petitions for enforcement of an

order entered pursuant to subsections 8(a)(1) and (a)(5) of

the National Labor Relations Act (“NLRA”) (codified at

29 U.S.C. § 158(a)(1) and (a)(5)), concluding that BCA

engaged in unfair labor practices. Banknote Corp. of Amer-

ica, Inc., 315 N.L.R.B. 1041 (1994). The Board found that

BCA, which acquired a high-security printing facility in

Suffern, New York, on February 27, 1990, became a legal

successor to the facility’s prior owner as of April 19, 1990,

when it hired nearly its full complement of workers from

among the prior owner’s work force. The Board found

that on April 23, 1990, BCA changed certain terms and

conditions of employment, without notice to or bargain-

ing with the three charging party unions: the New York

Lithographers & Photoengravers Union, # 1-P, Graphic

Communications International Union (“Local 1-P”); Dis-

trict 15, International Association of Machinists & Aero-

space Workers (“District 15”); and the Graphic

Communications International Union, Local 119B-43B,

New York (“Local 119B-43B”). Id. at 1044. The Board’s

order, issued on December 16, 1994, requires BCA to

recognize and bargain with the three unions, to rescind

the April 23 changes, and to make the affected employees

whole for any losses incurred by virtue of the changes. Id.

at 1044, 1047.

BCA petitions for review on the ground that two of

the Board’s findings — that the bargaining units that the

charging party unions seek to represent in this case are

“appropriate”; and that the announcement of terms and

App. 4

conditions of employment on April 23 constituted an

unlawful unilateral change — reflect improper application

of legal principles and are contrary to the record evi-

dence. We find merit in neither of BCA’s contentions. We

therefore deny BCA’s petition for review and grant the

General Counsel’s cross-petition for enforcement.

I. FACTS

The following facts of record are drawn primarily

from the Administrative Law Judge’s decision of March 3,

1992, affirmed by a divided panel of the Board in a

Decision and Order dated December 16, 1994.

This labor dispute stems from BCA’s acquisition in

early 1990 of a high-security printing facility located in

Suffern, New York. The facility was formerly owned by

American Banknote Company (“ABN”), one of the two

major U.S. firms engaged in the printing of security docu-

ments (e.g., stocks, bonds, visas, traveler’s checks). In

June 1989, ABN’s competitor, United States Banknote

Company (“USBN”), made a tender offer for ABN’s par-

ent company. The Justice Department raised antitrust

objections to the proposed tender offer and required, as a

condition of its approval of the transaction, the sale of an

ABN printing facility to an independent third party.

USBN entered into negotiations with a French security

printing firm, Francois-Charles Oberthur Fiduciare

(“FCO”), for the sale of ABN’s Suffern facility. FCO

formed an American subsidiary, BCA, to consummate the

transaction. On December 15, 1989, USBN and BCA

entered into a purchase agreement under which BCA

nal i te

App. 5

would acquire substantially all of ABN’s assets at the

facility.

Under the terms of the purchase agreement, BCA was

required to elect to receive either a “closed” plant or an

“operating” plant after USBN completed its tender offer

for ABN’s parent company. If BCA chose an operating

plant, it would interview ABN employees and, within

thirty days, provide USBN with a list of the employees it

wished to hire. On January 9, 1990, despite the fact that

USBN had not yet gained control of ABN’s parent, BCA

announced its intention to receive an operating plant.

USBN completed its tender offer for ABN’s parent com-

pany on February 27. The sale of the Suffern facility

assets to BCA closed on the same day.

ABN’s approximately 100 production employees

were divided into eleven bargaining units to reflect the

diversity of its work force, which included individuals

with a variety of skills involved in the high-security

printing process — designers, engravers, photoengravers,

plate finishers, machinists, and so on. Because of a delay

in USBN’s acquisition of ABN’s parent company, BCA

officers were not able to gain access to the facility to

interview employees as contemplated by the purchase

agreement. Accordingly, on March 13, BCA supplied

USBN with a list of those employees it wished to hire

without having interviewed the employees. USBN

“rejected” the employee list because it purportedly cre-

ated difficulties under the seniority provisions of the

collective bargaining agreements between ABN and the

labor unions representing employees at the plant. When

BCA officers began to discuss the rejection of the

employee list with USBN officers, they discovered that

App. 6

there had been a communication by the human resources

director of ABN to union representatives at the facility on

March 1 to the effect that “[FCO] has agreed to recognize

the Unions who are party to collective bargaining agree-

ments at the . . . plant and to be bound to the terms of the

existing collect[ive] bargaining agreements.” BCA

retained labor counsel, who subsequently wrote a letter

to union representatives indicating that the statements in

the March 1 letter were not authorized, that BCA had

made no commitment to recognize the unions or be

bound by the collective bargaining agreements, and that

BCA intended to “attempt to hire its initial work force

from among the employees currently working at

the . . . facility.” BCA’s president, Martin Ferenczi, met

with union representatives on April 11, 1990. At that

meeting, he announced that: (1) ABN would close its

Suffern facility on April 13; (2) all ABN employees in

Suffern would receive applications for employment with

BCA; (3) BCA officers would conduct interviews with the

former ABN employees on April 16 and 17; (4) the facility

would reopen on April 19; and (5) BCA would not honor

the collective bargaining agreements existing between

ABN and the unions. Ferenczi also stated that BCA

intended to introduce greater “flexibility” in operations

at the plant, and that employees’ existing health benefits

would continue for a period of sixty days. He did not

otherwise discuss the terms or conditions of employment.

As planned, BCA distributed employment applica-

tions to ABN employees prior to the closing of the plant.

BCA interviewed 102 ABN employees on April 16 and 17,

and extended offers of employment to fifty ABN produc-

tion workers and four ABN supervisors, all of whom

App. 7

began work on April 19. BCA also hired two maintenance

workers not previously employed by ABN. On April 23,

BCA announced certain terms and conditions of employ-

ment, with the result that as of that date all employees

worked the same hours, participated in the same pension,

vacation, and sick pay plans, received the same health

and welfare benefits, and observed new company holi-

days. BCA also voluntarily recognized two of the eleven

unions that had previously represented ABN employees.

Five unions filed charges against the company for

violations of subsections § 8(a)(1) and (a)(5) of the NLRA,

claiming that BCA had improperly failed to recognize

and bargain with them prior to changing the terms and

conditions of employment on April 23. The Board’s

regional enforcement counsel issued a consolidated com-

plaint on behalf of all five unions in September 1990. In

March 1991, the Board severed and withdrew complaints

filed on behalf of two of the unions because each sought

to represent only one employee. The Board filed amended

complaints on behalf of the three remaining unions, Local

1-P, District 15, and Local 119B-43B. The case was heard

before Administrative Law Judge D. Barry Morris on

April 15-19, 1991. On March 3, 1992, the ALJ issued a

decision and recommended order.

The ALJ found that, as of April 19, 1990, when BCA

had hired nearly its full complement of employees from

ABN’s work force, BCA acquired a duty to bargain with

the three charging party unions. The ALJ concluded that,

despite the fact that BCA had hired only half of ABN’s

employees and had indicated its intent to introduce

greater “flexibility” in its operations, BCA was a legal

successor to ABN. As a prerequisite for the finding that

App. 8

BCA was a legal successor with a duty to bargain with

the charging party unions, the ALJ assessed whether the

three units involved in the proceedings were “appropri-

ate” bargaining units under BCA’s operations. The ALJ

found that BCA had failed to sustain its burden of dem-

onstrating that the bargaining units the charging party

unions sought to represent were inappropriate. As a

result, BCA’s duty to bargain attached no later than April

19. The duty to bargain carried with it a duty not to

institute unilateral changes in the terms and conditions of

employment without providing notice to or bargaining

with the charging party unions. BCA therefore engaged

in an unfair labor practice in announcing terms and con-

ditions of employment on April 23 without consulting the

unions

BCA, the Board’s General Counsel, and Local

119B-43B filed exceptions to the ALJ’s decision.! On

December 16, 1994, a panel of the NLRB, by a vote of 2-1,

affirmed the ALJ’s rulings, findings, and conclusions and

adopted the recommended order. BCA, 315 N.L.R.B. at

1041. The majority concluded that the bargaining units

the charging party unions sought to represent remained

“appropriate” under BCA’s operations, and that, as of

April 19, BCA was a legal successor with a duty to

bargain before altering the terms and conditions of

employment. In dissent, Member Stephens concluded

1 The General Counsel and Local 119-43B challenged the

ALJ’s conclusion that the BCA was not a “perfectly clear”

successor to ABN - that is, that BCA had no duty to bargain

with the unions prior to establishing its initial terms of

employment. See discussion infra pp. 10-11, 12.

App. 9

that changes instituted by BCA immediately upon its

takeover of the plant - including the introduction of

greater flexibility in the roles of the various production

employees — rendered the historical bargaining units

inappropriate. Id. at 1045.

On February 7, 1995, BCA filed a petition for review

of the Board’s decision and order, arguing that (1) the

historical bargaining units that the charging party unions

sought to represent were not appropriate under BCA’s

operations, and BCA therefore had no duty to recognize

or bargain with the unions; and (2) BCA’s announcement

of terms and conditions of employment on April 23 did

not constitute an unlawful unilateral change. The General

Counsel cross-petitioned for enforcement.

II. DISCUSSION

An employer’s collective bargaining obligation

derives from subsection 8(a)(5) of the NLRA, which pro-

hibits an employer from refusing “to bargain collectively

with the representatives of his employees, subject to the

provisions of [subsection 9(a) of the Act].” 29 U.S.C.

§ 158(a)(5). Subsection 9(a) identifies the representative

designated by a majority of the employees in a unit

appropriate for collective bargaining purposes as the

exclusive bargaining representative of those employees.

29 U.S.C. § 159(a). By conjunctive application of these two

subsections, the union designated by a majority of

employees in an “appropriate” bargaining unit may com-

pel the employer to negotiate as to the terms and condi-

tions under which employees of that bargaining unit will

work. In the instant case, the charging party unions had

App. 10

collective bargaining relationships with ABN, not BCA.

Nevertheless, it has long been held that under certain

circumstances a “successor” employer may be required to

presume that the representative of a bargaining unit con-

tinues to enjoy the support of a majority of the employees

in that unit and to negotiate with the unit’s bargaining

representative.

Many of the principles governing the inquiry into

whether and at what point an employer becomes a legal

successor with a duty to recognize and bargain with an

“incumbent” union were established in NLRB v. Burns

International Security Services, Inc., 406 U.S. 272 (1972),

and Fall River Dyeing and Finishing Corp. v. NLRB, 482 U.S.

