NATIONAL LABOR RELATIONS BOARD, PETITIONER V. NABORS TRAILERS, INC. (N/K/A STEEGO TRANSPORTATION EQUIPMENT CENTERS, INC. No. 90-1165 In The Supreme Court Of The United States October Term, 1990 The Solicitor General, On Behalf Of The National Labor Relations Board, Petitions For A Writ Of Certiorari To Review The Judgment Of The United States Court Of Appeals For The Fifth Circuit In This Case. Petition For A Writ Of Certiorari To The United States Court Of Appeals For the Fifth Circuit TABLE OF CONTENTS Question Presented Opinions below Jurisdiction Statutory provisions involved Statement Reasons for granting the petition Conclusion OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-18a) is reported at 910 F.2d 268. The decision and order of the National Labor Relations Board (App., infra, 24a-55a) is reported at 294 N.L.R.B. No. 93. The Board's order denying motions for reconsideration (App., infra, 56a-58a) is unreported. JURISDICTION The judgment of the court of appeals was entered on September 25, 1990. App., infra, 19a-23a. On December 17, 1990, Justice Scalia extended the time for filing a petition for a writ of certiorari to and including January 23, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTORY PROVISIONS INVOLVED The relevant provisions of the National Labor Relations Act, 29 U.S.C. 151 et seq., are as follows: Section 8.(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 guaranteed in section 7; * * * * * (5) to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 9(a). Section 8(d) of the NLRA, 29 U.S.C. 158(d), provides: (d) For the purpose of this section, to bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, but such obligation does not compel either party to agree to a proposal or require the making of a concession: Provided, That where there is in effect a collective-bargaining contract covering employees in an industry affecting commerce, the duty to bargain collectively shall also mean that no party to such contract shall terminate or modify such contract, unless the party desiring such termination or modification -- (1) serves a written notice upon the other party to the contract of the proposed termination or modification sixty days prior to the expiration date thereof, or in the event such contract contains no expiration date, sixty days prior to the time it is proposed to make such termination or modification; (2) offers to meet and confer with the other party for the purpose of negotiating a new contract or a contract containing the proposed modifications; (3) notifies the Federal Mediation and Conciliation Service within thirty days after such notice of the existence of a dispute, and simultaneously therewith notifies any State of Territorial agency esablished to mediate and conciliate disputes within the State or Territory where the dispute occurred, provided no agreement has been reached by that time; and (4) continues in full force and effect, without resorting to strike or lockout, all the terms and conditions of the existing contract for a period of sixty days after such notice is given or until the expiration date of such contract, whichever occurs later. QUESTION PRESENTED Whether the court of appeals should have deferred to the National Labor Relations Board's determination that, under Sections 8(a)(5) and 8(d) of the National Labor Relations Act, an employer must ordinarily bargain to impasse before implementing a unilateral change in wages or other working conditions that are mandatory subjects of bargaining. STATEMENT 1. Respondent manufactured trucks and trailers at a facility in Mansfield, Louisiana, until January 1988, when it closed the facility for economic reasons. App., infra, 30a. For over 30 years, the International Brotherhood of Boilermakers, Local 743, and the International Association of Machinists and Aerospace Workers, AFL-CIO (collectively "the Unions"), jointly represented the production and maintenance employees at the Mansfield plant. The parties' most recent collective bargaining agreement was effective from March 23, 1984, to March 22, 1987. Ibid. By letter dated January 19, 1987, respondent's General Manager, Harlon Blackmon, reopened the collective bargaining agreement. App., infra, 33a. The first negotiating session between respondent and the Unions, at which neither party presented a contract proposal, was held on March 11. Id. at 33a-34a. On March 17, at the second negotiating session, respondent presented a detailed review of the company's economic losses during the contract term. The company then told