27 (1987). A finding of legal successorship first requires a

finding of “substantial continuity” between the prede-

cessor’s enterprise and that of the successor. Fall River

Dyeing, 482 U.S. at 43 (quotation marks omitted); see

Burns, 406 U.S. at 280 n.4. Related to this inquiry is

whether the bargaining unit that a union seeks to repre-

sent remains “appropriate” under the successor’s opera-

tions. See Burns, 406 U.S. at 280. Subsections 8(a)(5) and

9(a) of the NLRA, read together, only require an

employer to bargain with the representative of an “appro-

priate” bargaining unit.

More complicated is the question of when a legal

successor’s duty to bargain will attach. In Burns, the

Court rejected the Board’s rule that a successor must in

all circumstances bargain with an incumbent union before

instituting employment terms different from those pre-

vailing under the predecessor’s collective bargaining con-

tract. The Court thus concluded that ordinarily a

successor may set the initial terms and conditions of

App. 11

employment — different from the substantive terms of the

previously negotiated collective bargaining agreement —

without bargaining. Id. at 281-86. The exception to this

general rule, stated in dictum in Burns and developed by

the Board and courts of appeals thereafter, is that a suc-

cessor employer may be required to bargain as to the

initial terms and conditions of employment when the

successor makes it “perfectly clear” that it will retain its

predecessor’s work force and operate on substantially the

same terms as the predecessor. See id. at 294-95; Interna-

tional Ass'n of Machinists & Aerospace Workers, 595 F. 2d

664, 671-74 (D.C. Cir. 1978), cert. denied, 439 U.S. 1070

(1979); Spruce Up Corp., 209 N.L.R.B. 194, 195 (1974), enf’d

per curiam on other grounds, 529 F. 2d 516 (4th Cir. 1975);

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

873, 881 (2d Cir. 1977). Even if an employer states its plan

to retain employees from its predecessor’s work force, its

simultaneous announcement that it will operate on terms

different from those of its predecessor raises the real pos-

sibility that the predecessor’s employees will not wish to

work on the new terms. See Spruce Up, 209 N.L.R.B. at

195. In such circumstances, it will not be “perfectly clear”

prior to hiring what portion of the successor’s employees

will be drawn from the predecessor’s work force. See id.

Although an ordinary successor — i.e., one that does

not make it “perfectly clear” that it intends to retain its

predecessor’s employees — may unilaterally set the initial

terms and conditions of employment, the Burns Court

concluded that a successor may ultimately acquire a duty

to recognize and bargain with the representative of the

predecessor’s employees. In Burns, that duty was found

to attach because a majority of the successor’s employees

App. 12

in an appropriate bargaining unit had been employed by

the predecessor. 406 U.S. at 278-79; see Saks & Co. v. NLRB,

634 F. 2d 681, 685-86 (2d Cir. 1980).2 In Fall River Dyeing,

the Court addressed the question of when the determina-

tion of the presence of a majority in the successor’s work

force is to be made. The Court rejected the view that the

determination of majority presence is appropriate only

when the successor has hired the “full complement” of its

employees, and instead adopted the Board’s rule that the

appropriate time to assess majority presence is when the

successor has hired a “substantial and representative

complement” of its employees. 482 U.S. at 47-52. Fall

River Dyeing also makes clear, however, that “[t]he suc-

cessor’s duty to bargain at the ‘substantial and represen-

tative complement’ date is triggered only when the union

has made a bargaining demand.” Id. at 52 (emphasis sup-

plied).

In the instant case, the Board concluded that BCA

was not a “perfectly clear” successor to ABN. Because

BCA had communicated to ABN’s unions in March and

early April 1990 that it intended to make certain changes

in the terms and conditions of employment, there existed

a real question as to whether ABN’s employees would

2 Burns actually contained conflicting language as to

whether the proper inquiry required (1) a determination of

whether a majority of the employees in the successor’s —

bargaining unit had been employed by the predecessor; or (2) a

determination of whether a majority of the employees in the

predecessor's bargaining unit were hired by the successor.

Compare 406 U.S. at 281 with id. at 278. We addressed this

question in Saks & Co., following other circuits in adopting the

former approach. See 634 F.2d at 685-86.

App. 13

accept the offered terms and enter into an employment

relationship with BCA. Thus, it could not be “perfectly

clear” from the outset that BCA would ultimately draw a

majority of its employees in the bargaining units in ques-

tion from ABN’s work force. As of April 19, however,

BCA had completed its hiring. Nearly all of BCA’s

employees were then former ABN employees. The Board

concluded that, under these circumstances, BCA had a

duty to bargain with the charging party unions as of

April 19. The duty to bargain encompassed a duty not to

impose unilateral changes in the terms and conditions of

employment without notice to or bargaining with unions

that are presumed to enjoy majority support among

employees in a bargaining unit. The Board therefore

found that BCA committed an unfair labor practice when

it introduced terms and conditions of employment on

April 23 without giving the unions prior notice and an

opportunity to negotiate.

To sustain and enforce the Board’s order, we must

accept two disputed conclusions underlying the Board’s

holding that BCA acquired a duty to bargain as of April

19. First is the Board’s factual determination that the

three bargaining units that the charging party unions

seek to represent remained “appropriate” bargaining

units under the operational structure and practices intro-

duced by BCA. Second is the legal conclusion — implicit

in the Board’s finding of a duty to bargain —- that the

charging party unions need not have made a demand that

BCA bargain with them in order to preserve their right to

challenge BCA’s unilateral institution of terms and condi-

tions of employment on April 23.

App. 14

We review these conclusions in reverse order. We

find no merit in BCA’s argument that, in the absence of a

demand by the charging party unions for recognition or

bargaining, no collective bargaining relationship would

have existed between BCA and the unions. We then con-

sider BCA’s argument that the Board’s finding of unit

appropriateness is unsupported by the record evidence.

We reject this contention as well.

A. Significance of Bargaining Demand in Ordinary Suc-

cessorship Cases

As previously noted, in Fall River Dyeing the Court

addressed the question of when a successor’s obligation

to bargain with an “incumbent” union attaches. The

Court upheld the Board’s conclusion that a bargaining

obligation attached in that case although the union had

made a premature bargaining demand - that is, it had

demanded bargaining prior to the successor’s hiring of a

substantial and representative complement of employees.

The Board’s conclusion was based on its finding that the

union’s bargaining demand was “continuing in nature.”

The Court reasoned as follows:

[T]he Board’s “continuing demand” rule is rea-

sonable in the successorship situation. The suc-

cessor’s duty to bargain at the “substantial and

representative complement” date is triggered

only when the union has made a bargaining

demand. Under the “continuing demand” rule,

when a union has made a premature demand

that has been rejected by the employer, this

demand remains in force until the moment

App. 15

when the employer attains the “substantial and

representative complement.”

Id. at 52. Relying on this language, as well as similar

pronouncements of courts of appeals, BCA argues that it

could not have acquired a duty to bargain in the absence

of any request for recognition or bargaining by the charg-

ing party unions. If no duty to bargain attached prior to

BCA’s introduction of new terms and conditions of

employment on April 23, BCA’s action could not have

constituted an unlawful unilateral change.

We are unpersuaded. To be sure, several courts of

appeals and Board cases applying Fall River Dyeing

unequivocally state that the concurrence of two circum-

stances is required to trigger a bargaining obligation on

the part of an “ordinary” (i.e., not “perfectly clear”) suc-

cessor: (1) the hiring of a “substantial and representative

complement” of employees, a majority of whom were

employed by the predecessor; and (2) the existence of an

outstanding demand by the union for recognition or bar-

gaining. See Nephi Rubber Prods. Corp. v. NLRB, 976 F.2d

1361, 1365 n.6 (10th Cir. 1992) (determination of whether

successor employer has duty to bargain requires analysis

of whether successor has hired substantial and represen-

tative complement of employees at time of union’s bar-

gaining demand); Williams Enters., Inc. v. NLRB, 956 F.2d

1226, 1232 (D.C. Cir. 1992) (“The presumption of majority

support that creates a successor’s duty to bargain arises

. only when . . . the new employer has hired a

‘substantial and representative complement’ of its work-

force and a majority of that workforce is composed of

predecessor employees; and the incumbent union has, at

some time, issued a valid bargaining demand to the new

App. 16

employer.”), decision supplemented by 312 N.L.R.B. 937

(1993), enf’d, 50 F.3d 1280 (4th Cir. 1995); Briggs Plumbing-

ware, Inc. v. NLRB, 877 F. 2d 1282, 1286-87 (6th Cir. 1989)

(“The concurrence of two events is necessary to obligate

the successor employer to bargain with the union: the

successor’s employment of a ‘substantial and representa-

tive complement’ of the predecessor’s employees and the

union’s demand for recognition.”); see also Capitol Steel &

Iron Co., 299 N.L.R.B. 484, 496 (1990); Royal Midtown

Chrysler Plymouth, Inc., 296 N.L.R.B. 1039, 1040 (1989). As

the Board stated in Royal Midtown Chrysler Plymouth:

Successorship does not automatically carry

with it the obligation to bargain with the union

that represented the predecessor’s employees.

Nor does the fact that the union represents a

majority of the successor’s employees in an

appropriate unit operate alone to invoke the

bargaining obligation; and this is so even when

the successor has attained a “substantial and

representative complement” of employees. The

bargaining obligation - albeit potentially pre-

sent when successorship and representative

complement are established — must be triggered

by a demand for recognition or bargaining.

296 N.L.R.B. at 1040 (emphasis supplied).

Neither the ALJ nor the Board discussed the require-

ment of a bargaining demand in this case. In defending

the Board’s decision, the General Counsel does not argue

that the charging party unions demanded recognition

prior to the employer’s April 23 action allegedly altering

the terms and conditions of employment. Rather, the

General Counsel argues that no bargaining demand was

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App. 17

required. First, the General Counsel contends that a suc-

cessor has an obligation to bargain over terms and condi-

tions of employment once it is clear that the majority of

the employees in a bargaining unit were drawn from the

predecessor’s work force, regardless of whether the

union has made a valid bargaining demand. Second, the

General Counsel claims that no specific bargaining

demand is required where an employer imposes, without

notice, changes to the terms and conditions of employ-

ment. That is, where a union did not receive prior notice

of possible changes as to a mandatory subject of collec-

tive bargaining, it cannot be thought to have waived its

right to bargain as to such changes by failing to make a

bargaining demand. Because we accept a variant of the

first argument, we need not address the second.