the Unions that it needed an average wage reduction of 28 percent and gave the Unions a list of proposed new job titles and classifications. Id. at 34a-35a. On March 18, when the parties met for the third time, Union representative Boykin expressed doubt that employee wages and benefits, which were in line with those of the competition, were a significant source of respondent's financial difficulties. Respondent asserted that the company was, nevertheless, still losing money and needed to effect a 28 percent pay cut. At the Union's request, the company provided specific wage rates for each of the new job classifications proposed by the company. After further discussion, the parties agreed to meet again on March 23. App., infra, 35a-36a. On March 20, General Manager Blackmon personally delivered to the Unions a written notice of respondent's intention to terminate the contract in five days as provided in the contract. App., infra, 36a. On March 23, respondent mailed a letter to the Federal Mediation and Conciliation Service (FMCS) in Washington, D.C., giving notice of the labor dispute. Id. at 6a. The parties met for the fourth time on March 23. The Unions told respondent's representatives that they understood respondent's wage proposal to include 33 job classifications and 11 pay grades, amounting to over 300 separate pay rates, and expressed their belief that such a system would be impractical. App., infra, 36a-37a. The Unions then presented a detailed counterprposal, which included a 12 percent wage increase for all employees. Respondent's representatives told the Unions that the counterproposal was unresponsive to the company's economic problems. The Unions then expressed a willingness to accept a wage reduction provided all employees -- including nonunion employees -- also took a similar wage cut, and asked respondent to explain in detail how it would implement the proposed job structure by providing the precise wage for each employee under its proposal. Id. at 37a. On March 24, at the parties' fifth bargaining session, respondent provided the wage information requested by the Unions, and the parties briefly discussed various non-wage aspects of the contract -- such as layoffs, seniority, and job postings. Before the meeting's end, Union representative Yates offered to reduce the Unions' demand for a wage increase from 12 percent to 11 percent, and Blackmon asked that the Unions discuss respondent's wage proposal with their members. Before adjourning, the parties scheduled another meeting for March 31. App., infra, 38a. At a Union membership meeting later that same day, the Unions gave each employee a copy of respondent's proposed specific hourly wage rate for his job, and presented a proposal made by respondent in response to some of the Unions' objections. No official vote was taken, but an informal poll showed that the employees would overwhelmingly reject respondent's proposal. App., infra, 38a. On March 25, Blackmon, having learned of the results of the informal poll, posted a notice to employees stating, inter alia (App., infra, 38a-39a): On March 24, the Unions voted not to accept the Company's proposal. There will be NO lockout and the plant WILL be open as usual on Monday March 30 for those of you who wish to work. The new labor rates will go into effect at that time * * *. On March 26 or 27, Yates, the Unions' representative, asked Blackmon not to institute the wage decreases and told Blackmon that, if respondent did so, the Unions would be forced to file unfair labor practice charges. Respondent nevertheless implemented its proposed wage reduction on March 30. App., infra, 39a. On March 31, at the parties' scheduled meeting, the Unions reiterated their request to respondent to refrain from reducing wages. When respondent indicated that the reduction was already in place, the Unions once again stated their intent to file unfair labor practice charges. Id. at 40a. Between April and October 21, the parties met six more times and ultimately suspended negotiations pending respondent's attempt to sell the facility. By letter dated December 29, respondent notified the Unions of its decision to cease manufacturing operations at the facility as of January 29, 1988. App., infra, 40a-43a. 2. The Unions filed charges with the Board alleging, inter alia, that respondents had engaged in an unfair labor practice by implementing the wage cuts without bargaining to impasse. The Board upheld the ALJ's determination that respondent's action violated Section 8(a)(5) and (1) of the Act, 29 U.S.C. 