Although the rule invoked by BCA here - that the

concurrence of the hiring of a substantial and representa-

tive complement of employees, a majority of whom had

been employed by the predecessor, and a bargaining

demand is required to trigger an employer’s duty to

bargain — has been broadly stated, it developed within a

specific factual context: where “there is a start-up period

by the new employer while it gradually builds its opera-

tions and hires employees.” Fall River Dyeing, 482 U.S. at

47. If an employer builds its work force gradually, assess-

ing whether a majority of the successor’s employees were

drawn from the predecessor’s work force once the

employer has hired a substantial and representative com-

plement — rather than when the employer has hired its

full employee complement - serves the interest of the

employees in being represented as soon as possible in the

relationship with their new employer. Id. at 48. Requiring

App. 18

the confluence of a majority presence in a substantial and

representative complement of employees and a bargain-

ing demand, among other things, eases the burden of

uncertainty on the employer: “Once the employer has

concluded that it has reached the appropriate comple-

ment, then, in order to determine whether its duty to

bargain will be triggered, it has only to see whether the

union already has made a demand for bargaining.” Id. at

52-53.

While the two-pronged rule of Fall River Dyeing may

be appropriate in a situation involving the staggered or

gradual hiring of employees during a startup period, or

even the hiring of employees after a prolonged delay

between the closing and reopening of a business, we do

not find it appropriate here. Where a successor rebuilds

an operation over a period of time or where there is a

hiatus between the closing and reopening of an enter-

prise, there may be considerable doubt as to whether a

union that enjoyed the support of a majority of a prede-

cessor’s bargaining unit continues to do so under the

successor’s operation. Here, however, the employer hired

its full complement of employees at once, shortly after

the change in ownership of the business. Accordingly, the

fact that the majority of the employees in each bargaining

unit were former ABN employees was immediately clear

to BCA. BCA could easily discern its obligation to pre-

sume that the representatives of ABN’s employees contin-

ued to enjoy majority status. We see no reason to adopt

BCA’s for realistic approach where the requirement of a

demand would have supplied it with no additional cer-

tainty regarding this obligation.

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App. 19

We therefore find those cases involving gradual hir-

ing over a startup period or involving a hiatus in opera-

tions, in which courts and the Board have linked a

determination of a duty to bargain with a bargaining

demand, sufficiently distinguishable from the instant case

to warrant application of a different rule here. Cf. Nephi

Rubber Prods., 976 F. 2d at 1365 (concluding that, after

sixteen-month hiatus in operations, employee had hired

substantial and representative complement of employees

as of date of bargaining demand); Williams Enters., 956

F.2d at 1230, 1232-34 (remanding to Board for determina-

tion of whether bargaining demand coincided with hiring

of substantial and representative complement; successor

immediately rehired nearly twenty percent of prede-

cessor’s employees and then “continually increased the

size of its production staff” throughout next two months);

Briggs Plumbingware, 877 F.2d at 1284, 1287 (requiring

concurrence of bargaining demand and majority presence

in substantial and representative complement where suc-

cessor first hired some of predecessor’s employees for

pre-production work and began actual production with

additional workers two months later); Capitol Steel & Iron,

299 N.L.R.B. at 485, 486 (examining whether successor to

employer that ceased operations in January 1986 had

duty to bargain, based on whether substantial and repre-

sentative complement existed as of union’s October 1987

bargaining demand). To the extent that other cases can be

read to suggest that a bargaining demand is required

even where the successor can immediately discern that a

majority of its employees were employed by the prede-

cessor, we simply disagree that Fall River Dyeing compels

any such result. Cf. NLRB v. Houston Bldg. Serv., Inc., 936

App. 20

F.2d 178, 180 (5th Cir. 1991) (noting, in case where

employer immediately hired all of predecessor’s

employees and union had made bargaining demand, that

obligation to bargain arises where “’a majority of the

successor’s employees had been employed by its prede-

cessor,’ ” “assuming that the union has made a bargain-

ing demand” (quoting Fall River Dyeing, 482 U.S. at 47)),

cert. denied, 502 U.S. 1090 (1992); Royal Midtown Chrysler

Plymouth, 296 N.L.R.B. at 1039 (holding that no bargain-

ing obligation attached where successor hired three of

four employees from predecessor’s bargaining unit one

week after change in ownership, but union made demand

after predecessor’s employees no longer formed majority

in successor’s bargaining unit). Indeed, Fall River Dyeing

itself suggests the possibility that the composition of the

successor’s work force alone may in some circumstances

be sufficient to trigger an employer’s duty to bargain: in

describing the holding of Burns, the Fall River Dyeing

Court stated that in that case “[t]he ‘triggering’ fact for

the bargaining obligation was [the] composition of the

successor’s work force” specifically, the fact that a major-

ity of the successor’s employees had previously been

employed by the predecessor. Fall River Dyeing, 482 U.S.

at 46.5

3 The union in Burns did make a bargaining demand prior

to the successor’s hiring of the predecessor’s employees.

Nevertheless, neither the Burns Court nor the Fall River Dyeing

Court, in its exposition of Burns, appeared to attach legal

significance to that fact.

App. 21

We therefore conclude that the absence of a bargain-

ing demand in this case —- which involves neither a pro-

longed startup period and gradual or staggered hiring of

employees nor a significant hiatus in operations, but

rather, a rapid transition period with the immediate hir-

ing of a full employee complement - does not preclude a

finding of a duty to bargain on the part of BCA.4 Assum-

ing that the remaining prerequisites for successorship

and a duty to bargain were met (a topic to which we shall

return shortly), BCA’s duty to bargain would have

attached as of April 19, 1990, when BCA hired its

employees. BCA was thereafter no longer free to act

* In so holding, we do not fully accept the General

Counsel’s position on the question of when a bargaining

demand is required to preserve a union’s right to object to the

unilateral imposition of terms and conditions of employees.

That position appears to be that BCA, though not initially a

“perfectly clear” successor, developed or ripened into one after

hiring its full complement of employees, nearly all of whom

were drawn from ABN’s ranks. We agree with BCA that, absent

indicia that an employer intends to retain its predecessor’s

employees on substantially the same terms, successorship is not

perfectly clear. To apply that label to BCA on the theory that an

employer can “ripen” into a perfectly clear successor is to

ignore the legal significance that has attached to that term: A

perfectly clear successor, unlike an ordinary successor, acquires

a duty to bargain prior to hiring its predecessor’s employees.

Nevertheless, we take the General Counsel’s point to be that,

once it is plain to an employer that a majority of the employees

in a bargaining unit are former employees of the predecessor,

the employer is required to presume that a union’s majority

status continues, regardless of whether the union has made a

bargaining demand. Where, as here, there is a rapid transition

from one employer to another and the predecessor’s employees

are rehired almost immediately, we agree.

App. 22

unilaterally with respect to mandatory subjects of collec-

tive bargaining and BCA’s imposition of new terms and

conditions of employment on April 23 was unlawful.°

We turn to BCA’s remaining contentions. We address

at length only BCA’s argument that the ALJ and the

Board erred in concluding that the bargaining units the

charging party unions sought to represent remained

“appropriate” under BCA’s operations, finding the

remainder of BCA’s contentions to be insubstantial.

B. Unit Appropriateness Under BCA’s Operations

BCA challenges on two grounds the determination

that the bargaining units in question remained appropri-

ate after BCA took over the plant. First, BCA contends

that the Board improperly applied a rebuttable presump-

tion in this case in favor of the appropriateness of histori-

cal bargaining units. BCA argues that the Board should

instead have conducted the “community-of-interest”

5 Thus, we reject BCA’s argument that the terms of

employment imposed on April 23 were “initial” terms of

employment. Under principles established by the Board and

sanctioned over many years by courts of appeals, a successor is

not held to the terms of its predecessor’s contract, but to the

terms on which it hired its employees. A successor must make

clear, before its duty to bargain attaches, that it intends to vary

its predecessor’s terms; in so doing, it establishes its “initial”

terms. See International Ass’n of Machinists, 595 F.2d at 674-75.

We accept the conclusion of the ALJ, adopted by the Board, that

BCA established only two “initial” terms here: that it would

continue employee health benefits for sixty days, and that it

would introduce greater “flexibility” in the workplace. See BCA,

315 N.L.R.B. at 1043 n.5; id. at 1049 (decision of ALJ).

App. 23

analysis that it typically employs in determining whether

a bargaining unit is appropriate; bargaining history is

only one of several factors considered under that

approach. Second, BCA suggests that it succeeded in

overcoming the presumption in any event.

We examine each argument in turn.

1. Board's Use of a Rebuttable Presumption in Favor of

Historical Units

In concluding that BCA had failed to demonstrate

that the three bargaining units the charging party unions

sought to represent were inappropriate, the Board rea-

soned as follows:

[T]he Board has consistently held that long-

established bargaining relationships will not be

disturbed where they are not repugnant to the

Act’s policies. The Board places a heavy eviden-

tiary burden on a party attempting to show that

historical units are no longer appropriate.

315 N.L.R.B. at 1043 (footnote omitted); see Great Atlantic

& Pacific Tea Co., 153 N.L.R.B. 1549, 1550 (1965); Columbia

Broadcasting Sys., Inc., 214 N.L.R.B. 637, 642-43 (1974).

BCA contends that the proper inquiry into whether a

bargaining unit remains appropriate under a successor

employer involves application of the Board’s “commu-

nity-of-interest” test. See Kalamazoo Paper Box Corp., 136

N.L.R.B. 134, 137 (1962); NLRB v. Indianapolis Mack Sales &

Serv., 802 F. 2d 280, 283-84 (7th Cir. 1986). Under that test,

an assessment of unit appropriateness depends upon the

degree to which a group of employees share a “commu-

nity of interests” distinct from the interests of other

App. 24

employees of the company. The degree to which

employees share a community of interests is measured by

a number of factors, including whether, in relation to

other employees, they have different methods of compen-

sation, hours of work, benefits, supervision, training and

skills; if their contact with other employees is infrequent;

if their work functions are not integrated with those of

other employees; and if they have historically been part

of a distinct bargaining unit. Kalamazoo Paper Box, 136

N.L.R.B. at 137; see also Staten Island Univ. Hosp. v. NLRB,

24 F. 3d 450, 455 (2d Cir. 1994). BCA contends that, in

giving great weight to the “lorig-established bargaining

relationships” in this case, the Board improperly elevated

a single factor in the community-of-interest test — bar-

gaining history - over all others, thereby creating a

rebuttable presumption of the appropriateness of histori-

cal bargaining units and abdicating its duty under sub-

section 9(b) of the Act to decide “in each case” what “unit

[is] appropriate for purposes of collective bargaining.” 29

U.S.C. § 159(b).

We find BCA’s argument unpersuasive. We have pre-

viously acknowledged the power of the Board to apply

rebuttable presumptions regarding the appropriateness of

bargaining units. Most recently, in Staten Island University

Hospital, we found that power to be “beyond dispute,”

recognizing that the Board “is not required to exercise

‘standardless discretion in each case’ ” and “has authority

to ‘resolve certain issues of general applicability unless

Congress clearly expresses an intent to withhold that

authority.’ ” 24 F.3d at 456-57 (quoting American Hosp.

Ass'n v. NLRB, 499 U.S. 606, 612 (1991)).

Sedat i nti caine tic Si

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App. 25

A rule such as the one invoked by the Board here -

favoring long-established bargaining relationships — is

“reviewable for consistency with the Act, and for ratio-

nality.” Beth Israel Hosp. v. NLRB, 437 U.S. 483, 501 (1978).

The Board’s invocation of a presumption in favor of

historical bargaining units simply is not, as a general

matter, inconsistent with the requirement of § 9(b) of the

NLRA that the Board “decide in each case” the appro-

priateness of a bargaining unit.

BCA contends, however, that the Board’s reliance on

the presumption was improper in this case. Specifically,

BCA claims that the application of a presumption in favor

of historical bargaining units is not rational here, where

the historical bargaining units have long gone

unchallenged despite significant changes in the technol-

ogy of the high-security printing industry.®

The rationality of applying a particular presumption

need not be demonstrated by reliance on testimonial evi-

dence in the case in which the Board invokes the pre-

sumption, Big Y Foods, Inc. v. NLRB, 651 F.2d 40, 46 (1st

takeover of the printing facility render the application of a

presumption in favor of the appropriateness of long-established

bargaining units improper in this case. Evidence of changes

instituted by BCA would not cast doubt upon the rationality of

applying the presumption, but would demonstrate that the

presumption has been overcome in this case. We therefore

postpone scrutiny of this evidence. Even if we thought BCA’s

position relevant here, as will become clear, BCA fails to

establish the factual predicate of this argument - namely that,

upon its takeover of the plant, it immediately introduced a new

operational structure, as a result of which functions were no

longer divided along unit lines.

App. 26

Cir. 1981) — indeed, such a requirement would undercut

the ability of the NLRB to resolve issues of general appli-

cability. Rather, the Board may draw upon its past experi-

ence in like cases in deciding whether to apply a

presumption, and in such cases the application “is likely

to be rational.” Id.; see Republic Aviation Corp. v. NLRB, 324

U.S. 793, 804-05 (1945). Nonetheless, if it were the case

that BCA had introduced significant evidence that ABN’s

units had been rendered obsolete by industry shifts or

developments at ABN, and the Board had applied the

presumption in favor of long-established units in disre-

gard of this evidence, we would not hesitate to find the

application of the presumption irrational. Here, however,

we find that BCA fails to carry the argument. The record

does suggest that ABN underwent significant changes in

structure over several decades, including shifting its

operations in 1984 from a one central plant to three

smaller plants, of which the Suffern facility was one. The

record also suggests that at the time the Suffern facility

was transferred to BCA, ABN employed at that facility a

fraction of the workers that it had once employed at a

central plant in the Bronx, New York: ABN’s Bronx facil-

ity at one time had 2,000 workers; in early 1990, ABN’s

Suffern facility had approximately 100 production

employees. Yet the record is virtually devoid of testimony

or documentary evidence that the changes in structure

and size in any way affected the working conditions,

essential functions, and interaction of the employees of

the different ABN units. BCA argues strenuously that a

blurring of craft lines has over time rendered traditional

unit designations in the printing industry obsolete. That

may well be so, but absent evidence to that effect, BCA

be a

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App. 27

cannot demonstrate that application of a presumption in

favor of long-established bargaining relationships is inap-

propriate in this case. We discern no error in this aspect

of the Board’s decision and order.

2. Board’s Finding that BCA Failed To Overcome Pre-

sumption in Favor of Existing Bargaining Units

BCA contends that even if the Board rationally

applied here a presumption that long-established bar-

gaining units remain appropriate, BCA has overcome that

presumption. BCA claims that, upon reopening the plant,

it significantly restructured the workplace. As a result,

“[njot one of the [charging party] unions sought to repre-

sent a properly severable group of employees.” Brief of

Petitioner-Cross-Respondent at 31. BCA first emphasizes

that it made clear prior to hiring its employees that it

intended to develop a more “flexible” production pro-

cess; it launched a program of “cross-utilization” almost

immediately, as a result of which employees of the bar-

gaining units in question performed functions largely

indistinguishable from those performed by other BCA

employees. Second, BCA claims that all BCA employees

were paid on the same hourly scale, were covered by the

same benefit plans, and worked the same hours.

In relying on the fact that all BCA employees had the

same hours, wages, and benefits, BCA refers to the state

of affairs following the April 23 institution of terms and

conditions of employment. Like the Board and the ALJ,

we decline to consider those changes in determining unit

appropriateness. Based on the testimony of several ABN

employees, the ALJ and the Board found that the only

App. 28

changes BCA officers announced as terms and conditions

of employment were that employee health benefits would

be extended for a period of sixty days and that BCA

intended to introduce greater flexibility in the plant’s

operations. 315 N.L.R.B. at 1043 n.5; id. at 1049 (decision

of ALJ). We cannot say that this finding is contrary to the

record evidence. The introduction of terms and condi-

tions of employment on April 23 therefore cannot, as BCA

claims, be cast as an introduction of “initial” terms and

conditions, rather than as a change in the existing terms

and conditions of employment.

We turn to BCA’s argument that it restructured the

workplace, integrating the functions of various

employees and rendering the bargaining units in question

— which had developed along strict craft lines - inap-

propriate. The Board rejected BCA’s position, concluding

that the employees in the three bargaining units at issue

in this case “continued performing the same or substan-

tially the same work as they had prior to the change in

ownership, only occasionally filling in as needed on tasks

otherwise assigned to employees in other bargaining

units.” 315 N.L.R.B. at 1043. An examination of the evi-

dence as to each bargaining unit leads us to the conclu-

sion that substantial evidence on the record as a whole

supports the Board’s finding.

a. Local 1-P

Local 1-P represented six photoengravers employed

by ABN. ABN’s photoengravers prepared film images of

designs for transfer to plates used on the facility’s print-

ing presses. Three of the six workers represented by Local

App. 29

I-P were rehired by BCA. BCA contends that it imme-

diately expanded the duties of the photoengravers and

submitted as evidence a chart suggesting that photo-

engravers’ new duties included tasks of other engraving

department employees — such as creating models, design-

ing support material, and preparing lithographic plates.

The testimony of two Local 1-P photoengravers, however,

indicates that: (1) in interviews with BCA officers after

the closing of the plant, the photoengravers were told

that, if hired, they would perform largely the same func-

tions under BCA as they had under ABN; (2) to the extent

that they performed additional functions, they did not

begin to do so until December 1990 or January 1991,

several months after they were rehired by BCA. Although

BCA’s chart indicates that the employees Local 1-P

sought to represent immediately performed the same

tasks as other engraving department employees, it is

directly contradicted by the testimony of these

employees. The ALJ was entitled to credit that testimony,

and the Board was entitled to accept it as demonstrating

that any performance of duties across unit lines was,

during the relevant time period, sporadic.

b. Districi 15

District 15 represented four ABN machinists. They

were responsible for preparing plates for use on the

printing presses, by “grinding” the back of the plates,

bending the plates to the shape of the press, and punch-

ing holes in the plates for press clamps. In addition, the

machinists maintained and repaired the presses, building

parts when necessary. BCA hired two District 15

App. 30

employees. BCA contends that other employees share

machinists’ duties: those who operate the presses are

responsible for more maintenance than they had been

under ABN, and others grind and bend plates, a task

previously performed exclusively by machinists. Again,

BCA’s contention that many other employees perform

tasks traditionally assigned to the machinists is contra-

dicted by the relevant employee testimony. Both BCA

machinists testified that they perform the same duties

under BCA as they did under ABN. One machinist testi-

fied that, beginning in November or December 1990, he

was trained to apply serial numbers to documents (such

as visas). The testimony suggests that only the machinists

grind plates and that others bend and punch plates only

if the machinists are “overloaded.”

c. Local 119B-43B

Local 119B-43B represented 13 workers engaged in

finishing operations at ABN. ABN’s finishing workers

would count and examine printed sheets containing mul-

tiple documents, remove those with imperfections, and

cut or otherwise separate the documents. Nine of the

workers represented by Local 119B-43B were rehired by

BCA. BCA contends that it immediately introduced

changes so that former finishing workers of ABN -— char-

acterized, along with other employees in BCA’s printing

department, as “General Workers” — began to perform a

variety of other tasks, and that other employees began to

perform tasks formerly exclusively performed by the fin-

ishing workers. Specifically, according to BCA, finishing

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App. 31

workers now perform tasks further along in the produc-

tion process (such as shrink-wrapping, packing, and stor-

ing products) as well as tasks performed earlier in the

production process (such as “unwinding” - meaning

unrolling metal printing plates from the spool on which

they are shipped). As with Local 1-P and District 15

employees, the Local 119B-43B employees do not appear

to have performed additional duties until several months

after the reopening of the facility, or to have performed

those duties regularly. Thus, a 119-43B employee testified

that after five months she was trained to work on the

unwinding machine and had done so on two or three

occasions.

Based on our review of the record, we conclude that

substantial evidence supports the Board’s finding that

employees in the units in question continued for some

time to perform substantially the same work as they had

prior to the change in ownership of the facility, only

occasionally performing tasks assigned to employees in

other bargaining units and being trained to perform other

tasks several months after BCA reopened the plant. We

are unpersuaded by the dissenting Board Member’s sug-

gestions that significant changes in the allocation tasks

were “already in the works before [BCA] hired its

employee complement” and that BCA “implemented

these changes in job functions from the start.” 315

N.L.R.B. at 1046. Even testimony by BCA supervisors and

officers regarding instances of “cross-utilization” does

not contradict the testimony of BCA employees that they

were not trained to perform new functions until Decem-

ber 1990 or January 1991.

App. 32

Nonetheless, we do not mean to suggest that the

record would admit only of one finding. Some of BCA’s

documentary evidence on the distribution of work

responsibilities under ABN and BCA at the facility

appears to be corroborated by testimony of supervisors

or officers of BCA. However, we are mindful that in

reviewing a decision of the Board as to unit appropriate-

ness, our task is not to substitute our judgment for that of

the Board, but to determine whether the Board’s conclu-

sion is supported by substantial evidence on the record as

a whole. We may not “displace the Board’s choice

between two fairly conflicting views.” Universal Camera

Corp. v. NLRB, 340 U.S. 474, 488 (1951).