158(a)(5) and (1). The ALJ found that "(t)he parties had not reached irreconcilable differences in negotiations, but rather were still in the midst of bargaining when Respondent instituted its wage reduction on March 30, 1987." App., infra, 48a. The ALJ noted that, at the time the change occurred, (1) respondent "had not even submitted a complete proposal, much less a final offer"; /1/ (2) "real substantive negotiations were just beginning"; and (3) respondent had failed to "propose a date or mention a deadline" or express any intention to implement the reduction before the next scheduled meeting. Id. at 48a-49a. Rejecting respondent's contention that any violation of the Act was purely "technical," the ALJ stated (App., - infra, 46a-47a): (B)argaining lies at the very heart of the relationship between an employer and a union which represents its employees. Requiring that an employer bargain in good faith to impasse before implementing significant changes in the wages, hours, and working conditions of employees is designed to give both the employer and the union every opportunity to explore and attempt to resolve problems which are equally significant to both the employer and the employees. The Board ordered respondent, inter alia, to cease and desist from making changes in conditions of employment "without bargaining in good faith to impasse with the Unions," and to make its employees whole for any loss of earnings or benefits resulting from the unlawful reduction in their wages. App., infra, 51a-52a. /2/ 3. On the employer's petition for judicial review and the Board's cross-application for enforcement, the court of appeals refused to enforce the Board's determination that respondent violated Section 8(a)(5) by implementing its wage proposal before bargaining to impasse. App., -- infra, 11a, 19a. /3/ The court of appeals applied its own rule, established in NLRB v. Citizens Hotel Co., 326 F.2d 501 (5th Cir. 1964), that "there is no violation (of 8(a)(5)) even in the absence of an impasse, if the employer notifies the union that it intends to institute the change and gives the union the opportunity to respond to that notice." App., infra, 10a. /4/ The court found that respondent "apparently complied with the bargaining obligation established by the Citizens Hotel line of cases," but concluded that the Board "did not evaluate the legality of (respondent's) actions in light of that standard." The court remanded the case to the Board to apply that test. App., infra, 11a. /5/ REASONS FOR GRANTING THE PETITION It is the Board's longstanding position that Section 8(d) of the Act, which requires an employer to meet and "confer in good faith." With the employees' bargaining representative, prohibits the employer from making changes in working conditions subject to mandatory bargaining until the parties have bargained to impasse. That position is a "rational and consistent" interpretation of the Act that is entitled to "considerable deference" from the courts of appeals, NLRB v. Curtin Matheson Scientific, Inc., 110 S. Ct. 1542, 1549 (1990), and it comports with the decisions of this Court. The position of the court of appeals in this case -- that an employer is free to make unilteral changes once it provides the union with notice and an opportunity to respond -- conflicts with the decisions of every other court of appeals to consider the issue. See pp. 14-15, infra. Not only does the court's decision disregard the Board's considered judgment, but it is inconsistent with the policies of the Act and the underlying purpose of the good-faith bargaining requirement. The scope of the employer's right to act unilaterally during collective bargaining "lies at the very heart of the relationship between the employer and (the) union which represents its employees." See App., infra, 46a. Since the issue arises frequently in the administration of the Act, review by this Court is warranted. 1. Section 8(d) of the Act defines the duty to bargain as "the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment." Section 8(a)(5) of the Act makes it an unfair labor practice for an employer "to refuse to bargain collectively with the representative of his employees." As this Court has recognized, "Congress made a conscious decision" in Section 8(d) to delegate to the Board "the primary responsibility of marking out the scope of the statutory language and of the statutory duty to bargain." Ford Motor Co. v. NLRB, 441 U.S. 488, 496 (1979). Accordingly, "if (the Board's) construction of the statute is reasonably defensible, it should not be rejected merely because the courts might prefer another view of the statute." Id. at 497. Accord Charles D. Bonanno Linen Service v. NLRB, 454 U.S. 404, 417-418 (1982). Rather, as this Court has repeatedly held, "(i)f the Board adopts a rule that is rational and consistent with the Act, * * * then the rule is entitled to deference from the courts." Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 42 (1987). In Bi-Rite Foods, Inc., 147 N.L.R.B. 59, 64-65 (1964), the Board held that the duty to bargain in good faith under Sections 8(a)(5) and 8(d) entails the obligation to "exhaust" the negotiating process before making unilateral changes. /6/ See also Alsey Refractories Co., 215 N.L.R.B. 785, 786 & n.6 (1974) (employer is free to implement changes comprehended by bargaining proposals only after exhausing the prospects of an agreement through good faith negotiations); Taft Broadcasting Co., 163 N.L.R.B. 475, 478 (1967) (same), enforced sub nom. American Federation of Television & Radio Artists v. NLRB, 395 F.2d 622, 624 (D.C. Cir. 1968). /7/ In the course of reiterating the duty to bargain to impasse under the Act, the Board in Winn-Dixie Stores, Inc., 243 N.L.R.B. 972 (1979), explained its reasons for rejecting the Fifth Circuit's approach in Citizens Hotel. The Board observed that, by allowing an employer to implement any proposed change "as soon as the (union) (i)s notified of the intended change and given an opportunity" to respond, the Citizens Hotel rule removes the incentive to come to an overall agreement. Since an employer can fulfill its obligations merely by giving notice of its proposal and waiting for the union's response, the employer can simply "go() through the motions of proffering a specific bargaining proposal as to one item while others are undecided." 243 N.L.R.B. at 974-975 (quoting Cox, The Duty to Bargain in Good Faith, 71 Harv. L. Rev. 1401, 1433 (1958)). Such a "ritual or pro forma approach to bargaining" cannot constitute "the kind of rational exchange of facts and arguments which increases mutual understanding and then results in agreement." 243 N.L.R.B. at 974-975. Moreover, by allowing an employer to engage in a series of notices and implementations without reference to the overall state of negotiations, the court of appeals' approach ignores the practicalities of collective bargaining. Since a compromise on one subject is frequently traded off for agreement on others, meaningful collective bargaining requires that the parties bargain about the issues confronting them as a whole, not about each issue in isolation. Winn-Dixie Stores, 243 N.L.R.B. at 974. Therefore, to permit unilateral action before there is an overall impasse effectively removes some subjects from the bargaining agenda prematurely and makes it more difficult to reach a final agreement. Finally, in allowing extensive unilateral action while negotiations are ongoing, the court of appeals' rule demonstrates to employees that the employer can ignore the bargaining process and their bargaining agent. As a result, "the role of the bargaining representative is effectively vitiated." Winn-Dixie Stores, 243 N.L.R.B. at 975. See also May Dep't Stores Co. v. NLRB, 326 U.S. 376, 385 (1945) ("(U)nilateral action minimizes the influence of organized bargaining. It interferes with the right of self-organization by emphasizing to the employees that there is no necessity for a collective bargaining agent."). In sum, the Citizens Hotel approach undermines the process of "meaningful collective bargaining" that Congress had in mind when it created the duty to bargain in good faith. Winn-Dixie Stores, 243 N.L.R.B. at 974. It is reasonable for the Board to conclude that an approach so "clearly in disparagement of the collective bargaining process," ibid., is incompatible with Section 8(d) of the Act. 2. In determining that an employer ordinarily may not unilaterally change working conditions while bargaining is in progress, the Board has relied on this Court's decision in NLRB v. Katz, 369 U.S. 736 (1962). There, the Court stated (369 U.S. at 743) that "an employer's unilateral change in conditions of employment under negotiation is * * * a violation of Section 8(a)(5), for it is a circumvention of the duty to negotiate which frustrates the objectives of Section 8(a)(5) much as does a flat refusal." As the Board noted in Winn-Dixie Stores, 243 N.L.R.B. at 974, the unilateral changes in Katz were "granted without notice to the union," while in Winn-Dixie Stores, as here, the employer notified the union of the impending change. The Board in Winn-Dixie Stores concluded, however, that "the basic tenets established by th(is) Court in (Katz) and by Congress in enacting Section 8(d) of the Act" require the parties to "reach impasse before a unilateral change may be lawfully implemented, rather than merely discuss a proposed change." 