We recognize that, in upholding the Board’s findings

and conclusions, we sustain an agency order requiring

BCA to recognize three unions that together claim to

represent only one quarter of BCA’s employees. As a

result, BCA may encounter additional obstacles in its

efforts to achieve further integration of its operations, if

that is indeed its goal. In its decision, the Board alluded

to these difficulties, recognizing that unit fragmentation

may result from technological changes in the printing

industry and emphasizing that the Board’s unit clarifica-

tion procedures provide a mechanism for “ensuring that

bargaining units continue to reflect the reality of the

workplace.” 315 N.L.R.B. at 1044. We simply note that the

outcome here was by no means inevitable. The Board’s

successorship doctrine recognizes the interest of a suc-

cessor in altering the structure of an inefficient or mori-

bund business beyond the confines of its predecessor’s

labor agreement. See Fall River Dyeing, 482 U.S. at 40.

That interest is served by permitting an employer to set

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App. 33

the initial terms on which it will hire the predecessor’s

employees, not bound by the provisions of the prede-

cessor’s bargaining agreement. The ALJ and the Board

majority were unable to discern on the part of BCA a

concrete plan to restructure the printing facility, or evi-

dence of implementation of such a plan prior to BCA’s

hiring of the ABN employees. It was fully within BCA’s

control to avoid the difficulty here: it could easily have

made plain to the ABN employees, prior to hiring them,

that it intended to integrate the employees into a more

cohesive group by instituting new hours, benefits, and a

new pay scale.

CONCLUSION

To summarize:

1. We find this case sufficiently distinguishable

from Fall River Dyeing and its progeny to warrant the

conclusion that the charging party unions need not have

demanded recognition and bargaining to trigger BCA’s

duty to bargain in this case. Instead, the bargaining oblig-

ation was triggered by BCA’s virtually immediate hiring

of a full complement of employees, nearly all of whom

were former ABN employees.

2. We likewise reject BCA’s claim that the Board

erred in concluding that the bargaining units the charging

party unions seek to represent were inappropriate.

a. We find no error in the Board’s application of

a presumption in favor of the appropriateness of long-

established bargaining units.

App. 34

b. We conclude that the Board’s finding that

BCA failed to overcome this presumption was supported

by substantial evidence on the record as a whole.

3. We have considered the remainder of BCA’s argu-

ments and find them to be without merit.

Accordingly, the petition for review is denied and the

petition for cross-enforcement is granted.

ide ebay “ta Stat ae

App. 35

DECISION OF THE NATIONAL

LABOR RELATIONS BOARD

BanknoteCorporation of America and Graphic Commu-

nications International Union, Local 119B-43B, New

York and New York Lithographers & Photoengravers

Union, #1-P, G.C.I.U. and District 15, International Asso-

ciation of Machinists & Aerospace Workers. Cases

2-CA-24304, 2-CA-24371, and 2-CA-24500

December 16, 1994

DECISION AND ORDER

BY MEMBERS STEPHENS, DEVANEY,

AND BROWNING

On March 3, 1992, Administrative Law Judge D.

Barry Morris issued the attached decision. The Respon-

dent, the General Counsel, and Charging Party Graphic

Communications International Union, Local 119B-43B,

New York, filed exceptions and supporting briefs; the

Respondent and the General Counsel filed answering

briefs; and the Respondent filed a reply brief.

The National Labor Relations Board has delegated its

authority in this proceeding to a three-member panel.

The Board has considered the decision and the record

in light of the exceptions and briefs and has decided to

affirm the judge’s rulings, findings, and conclusions and

to adopt the recommended Order.

App. 36

We agree with the judge’s finding that the Respon-

dent is the legal successor to American Bank Note Com-

pany (ABN) within the meaning of NLRB v. Burns Security

Services, 406 U.S. 272 (1972), and that the three historical

units which the Charging Party Unions claim to represent

constitute appropriate units for bargaining. Specifically,

we find that the Respondent failed to show that the

changes that it made in the operation of the plant ren-

dered inappropriate the three longstanding units at issue

here. We also agree with the judge’s conclusion that the

Respondent was not a “perfectly clear” successor to ABN

within the meaning of Burns, and therefore was free to set

initial terms and conditions of employment prior to its

April 19, 1990 hiring of ABN’s former employees. On that

date, however, a bargaining obligation had attached with

respect to any subsequent changes the Respondent

wished to make in terms and conditions of employment.

Accordingly, we find that the Respondent violated Sec-

tion 8(a)(5) and (1) of the Act by unilaterally changing

terms and conditions of employment on about April 23,

1990, without affording the Charging Party Unions an

opportunity to bargain about the changes.

I. FACTUAL BACKGROUND

On December 15, 1989, Francois-Charles Oberthur,

through its subsidiary, Respondent Banknote Corporation

of America (BCA), entered into a purchase agreement to

acquire ABN’s Ramapo facility in Suffern, New York. The

askin nat cteh soiptiaath?

9 RK

App. 37

sale of ABN’s Ramapo facility was completed on Febru-

ary 27, 1990,! and the Respondent began operations at the

plant on April 19.

At the time of the acquisition, the Ramapo plant

employed about 100 production employees who were

represented in separate units by 11 unions, including the

three Charging Party Unions.

On March 23, the Respondent sent a letter to all 11

unions stating that the Respondent intended to attempt to

hire its initial work force from the employees currently

working at the Ramapo facility, but that it was not mak-

ing a commitment to recognize the Unions or be bound

by their collective-bargaining agreements with ABN. This

letter expressly disavowed a March 1 letter from ABN’s

director of human resources to Charging Party Lithogra-

phers Local 1-P stating that the Respondent intended to

recognize the Unions at Ramapo and to be bound by the

collective-bargaining agreements. We find that the March

23 letter adequately disavowed the comments attributed

to ABN’s management official. The March 23 letter stated

that the ABN official was not an agent of BCA and had no

authority to make such a commitment on behalf of BCA.

On April 11, the Respondent met with representa-

tives of all the Unions and informed them that it would

not honor the collective-bargaining agreements with

ABN. Martin Ferenczi, the Respondent's president,

advised the Unions’ representatives that the Respondent

intended to have a more flexible operation with respect to

the jobs that employees would perform, and that it would

! All dates are in 1990, unless otherwise stated.

App. 38

cross-train employees so that they would be able to per-

form various functions. Ferenczi also told the Unions that

health benefits presently in effect would continue for a

period of 60 days.? Ferenczi did not discuss any other

terms and conditions of employment during the April 11

meeting with the Unions.

On April 16, the Respondent interviewed 102 job

applicants, all former ABN employees. All the employees

who testified at the hearing were asked about the inter-

views. Their testimony was limited to the following.

Machinist Augustine Leone testified that the Respon-

dent said nothing to him during his interview about

vacation, sick leave, or holidays. He testified that flex-

ibility was mentioned, and that he was told that

employees would do things other than their own basic

jobs. Machinist Jaroslaw Sawaryn testified that he was

told that there would be job flexibility and that he would

be asked to do different things. Machinist Shop Steward

Salvatore Manitone said he was told nothing about bene-

fits in the interview.

Platefinishers Robert Whelan and Gerard Lindsey

recalled no discussion of holidays, vacation, sick leave, or

other benefits during their interviews. Lindsey recalled

that the interviewers mentioned that hours might be

longer and that the Company would like to have more

2 The Respondent also announced that ABN would close on

April 13, that applications would be given to all employees then

working for ABN, and that the Respondent would be

operational on April 19.

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App. 39

flexibility in terms of jobs. Photoengraver Luz Ruiz testi-

fied she was told during the interview that the salary and

benefits would be the same.

The only employees hired by the Respondent were

approximately 50 of these former ABN employees. They

began working for the Respondent on April 19, along

with four former ABN supervisors. These employees

comprised the Respondent’s entire work force.

On about April 23, the Respondent unilaterally

changed the employees’ terms and conditions of employ-

ment, with the result that as of that date all employees

worked the same hours, participated in the same pension,

vacation, and sick pay plans, received the same health

and welfare benefits, and observed new company holi-

days. The three units at issue in this case encompass 14

employees. Graphic Communications Local 119-43B

claims to represent nine employees classified as “general

workers” who work in the printing department; -Lithogra-

phers Local 1-P claims to represent three photoengravers

who work in the engraving department; and Machinists

District 15 claims to represent two other employees who

work in the engraving department. The Respondent has

recognized two other unions as the bargaining represen-

tatives of employees who are in the engraving depart-

ment. These two recognized unions are Printers and

Engravers Local 28-58, which represents 10 employees,

and ALA Local 1, which represents 6 employees.

App. 40

Il. THE JUDGE’S DECISION

The judge found, and we agree, that after the

Respondent took over the operation of the Ramapo facil-

ity from ABN, the same employees produced the same

products, in the same plant, with the same equipment, in

the same jobs, and by the same methods. He concluded,

therefore, that the Respondent was the legal successor to

ABN.

The judge properly noted that under Burns, supra,

the Supreme Court made it clear that a successor is

normally entitled to set the initial terms and conditions of

employment on which it will hire the predecessor’s

employees. He further noted, however, that in cases

where the successor plans to retain the predecessor’s

employees, and makes no mention of changes of employ-

ment conditions, the Board requires the successor to bar-

gain concerning initial terms and conditions of

employment.? The judge found that the only changes in

terms and conditions of employment which were

announced prior to hiring the employees were a desire

for flexibility in terms of job functions, and that the

health benefits in effect at that time with ABN would

continue for a period of 60 days. The judge thus con-

cluded that the Respondent was required to bargain con-

cerning any changes in other terms and conditions of

employment. Accordingly, the judge found that by uni-

laterally changing terms and conditions of employment

on April 23, without affording the Unions a chance to

3 Royal Vending Services, 275 NLRB 1222, 1222-1228 (1985).

a ee ee ee aT ee ee

App. 41

bargain about the changes, the Respondent violated Sec-

tion 8(a)(5) and (1).

The Respondent had contended, inter alia, that it was

not the legal successor to ABN because the three units

involved in this case were no longer appropriate in view

of changes the Respondent made in the organization of

production processes and the duties of the employees.

The Respondent argued that throughout its discussions

with the Unions it announced its intention to introduce

job flexibility and overlap, and that the duties of the

employees in the three units at issue had changed signifi-

cantly.

Although the judge acknowledged that under the

Respondent’s operation certain employees fill in for

employees in other departments, he concluded that this

was a result of the reduction in size of the work force,

and that employees in the three units perform the same

duties they previously performed for ABN.4 The judge

noted that while changes in working conditions may have

been casually mentioned in some employee interviews,

by no means were all or most of the employees speci-

fically told before they were hired of any definite

changes. In fact, the judge found that the employees were

told that things would be about the same. The judge held

that the three Charging Parties remained the bargaining

* The judge also found that the aforementioned changes in

employment terms and conditions were instituted after the

Respondent’s duty to bargain took effect, and therefore, the

Respondent could not rely on the commonality of hours,

benefits, and other terms to show that the three separate units in

question were inappropriate.