243 N.L.R.B. at 974. This Court's statements in decisions since Katz are consistent with the Board's interpretation of that case, and of the Act, as requiring bargaining to impasse. Thus, in NLRB v. Bildisco & Bildisco, 465 U.S. 513,533-534 & n.14 (1984), the Court described Katz as holding "that an employer's unilateral modification of terms and conditions of employment during the pendency of negotiations constitutes an unfair labor practice." And, in Laborers Health & Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484 U.S. 539, 543-544 nn. 5 & 6 (1988), the Court cited Katz, several court of appeals cases, and decisions of the Board in support of the proposition that it is a violation of the Act for an employer to make unilateral changes in the terms of an expired contract prior to reaching an impasse in bargaining. See also First Nat'l Maintenance Corp. v. NLRB, 452 U.S. 666, 674-675 (1981) (discussing Katz). 3. Every other court of appeals to consider the issue has adopted the Board's position that an employer must bargain to impasse before making a unilateral change in working conditions subject to bargaining. See Carpenter Sprinkler Corp. v. NLRB, 605 F.2d 60, 64-65 (2d Cir. 1979); NLRB v. Auto Fast Freight, Inc., 793 F.2d 1126, 1129 (9th Cir. 1986); Richmond Recording Corp. v. NLRB, 836 F.2d 289, 292-293 (7th Cir. 1987); Industrial Union of Marine & Shipbuilders Workers v. NLRB, 320 F.2d 615, 620-621 (3d Cir. 1963), cert. denied, 375 U.S. 984 (1964); American Federation of Television & Radio Artists v. NLRB, 395 F.2d 622, 624 (D.C. Cir. 1968); NLRB v. U.S. Sonics Corp., 312 F.2d 610, 615 (1st Cir. 1963); Cone Mills Corp. v. NLRB, 413 F.2d 445, 449-450 (4th Cir. 1969); NLRB v. H & H Pretzel Co., 831 F.2d 650, 655 (6th Cir. 1987). /8/ The issue of when an employer may act unilaterally during bargaining negotiations is a recurrent one in the administration of the Act. To assure uniformity in the Act's application, the Court should resolve the conflict created by the Fifth Circuit's decision. /9/ CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. KENNETH W. STARR Solicitor General DAVID L. SHAPIRO Deputy Solicitor General AMY L. WAX Assistant to the Solicitor General JERRY M. HUNTER General Counsel D. RANDALL FRYE Acting Deputy General Counsel NORTON J. COME Deputy Associate General Counsel LINDA SHER Assistant General Counsel LAURENCE S. ZAKSON Attorney National Labor Relations Board JANUARY 1991 /1/ The ALJ explained (App., infra, 48a): At the second meeting during which Respondent proposed its 28 percent wage reduction, Respondent nevertheless did not even have a complete economic proposal. At the third bargaining session, Respondent proposed an unprecedented job classification system with 33 job titles, each having 11 pay scales, to cover only approximately 125 employees. By the end of the fourth bargaining session, the parties were still discussing this cumbersome job classification system. /2/ The Board also upheld the ALJ's finding that respondent violated Section 8(a)(5) and (1) by instituting its wage reduction without giving the FMCS timely notice and at least 30 days to participate in the bargaining as required by Section 8(d)(3) of the Act, 29 U.S.C. 158(d)(3). App., infra, 44a-46a. The ALJ explained that, since respondent notified the Unions in writing on January 19 that it was opening the contract for negotiations, it should have notified the FMCS no later than February 19 that the parties were involved in a labor dispute, and, thus, it March 23 notice to the FMCS was untimely. And, respondent's failure to wait until 30 days after the actual date of notice to the FMCS before implementing the wage reduction also violated the Act. Id. at 45a-46a; see also id. at 12a-13a; Section 8(d)(4) of the Act, 29 U.S.C. 158(d)(4). The ALJ explained, citing Mar-Len Cabinets, Inc. 243 N.L.R.B. 523, 535, 538 (1979), enforced in part, remanded in part, 659 F.2d 995 (9th Cir. 1981), reaffirmed after remand, 262 N.L.R.B. 1398, 1400 (1982), that the backpay remedy for the Section 8(d) violation "is limited to the employees' losses from the date of implementation to a date that is 30 days from the notice to the FMCS." App., infra, 50a-51a. /3/ The