Spe Ah th age

App. 42

representatives of the employees in each of the three

respective units.

Ill. DISCUSSION

The General Counsel and the Charging Parties have

excepted to the judge’s failure to find that the Respon-

dent is a “perfectly clear” successor to ABN within the

meaning of Burns, supra, 406 U.S. at 294, 295, with an

obligation to bargain with the Unions before setting ini-

tial terms of employment. We find no merit in these

exceptions.

The Board held in Spruce Up Corp., 209 NLRB 194

(1974), enfd. on other grounds, 529 F.2d 516 (4th Cir.

1975), that even if a successor employer indicates a will-

ingness to hire a majority of its employees from the ranks

of the predecessor’s employees, it is not “perfectly clear”

that it will be a successor if, at the same time, it informs

those employees that it does not intend to adopt the

terms and conditions of employment which had pre-

vailed under the predecessor. As the Board explained in

Spruce Up:

When an employer who has not yet commenced

operations announces new terms prior to or

simultaneously with his invitation to the pre-

vious work force to accept employment under

those terms, we do not think it can fairly be said

that the new employer ‘plans to retain all of the

employees in the unit,’ as that phrase was

intended by the Supreme Court. The possibility

that the old employees may not enter into an

employment relationship with the new

employer is a real one. 209 NLRB at 195.

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App. 43 :

That is the situation presented in this case. Although in

its March 23 letter to the Unions the Respondent stated its

“intention to attempt to hire its initial work force from

among the employees currently working at the Ramapo

facility,” this letter also effectively announced that it

would be instituting new terms and conditions of

employment. Specifically, the Respondent's statements in

the March 23 letter disavowing the notion that the

Respondent had agreed to be bound by the terms and

conditions of the ABN collective-bargaining agreements

and declaring that the Respondent had “not made any

such commitments” put the employees on notice that the

Respondent would be making changes in the employ-

ment terms of the predecessor. In our view, the Respon-

dent's statements in the letter convey to the predecessor’s

employees the message that the Respondent would not be

adopting the predecessor’s terms and conditions of

employment. Thus, simultaneous with its stated intention

to retain the predecessor’s employees, the Respondent

announced new terms and conditions of employment.

Subsequently, specific anticipated changes were commu-

nicated to the Unions and to three of the prospective

employees at their interviews. Under these circum-

stances, we conclude that the Respondent was not a

“perfectly clear” successor under Burns, and that its bar-

gaining obligation did not attach until it hired the

employees on April 19.

Critical to a finding of successorship is a determina-

tion that the bargaining unit of the predecessor employer

App. 44 i

remains appropriate for the successor employer.° In

Burns, supra, the Supreme Court found that the successor

employer (Bums) was obligated to bargain with the union

that represented the employees of the predecessor

(Wackenhut). The Court observed however: “It would be

a wholly different case if the Board had determined that

because Burns’ operational structures and practices dif-

fered from those of Wackenhut, the Lockheed bargaining

unit was no longer an appropriate one.” Id. at 280. The

Board’s longstanding policy is that “a mere change in

ownership should not uproot bargaining units that have

enjoyed a history of collective-bargaining unless the units

no longer conform reasonably well to other standards of

appropriateness.” Indianapolis Mack Sales & Service, 288

NLRB 1123 fn. 5 (1988). As noted by the judge, the Board

has consistently held that long-established bargaining

relationships will not be disturbed where they are not

evidentiary burden on a party attempting to show that

historical units are no longer appropriate. See Columbia

5 We agree with the judge, and our dissenting colleague

does not dispute, that all of the other legal prerequisites for

successorship are satisfied in this case. We also agree with the

judge’s finding that the only initial terms and conditions set by

the Respondent were those announced to the Unions’

representatives at the April 11 meeting. Contrary to our

dissenting colleague, we find that the Respondent’s inconsistent

and generally vague statements to various employees in their

prehire interviews were insufficient to provide notice of

additional initial terms and conditions of employment.

6 Fraser & Johnston Co., 189 NLRB 142, 151 fn. 50 (1971), enf.

granted in relevant part and denied in part on other grounds,

469 F.2d 1259 (9th Cir. 1972).

App. 45

Broadcasting System, 214 NLRB 637, 642-643 (1974) (“com-

pelling circumstances” must be shown before the Board

will disturb a historical unit).

We find that the Respondent has not sustained its

burden of showing that the Charging Parties’ historical

units no longer are appropriate separate units. The

sketchy testimony of the six employees above, as well as

several inconclusive documents purporting to show the

switch in job duties, are the only evidence supporting the

Respondent’s contention that the three units are now

inappropriate for bargaining. Contrary to our dissenting

colleague’s position, we do not find this proof to be

sufficient to overturn well-established units, particularly

where many of the changes in duties relied upon by the

Respondent actually occurred after the bargaining obliga-

tion attached.

Careful review of the record strongly supports the

judge’s finding that the employees in these units contin-

ued performing the same or substantially the same work

as they had prior to the change in ownership, only occa-

sionally filling in as needed on tasks otherwise assigned

to employees in other bargaining units. Such occasional

or sporadic performance of duties across unit lines is

insufficient to destroy the integrity of the Charging Par-

ties’ units at the facility.

When employed by ABN, the photoengravers repre-

sented by Lithographers Local 1-P were responsible for

preparing film components and etching. Under BCA’‘s

work assignment system, they remain the only employees

who perform these duties. The Respondent’s engraving

App. 46

division manager testified that the photoengravers “sel-

dom” perform the additional tasks of creating models,

designing support materials, and preparing litho plates.

The employees represented by the Machinists carry

out precisely the same functions in the production pro-

cess as they had under ABN, which generally involves

shearing, grinding, and cutting. These employees have

been given no new assignments by the Respondent, and

employees in other units fill in to perform some of their

functions only from time to time.

Although the employees represented by Graphic

Communications Workers 119B-43B have been assigned

to fill in on a wider scope of new duties, the fact remains

that they continue to serve as the primary, and in some

areas the only, employees performing their traditional

duties.

The Respondent’s contention that the intermittent or

occasional performance of tasks across unit lines destroys

the appropriateness of the Charging Parties’ historical

units is belied bv its voluntary recognition of two of the

other historical units, whose functions and duties the

Respondent describes as “relatively intact and distinct.”

The evidence presented by the Respondent reveals that

the employees in those two voluntarily recognized units

also are performing new duties under the Respondent’s

operation. For example, employees represented by

Printers and Engravers Local 28-58 now perform eight

new functions not previously assigned to them by ABN.

In addition, four of the tasks previously assigned exclu-

sively to those employees are now occasionally per-

formed by others. Thus, the introduction of new job

App. 47

duties is not a basis for distinguishing between the two

units recognized by the Respondent and the three units at

issue.”

The evidence presented by the Respondent, as well

as the employee testimony, demonstrates that the work of

the employees in the three units, although less skilled

than some of the work of the hand engravers in the

voluntarily recognized Local 28-58 unit, continues to be

assigned in much the same manner as it had been by

ABN. Thus, we find that the functions of these units are

also “relatively intact and distinct” despite the Respon-

dent’s introduction of some job flexibility.

In sum, the burden was on the Respondent to demon-

strate that it had instituted such fundamental changes in

the employees’ duties that the three historical units no

longer were separate, appropriate units. The Respondent

failed to satisfy this heavy burden. Instead of producing

detailed records concerning new and different functions

being performed by the employees in the three units, the

Respondent introduced nothing more than conclusory

evidence of interchange, and virtually no evidence about

the magnitude of that alleged interchange. Thus, from the

testimony and other evidence presented by the Respon-

dent, we can determine only that one or more employees

in one traditional bargaining unit have on some occasion

performed duties within the same general job function as

employees in another traditional unit. In the face of such

scant evidence, the presumed appropriateness of the

” We recognize that Local 28-58 represents some employees

who perform hand engraving, the most highly skilled work at

the facility, and that this work continues to be reserved for them.

App. 48

three traditional units represented by the Charging Par-

ties was left undisturbed.

We are cognizant that this case arises in an industry

that has traditionally been characterized by multiple, nar-

rowly defined bargaining units and that the printing

industry has undergone significant technological change

in recent years. Such technological change, as well as the

reductions in operations and staffing present in this case,

may sometimes make cross-training and job flexibility

both desirable and appropriate. The Board is keenly

aware that unit fragmentation may result from these

changes. Nonetheless, the Board’s procedures for unit

clarification provide a mechanism for ensuring that bar-

gaining units continue to reflect the reality of the work-

place. Here, however, the issue presented is whether the

Respondent was a legal successor, including whether the

bargaining units were appropriate, at a particular point in

time, no later than April 19, when the former ABN

employees began their employment with the Respondent.

We are persuaded that the Respondent's job flexibility

system, as described prior to the employees’ commence-

ment of work for the Respondent and as it operated when

production began on April 19 under the Respondent's

ownership, did not fundamentally alter the identity of the

established bargaining units.6 Accordingly, we conclude

that the Respondent had a duty to bargain with the

8 We agree with the judge that this case is distinguishable

from P.S. Elliott Services, 300 NLRB 1161 (1990), where, upon the

acquisition of the business by the new owner, the employees

became part of a highly integrated and centralized organization

in which a single location unit could not be appropriate for

bargaining.

App. 49

Charging Parties concerning the April 23 changes in

terms and conditions of employment and that its failure

to do so violated Section 8(a)(5) and (1).9

ORDER

The National Labor Relations Board adopts the rec-

ommended order of the administrative law judge and

orders that the Respondent, Banknote Corporation of

America, Suffern, New York, its officers, agents, suc-

cessors, and assigns, shall take the action set forth in the

Order.

Dated, Washington, D.C. December 16, 1994

Dennis M. Devaney, Member

Margaret A. Browning, Member

(SEAL) NATIONAL LABOR RELATIONS BOARD

MEMBER STEPHENS, dissenting in part:

* The record shows that among the changes unilaterally

implemented on April 23 was the institution of a new health and

welfare benefits program for all employees. Thus, the

Respondent did not act consistently with its pre-April 19

announcement to employees that the predecessor’s health

benefits would continue in effect for 60 days. Accordingly, we

find that the Respondent’s April 23 changes in health benefits

also were unlawful.

App. 50

Contrary to my colleagues in the majority, I find

merit in the Respondent’s exceptions to the judge’s find-

ing that the bargaining units are appropriate and that the

Respondent is the legal successor to ABN.

Based on my examination of the record, I find that,

even assuming the units in which the Charging Parties

sought to represent the Respondent’s employees were

appropriate under ABN, they are not appropriate units

under the Respondent.!