court affirmed the Board's finding that respondent violated the Act by failing to give the FMCS the timely notice required by Section 8(d)(3) and by unilaterally implementing its wage reduction proposal before 30 days had elapsed from the date of notice to the FMCS. App., infra, 12a-18a. /4/ The Court noted that it had "upheld * * * and reaffirmed the continuing vitality of the Citizens Hotel standard" in several cases decided since Citizens Hotel. App., infra, 10a-11a (citations omitted). The court added that the impasse standard is not "irrelevant" to determining whether an employer has made unlawful unilateral changes since, where an employer has not met the Citizens Hotel requirements, it can nevertheless make unilateral changes "if it can show negotiations were at an impasse." App., infra, 11a. /5/ The court did not reach the issue of respondent's "attack on the Board's 'no impasse' findings." App., infra, 11a. /6/ The Board explained (147 N.L.R.B. at 64-65.): An employer violates his collective-bargaining duty if, when collective-bargaining negotiations are sought or are in progress, he institutes on his own motion any changes in employment conditions. * * * On the other hand, after the parties have bargained to an impasse, that is after negotiating in good faith they apparently have exhauste the prospects of concluding an agreement, the employer is free to institute by unilateral action changes which are in line with or which are no more favorable than those he offered or approved in the negotiations preceding the impasse. /7/ The Board has recognized that extenuating circumstances can justify unilateral action in the absence of impasse in two circumstances, neither of which is relevant here: where a union has clearly waived its right to bargaining -- either expressly or by its conduct -- see NLRB v. Auto Fast Freight, Inc. 793 F.2d 1126, 1130-1131 (9th Cir. 1986); M & M Building & Electrical Contractors, Inc. 262 N.L.R.B. 1472, 1476 (1982)), and where economic exigencies compel prompt action, see Winn-Dixie Stores, Inc., 242 N.L.R.B. 972, 974 & n.9(1979). /8/ Before Katz, in NLRB v. Bradley Washfountain Co., 192 F.2d 144, 150-152 (7th Cir. 1951) and NLRB v. Landis Tool Co., 193 F.2d 279 (3d Cir. 1952), the courts considered whether an employer's unilateral wage increase during bargaining, where the increase was rejected by the union as too low, was in itself sufficient to demonstrate the employer's lack of good faith in bargaining. Finding that the change would not necessarily disparage the employees' bargaining agent or the collective-bargaining process, the courts in those cases rejected the Board's findin of an 8(a)(5) violation and ruled that, standing alone, the unilateral wage increase did not constitute bad faith in bargaining. After Katz, however, both the Seventh and Third Circuits upheld the Board's position that a particular employer's "good faith" does not negate the employer's violation of Section 8(a)(5) in instituting a unilateral change prior to reaching a bargaining impasse with the union. See Richmond Recording v. NLRB, supra; Industrial Union of Marine & Shipbuilders Workers v. NLRB, supra. In Local 777, Democratic Union Org. Comm. v. NLRB, 603 F.2d 862, 890 n.77 (1978), the D.C. Circuit cited Citizens Hotel with approval in dictum. However, the court has recently repudiated that dictum by holding that Section 8(a)(5) precludes unilateral changes without bargaining to impasse. See Teamsters Local Union No. 175, v. NLRB, 788 F.2d 27, 30 (1986). /9/ The court of appeals resolved this case against respondent insofar as it affirmed the Board's determination that respondent violated 8(d)(3) by failing timely to inform the FMCS of the opening of bargaining negotiations. However, reversal by this Court of the court of appeals' holding with regard to the impasse issue will have remedial consequences for respondent over and above those flowing from the finding of an 8(d)(3) violation. As the Board itself acknowleged, "(t)he appropriate remedy for a Section 8(d)((3)) violation is more restrictive than the remedy for unlawful implementation of a wage proposal prior to a bona fide impasse." App., infra, 50a. To remedy the failure to bargain to impasse, the Board ordered backpay from the date of the unilateral wage reduction to the date of the closing of the plant; in contrast, the 8(d)(3) violation would only support a more limited award of backpay for "employee() losses from the date of implementation to a date that is 30 days from the notice to FMCS." Id. at 51a. APPENDIX