At Ramapo under ABN, 11 unions represented its 100

production employees in 11 separate units, and there was

strict compartmentalization of functions and job duties.

With rare exceptions, each unit was exclusively responsi-

ble for particular steps in the printing and engraving

process. The Respondent’s work force is approximately

half the size of that employed by ABN at Ramapo. Unlike

the five departments utilized by ABN, the Respondent

has two departments — printing and engraving.

The Respondent has recognized two unions as the

bargaining representatives of certain employees who are

in the engraving department and whose functions remain

relatively unchanged from what they were under ABN.

These two recognized unions are Printers and Engravers

Local 28-58, which represents 10 employees and ALA

Local I, which represents 6 employees. The Respondent

has designated all other employees in both departments

as general workers and cross-trained them so that all of

1 | join my colleagues in the majority in finding that the

Respondent is not a “perfectly clear” successor under NLRB v.

Burns Security Services, 406 U.S. 272 (1972).

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App. 51

them perform several new duties. General workers’

duties in the printing department require minimal quali-

fications, as evidenced by the Respondent's frequent use

of temporary employees for these positions. General

workers in the engraving department are skilled or semi-

skilled employees, but their skills are interchangeable

and these employees are not restricted to one set of tasks.

The Respondent's documentary evidence was not

specifically contradicted, and it was corroborated by the

testimony of the employees. It shows that many tasks

previously performed by employees from only one or at

most two former ABN units are now performed by

employees from as many as five former ABN bargaining

units. In addition, employees in the three units claimed

by the Charging Parties are performing job functions for

the Respondent that differ markedly from the duties they

performed for ABN.

Specifically with regard to the units at issue, under

ABN, employees represented by Local 119B-43B were

exclusively responsible for finishing work in the engrav-

ing department. That work is now performed by nearly

all general worker employees, including many who were

represented by other unions under ABN. In addition, the

Respondent’s employees formerly represented by Local

119B-43B now perform unwinding and rewinding duties

which they did not do for ABN. These duties are also

performed by general worker employees that Local

119B-43B is not seeking to represent. Further, the nine

employees in the unit sought by Local 119B-43B also

perform examining work, which is a duty that is shared

by a number of other employees not included in the unit.

In sum, the nine employees sought by Local 119B-43B are

App. 52

functionally part of a group of 19 relatively unskilled

general worker employees who are engaged in the end of

the production process.

The three photoengravers sought to be represented in

a separate unit by Local 1-P are part of a larger group of

14 engraving department employees who make printing

plates by photographic processes such as operating cam-

eras, making negatives, and stripping and assembling the

negatives. Although .hese employees are skilled and

semiskilled employees with a history of separate repre-

sentation, they are not functionally distinct in the

Respondent’s operation. For example, employees repre-

sented by Local 28-58 also perform certain functions that

the three photoengravers perform, i.e., creating models,

designing support material, and preparing lithographic

plates. The record shows that only the hand engravers

and designers (employees not at issue with respect to this

unit) possess such specialized skills that other engraving

department employees could not perform their jobs.

Finally, Charging Party Machinists District 15 seeks

to represent 2 of 14 engraving department general

workers who move, repair, and maintain presses and

other equipment, and who also perform plate-making

duties. Unlike under ABN’s operation, these two

employees are no longer exclusively responsible for

equipment maintenance and moving or for plate prepara-

tion functions. In addition to the two employees sought

by the Machinists, the Respondent also uses employees

previously represented by the Plate finishers Union

(employees not in issue in this case) to operate machines

in the engraving department and assist in the plate prep-

aration process. Similarly, although the two employees

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App. 53

previously represented by the Machinists perform some

maintenance functions in the printing department, they

share that work with employees previously represented

by other unions. Further, because their job functions are

performed in two separate departments, the two

employees sought by the Machinists are not supervised

exclusively by one supervisor.

As is apparent from the factual recitation above, the

predecessor employer was essentially a traditional print-

ing and engraving operation with numerous highly spe-

cialized, separately represented crafts. The Respondent’s

operation, reflecting an entirely different organization of

the work, features both an amalgamation of tasks — i.e,

now one worker often performs tasks formerly split

among workers in two or more crafts - and a splitting of

tasks - ie., tasks formerly performed by a single craft or

classification of workers may now be performed both by

a worker in one of the groups sought by the Charging

Party Unions and by workers outside the groups sought

be represented. In short, the units which the three Charg-

ing Party Unions now seek to represent are not clearly

definable either by their place in the organizational struc-

ture of the plant or the work they do.

The Board does not lightly disturb long-established

bargaining relationships, and historical units will not nor-

mally be found inappropriate simply because of minor

changes in the successor employer’s operation such as

the addition of some new job duties for employees.2 In

2 See, e.g., Phoenix Pipe & Tube Co., 302 NLRB 122 (1991),

enfd. mem. 940 F.2d 766 (3d Cir. 1991).

App. 54

the unique circumstances presented here, however, con-

trary to my colleagues in the majority, I would find that,

because of the Respondent’s extensive and fundamental

changes in the scope of the job tasks performed by its

employees, that each of the three units no longer retains a

distinct community of interest sufficient to support a

determination that each unit is a separate appropriate

unit for bargaining.®

Here, before it began operating the Ramapo facility,

the Respondent announced to the employees and their

unions its clear intention to operate without the func-

tional distinctions that existed under ABN, and instead to

utilize employee flexibility and interchangeability among

jobs. These changes were already in the works before the

Respondent hired its employee complement and the

Respondent implemented these changes in job functions

from the start, beginning with its hiring decisions and

continuing through the commencement of operations.

Indeed, the Respondent was able to cut substantially the

size of the work force, in part because of the elimination

of the strict lines between crafts that had existed in the

3 In finding that the three units sought by the Charging

Parties are not appropriate, I emphasize that I express no

opinion on what may constitute an appropriate unit or units

under the Respondent’s operation.

4 These changes are distinguishable from the April 23

changes in terms and conditions of employment, which were

not implemented until after the Respondent commenced

operations. As to the latter changes, I agree with the judge that

the Respondent may not rely upon them to show that the three

units in question are no longer appropriate.

App. 55

ABN operation. These actions were taken contemporane-

ously with the beginning of the Respondent’s operation

of the Ramapo plant, and were consistent with what

employees were told during their hiring interviews.

Thus, the employees had no reason to believe that they

would be working in the narrow crafts that they had

under ABN; rather, the employees were put on notice that

they would be performing duties different from those

they had performed for the predecessor. As reconstituted

under the Respondent's operation, the employees in the

three units in question no longer function as distinct craft

groups, and no longer have distinct communities of inter-

est.

Because I have found that.the functional distinctions

that may once have justified recognizing separate bar-

gaining units for the Charging Parties under ABN do not

exist under the Respondent’s operation of the Ramapo

facility, I find that the three units sought by the Charging

Parties are not appropriate.5 Accordingly, I find in the

peculiar circumstances presented here that the Respon-

dent is not a successor with an obligation to bargain with

these historical units, and that it thus did not violate

Section 8(a)(5) and (1) by unilaterally implementing

° Thus, this case differs markedly from the situation

presented in Phoenix Pipe & Tube Co., supra, where the Board

found that the respondent company was a successor employer

even though it had changed job classifications and requirements

of craft employees. Unlike here, the employees in Phoenix Pipe

continued to do substantially the same work that they did for

the predecessor (with the addition of some cleaning and

painting duties), and the respondent employer’s plans to cross-

train employees were speculative.

App. 56

changes in employees’ terms and conditions of employ-

ment on April 23. P.S. Elliott Services, 300 NLRB 1161

(1990).

Dated, Washington, D.C. December 16, 1994

James M. Stephens, Member

NATIONAL LABOR RELATIONS BOARD

Laura B. Sacks, Esq. and David E. Leach, III, Esq., for

the General Counsel.

]. Richard Hammett, Esq., Mary K. Williams, Esq., and

Katherine A. Ellis, Esq. (Verner, Liipfert, Berhard, McPherson

& Hand), of Houston, Texas, for Respondent.

Moss K. Schenck, Esq., of New York, New York , for

Local 1-P.

Valerie Marcus, Esq. (Vladeck, Waldman, Elias &

Engelhard), New York, New York, for Local 119B.

William Rudis, of Stamford, Connecticut, for District

15.

DECISION

STATEMENT OF THE CASE

D. BARRY MORRIS, Administrative Law Judge. This

case, was heard before me in New York City on April

15-19, 1991. Upon charges filed on April 13, May 18, and

July 17, 19901, a consolidated complaint was issued on

1 All dates refer to 1990 unless otherwise specified.

App. 57

November 21 and amended on March 28, 1991, alleging

that Banknote Corporation of America (BCA or Respon-

dent) violated Section 8(a)(1) and (5) of the National

Labor Relations Act (the Act). Respondent filed an

answer denying the commission of the alleged unfair

labor practices.

The parties were given full Opportunity to partici-

pate, produce evidence, examine and cross-examine wit-

nesses, argue orally, and file briefs. Briefs were filed by

General Counsel and Respondent on July 8, 1991. A reply

brief was filed by Respondent on August 15, 1991, and an

answering brief was filed by General Counsel on Septem-

ber 4, 1991.

Upen the entire record of the case, including my

observation of the demeanor of the witnesses, I make the

following

FINDINGS OF FACT

I. JURISDICTION

Respondent, a corporation with an office and place of

business in Suffern, New York, has been engaged in the

production, engraving, and printing of security docu-

ments. Respondent admits that based on a projection of

its operations since April 18, 1990, it annually sells and

ships from its Suffern facility goods valued in excess of

$50,000 to customers located outside the State of New

York. I find that Respondent is an employer engaged in

commerce within the meaning of Section 2(2), (6), and (7)

of the Act. In addition, it has been admitted, and I find,

that Graphic Communications International Union, Local

App. 58

119B-43B, New York (Local 119B-43B), New York

Lithographers & Photoengravers Union, #1-P, G.C.LU.

(Local 1-P), and District 15, International Association of

Machinists & Aerospace Workers (District 15; (the

Unions) are labor organizations within the meaning of

Section 2(5) of the Act.

Il. THE ALLEGED UNFAIR LABOR PRACTICES

A. The Issues

The issues in this proceeding are:

1. Is Respondent the legal successor to American

Bank Note Company (ABN)?

2. Did Respondent violate Section 8(a)(1) and (5) of

the Act by setting new terms and conditions of employ-

ment without prior bargaining with the Unions?

B. The Facts

1. Background

Prior to the spring of 1989 there were two principal

competitors in the securities printing industry, United

States Banknote Company and ABN. ABN was a subsid-

iary of International Banknote Co., Inc. Around June

1989, United States Banknote made a tender offer for

International Banknote. The United States Department of

Justice, however, raised antitrust objections to the pro-

posed tender offer and required the sale of at least one

ABN security printing facility to a neutral third party.

Consequently, on December 15, 1989, Francois-Charles

App. 59

Oberthur (FCO), through its subsidiary, BCA, entered

into a purchase agreement with United States Banknote

to acquire substantially all of ABN’s assets at its Ramapo

facility in Suffern, New York.2

On January 9 BCA announced its intent to acquire the

Ramapo facility as an operating plant. On February 26

Jean-Pierre Savare, chairman of the board of FCO, wrote

the following letter to Malcolm Pritzker, attorney for

FCO:3

Confirming our telephone conversation of

earlier this afternoon, please be advised that

Francois-Charles Oberthur, through its USA

subsidiary, Banknote Corporation of America,

Inc., has decided to recognize the unions pres-

ently recognized at the American Bank Note

plant in Suffern, New York (“Ramapo facility”)

and to continue the union contracts currently in

force at the Ramapo facility.

The sale of assets of BCA closed on February 27. On

March 1, Robert J. Tesoriero, director of human resources

for ABN, advised Stanley Aslanian, president of Local

1-P, as follows:

I have been advised that the Oberthur Com-

pany has agreed to recognize the Unions who

* The acquisition of International Banknote by United

States Banknote Co. was completed on February 27, 1990.

3 There is some dispute as to whether Pritzker was in fact

counsel to FCO. In any event, Savare testified that he did not

authorize Pritzker to circulate the February 26 letter. In view of

Campbell’s March 23 letter, sent prior to any offers of

employment having been made, I believe that I need not decide

the question of Pritzker’s status and authority.

App. 60

are party to collective bargaining agreements at

the Ramapo plant and to be bound to the terms

of the existing collective bargaining agreements.

On March 23 John P. Campbell, newly appointed

counsel to FCO and BCA, wrote to Aslanian, as follows:

It has come to our clients’ attention that

persons not authorized to speak on behalf of

Oberthur or BCA have made statements to you

to the effect that Oberthur or BCA have already

agreed to recognize the unions at the Ramapo

facility and [have] already agreed to be bound

to the terms and conditions of the existing col-

lective bargaining agreements at the facility.

Any such statements were not authorized by

Oberthur or BCA, and Oberthur and BCA

hereby disavow them. No one has been or is

authorized to speak on behalf of Oberthur or

BCA on such matters except Oberthur or BCA.

Oberthur and BCA have not made any such

commitments.

The parties stipulated that an identical letter was

submitted to all the Unions. The letter also noted that “it

is BCA’s intention to attempt to hire its initial workforce

from among the employees currently working at the

Ramapo facility.”

On April 11 a meeting was held between representa-

tives of BCA and the Unions. The meeting was chaired by

Martin Ferenczi, president of BCA. Ferenczi announced

that ABN would close on April 13, that applications

would be given to all the employees then working at

ABN, and that these employees would be interviewed by

BCA on April 16 and 17. Ferenczi also announced that

App. 61

BCA would be operational on April 19. In addition, Fer-

enczi reiterated that BCA would not honor the collective-

bargaining agreements then existing between ABN and

the Unions. Ferenczi testified that he stated at the meet-

ing that BCA intended to introduce flexibility in terms of

jobs and that health benefits presently in effect with ABN

would continue for a period of 60 days. Ferenczi also

testified that he did not discuss working hours, nor did

he discuss any other benefits.

2. Interviews and employment at BCA

Augustine Leone testified that he was laid off by

ABN on April 13, when the ABN operations ceased. On

April 12 the ABN employees were handed applications

and told to come to the plant for interviews by BCA on

April 16. Leone testified that on April 16 only former

employees of ABN were at the plant for the purpose of

being interviewed. Leone was interviewed by Savare,

Ferenczi, and Philip Hurwitz, vice president of BCA and

formerly vice president and general manager of ABN.

Leone testified that nothing was said to him about vaca-

tion, sick leave, or holidays. On April 18 Leone was called

and told that he was hired and that he should report to

work the following day. Leone testified that when he first

began work at BCA his duties were the same as he had

previously performed for ABN, and substantially the

same products were produced, namely, stock certificates

and securities.

App. 62

Jaroslaw Sawaryn similarly testified that he was

interviewed on April 16 and the persons being inter-

viewed that day were all prior employees of ABN. Saw-

aryn testified that he was told at the interview that

flexibility would be required in terms of jobs but that the

benefits would be about the same as they were with ABN.

Sawaryn also testified that he was told that vacations

would be 1 week less and that operations were to begin

on April 19. Sawaryn was informed by Hurwitz on April

18 that he was being hired and he started work on April

19. Sawaryn testified that when he began work with BCA

his duties were substantially the same as they were at

ABN. He further testified that as of December 1990, in

addition to his other duties, he also worked on a number-

ing machine.

Robert Whelan testified that at the interview he was

told that he would be performing the same duties with

BCA that he did with ABN. He did not recall there having

been any discussion about vacation time and testified

that there was no mention of sick leave and holidays.

Gerard Lindsey testified that during the interview there

was no mention of holidays, vacations, sick leave, or

other benefits. He testified, however, that the inter-

viewers may have mentioned that the hours “might be

longer” and that Sayare mentioned that the Company

would like to have flexibility in terms of jobs. Luz Ruiz

testified that she was told that the salary and benefits

would be the same as they were at ABN. Salvatore Man-

tione testified that during the interview nothing was said

about the benefits he would receive if he were hired by

BCA.

App. 63

Ferenczi testified that the interviews took place on

April 16 and 17, that offers were made on April 18 and

that the payroll started on April 19. He testified that 102

people were interviewed, all of whom had previously

worked for ABN and who had been laid off by ABN on

April 13. The parties stipulated, that except for two main-

tenance employees, the production employees at BCA all

had previously been employees of ABN at the Ramapo

plant. Ferenczi further testified that 50 production

employees were initially hired and four former ABN

supervisors were hired to be supervisors for BCA. Thus,

John Volpe had been engraving division manager at ABN

and he holds the same position at BCA. Stanley Golemba

was assistant plant manager at ABN and is printing

department manager at BCA. As previously mentioned,

Philip Hurwitz had been vice president and general man-

ager at ABN and is vice president and plant manager at

BCA. Hurwitz testified that the processing of documents

is the same at BCA as it was at ABN.

Discussion and Conclusions

1. Respondent is the legal successor of ABN

On February 27, 1990, Respondent purchased the

assets of ABN. It had earlier announced its intent to

acquire the Ramapo facility as an operating plant. The

parties stipulated, that except for two maintenance

employees, the BCA production employees had all previ-

ously been employees of ABN at the Ramapo plant. Four

of the ABN supervisors continued as supervisors at BCA.

Leone credibly testified that when he first began to work

at BCA his duties were the same as they had been at ABN

App. 64

and substantially the same products were produced,

mainly stock certificates and securities. This testimony

was corroborated by Sawaryn. In addition, Hurwitz,who = _.

had been vice president and general manager at ABN and

is vice president and plant manager at BCA, testified that

the processing of documents at BCA is the same [as] it

was at ABN.

The Board has evolved a set of criteria to determine

whether legal successorship exists. The relevant ques-

tions include:

(1) whether there has been a substantial

continuity of the same business operations; (2)

whether the new employer uses the same plant;

(3) vhether he has the same or substantially the

same work force; (4) whether the same jobs exist

under the same working conditions; (5) whether

he employs the same supervisors; (6) whether

he uses the same machinery, equipment, and

methods of production; and (7) whether he man-

ufactures the same product or offers the same

services. J.P. Mfg., 194 NLRB -965, 968 (1972);

Band-Age, Inc., 217 NLRB 449, 452-53 (1975),

enfd. 534 F.2d 1 (Ist Cir. 1976).

Based on the above, Respondent clearly meets the

criteria necessary for it to be deemed the legal successor

of ABN.

2. Duty to bargain

In NLRB v. Burns Security Services, 406 U.S. 272 (1972),

the Supreme Court made it clear that a successor is

entitled to set the initial terms of employment on which it

will hire the predecessor’s employees. However, in cases

App. 65

where the successor plans to retain the old employees,

and makes no mention of changes in employment condi-

tions, the Board has held that the successor must bargain

concerning initial terms and conditions of employment.

Royal Vending Services, 275 NLRB 1222, 1227-1228 (1985).

The complaint alleges that on April 23, 1990, BCA

imposed a new set of terms and conditions of employ-

ment which, inter alia, changed employees’ hours of

employment, health and welfare benefits, holidays, pen-

sion benefits, and vacation leave. These changes were

made without the Unions being afforded an opportunity

to negotiate and bargain with respect to such changes. At

the meeting held on April 11, Ferenczi testified that he

Stated that BCA intended to introduce flexibility in terms

of jobs and that health benefits presently in effect with

ABN would continue for a period of 60 days. Ferenczi

also testified that at that meeting he did not discuss

working hours nor did he discuss any other benefits.

Leone testified that at his interview on April 16 nothing

was said to him about vacations, sick leave, or holidays.

Sawaryn testified that he was told at the interview that

flexibility would be required in terms of jobs but that the

benefits would be substantially the same as they were

with ABN. Similarly, Whelan and Lindsey testified that

during their interviews there was no mention of holidays,

vacations, sick leave, or other terms of employment.

However, Lindsey testified that the interviewers may

have mentioned that the hours “might” be longer and

that Sayare stated that the Company would like to have

flexibility in terms of jobs. In addition, Ruiz testified that

benefits would be the same as they were at ABN and

Montione testified that during the interview nothing was

App. 66

said about the benefits he would receive if he were hired

by BCA.

Based on the above, I find that the only changes in

terms of employment, which were announced prior to

hiring the employees, were a desire for flexibility in

terms of jobs and that the health benefits presently in

effect with ABN would continue for a period of 60 days.

No mention of changes in other employment conditions

was made. In accordance with the cases cited above,

Respondent would be required to bargain concerning any

changes in the other terms and conditions of employ-

ment.

3. Appropriate bargaining units

Respondent argues that because of changes it made

in the yi of the employees, the units involved in this

proceeding are no longer appropriate bargaining units.

The Board has consistently held that long-established

bargaining relationships will not be disturbed where they

are not repugnant to the Act’s policies. Fraser & Johnston

Co., 189 NLRB 142, 151 fn. 50 (1971), enf. granted in part

and denied in part on other grounds 469 F.2d 1259 (9th

Cir. 1972). Sawaryn testified that his duties at BCA were

substantially the same as they were at ABN, although, as

of December 1990, he also worked on a numbering

machine. Similarly, Leone testified that his duties at BCA

were the same as they were at ABN, except that he also

does “cross-over work between the en

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