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 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Fifth Circuit Reply Brief For The National Labor Relations Board 1. Respondent disagrees with out submission that there is a conflict in the circuits warranting review by this Court. It contends (Br. in Opp. 2) that the cases cited by the Board "merely recite the general proposition that unilateral action prior to impasse is a violation of the duty to bargain," that "(m)ost of the cases are ones in which impasse was found and there was no occasion to consider exceptions to the general rule," and that "(n)one of the cases rejects the possibility of an exception such as that recognized by the Fifth Circuit in the Citizens Hotel case and in this case." These statements do not accurately reflect the case law on the issue presented for decision in this case. a. Contrary to respondent's assertion, in most of the cases cited by the Board (Pet. 14) no impasse had been reached at the time the employer made the unilateral changes that were found to have violated its duty to bargain. /1/ Moreover, in many of those cases, the union had either been given notice of the planned change and an opportunity to discuss it, or the planned change had been discussed during negotiations. In the latter group of cases -- which includes decisions in four circuits -- the decisions turned on a rejection of the Fifth Circuit's view that mere notice and an opportunity to respond are sufficient to satisfy the employer's obligation to bargain under the Act. Thus, in Carpenter Sprinkler Corp. v. NLRB, 605 F.2d 60, 64 (2d Cir. 1979), after learning of the union's intent to strike if negotiations were unsuccessful, the employer asserted that negotiations were at an impasse, notified the union that it planned to implement certain reductions in wages and benefits, and requested the union's comments. Id. at 64-65. The court of appeals, finding that the employer violated the Act because no impasse had been reached when the changes were implemented, explained that a "strong requirement that a clear impasse in negotiations exist before any unilateral changes in the terms of employment be made" was necessary to "protect the integrity of the collective bargaining process." Ibid. In Richmond Recording Corp. v. NLRB, 836 F.2d 289, 291-292 (7th Cir. 1987), the employer declared an impasse and unilaterally implemented a wage classification proposal that had been presented to the union and to which the union had responded with a counterproposal. The court of appeals found that the parties were not at an impasse at the time the employer implemented the change, and held that an employer violates Section 8(a) (5) and (1) of the Act "if he unilaterally changes a condition of employment that is under negotiation before bargaining has reached an impasse." Id. at 293. Similarly, in Teamsters Local Union No. 175 v. NLRB, 788 F.2d 27, 29 (D.C. Cir. 1986), the employer notified the union that it intended unilaterally to reduce wages consistent with a proposal that the employer had presented during negotiations, and which the union was in the process of considering. Finding that no impasse had been reached, the court stated that "(i)t is well settled that an employer is required to maintain the status quo established by an expired collective bargaining agreement until the parties reach a new agreement or bargain to an impasse." Id. at 30. /2/ In Cone Mills Corp. v. NLRB, 413 F.2d 445, 448 (4th Cir. 1969), during the course of collective bargaining, the employer asked the union to consider a pension plan proposal it intended to implement. After failing to respond to the union's request for further information about the plan, the employer implemented it. The court of appeals, finding that no impasse had been reached, stated that "the unilateral implementation of the plan while negotiations were still being conducted was a violation of Section 8(a)(5) of the Act." Id. at 449. /3/ b. Even if respondent were correct in contending (Br. in Opp. 2-3) that other courts of appeals have endorsed the Fifth Circuit's Citizens Hotel principle by recognizing that impasse is not necessarily a prerequisite to unilateral change, there would still be a square conflict between the Fifth Circuit's decision in this case and the decisions of four other circuits, as discussed in the foregoing section, that would warrant resolution by this Court. But, in fact, the cases cited by respondent do not rest on the holding in Citizens Hotel, and are not inconsistent with the position of the Board here. Thus, in NLRB v. Auto Fast Freight, Inc., 793 F.2d 1126, 1129 (9th Cir. 1986), the court stated that "(u)nless and until the parties to a collective agreement 'bargain to impasse' on a mandatory subject of bargaining, an employer's unilateral action with respect to such a matter will constitute a refusal to bargain." It went on to find that the unilateral action taken by the employer in that case was not justified by the "narrow exception to the bargain to impasse rule," which only applies "where, upon expiration of a collective bargaining agreement, the union has avoided or delayed bargaining, and the employer has given notice to the union of the specific proposals the employer intends to implement." Id. at 1129. /4/ The court nowhere suggested (see Br. in Opp. at 2-3) that mere notice and an opportunity to bargain would suffice in every case to justify an employer's unilateral action and, in fact, refused to adopt the position that "unilateral action is justified whenever a union has a 'reasonable opportunity' to bargain over the unilateral change." Id. at 1131. In Industrial Union of Marine & Shipbuilders Workers v. NLRB, 320 F.2d 615, 620 (3d Cir. 1963), cert. denied, 375 U.S. 984 (1964), the court upheld the Board's finding that the employer unlawfully changed working conditions during negotiations over a new contract. Although it took note of the employer's argument that a unilateral change in working conditions is permissible if there has been notice and an opportunity to bargain, the court did not endorse that principle as such. Rather, the court found that, in the three days between receiving notice of the proposed change and the employer's implementation of that change, the union had not received "the bargaining opportunity to which it is entitled under NLRB v. Katz, 369 U.S. 736 * * *." Ibid. That statement is completely consistent with the Board's position here, and does not entail agreement with the Fifth Circuit's rule that the required "bargaining opportunity" is simply an opportunity to "respond to th(e) (employer's) notice" of the change. See Pet. App. 10a. Nor is respondent aided by its reliance (Br. in Opp. 3) on the cases it contends have specifically endorsed Citizens Hotel and other Fifth Circuit decisions applying it. First, even were respondent correct that the Eleventh Circuit followed Citizens Hotel in NLRB v. Sherwin-Williams Co., 714 F.2d 1095 (1983), that would not constitute independent authority for the Fifth Circuit's rule, since the Eleventh Circuit is bound by Fifth Circuit precedent in cases decided before the Eleventh Circuit was created. See Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981). In any event, Sherwin Williams is a waiver case: the court's decision did not turn on the principle articulated in Citizens Hotel; rather, the decision rested on the union's failure to object -- during two and one half months of bargaining negotiations -- to the employer's expressed intention to withhold holiday pay from a disabled employee during a strike that followed the expiration of the contract. 714 F.2d at 1102-1103. Both NLRB v. Ralph Printing & Lithographing Co., 433 F.2d 1058 (8th Cir. 1970), cert. denied, 401 U.S. 925 (1971), and NLRB v. Carbonex Coal Co., 679 F.2d 200 (10th Cir. 1982), involved a situation like that in NLRB v. Katz, 369 U.S. 736 (1962): the employer altered conditions of employment without notice to the union or any opportunity to bargain over the proposed change. In Ralph Printing, 433 F.2d at 1061-1062, the court held the employer in contempt of a Board order for increasing wages without notice to the union, and cited Katz for the basic principle that "(g)enerally speaking, a unilateral change in wages without first contacting the Union and granting an opportunity to bargain amounts to a refusal to bargain." In Carbonex, 679 F.2d at 204-205, the employer unilaterally laid off workers after the union won an election and prior to any bargaining negotiations. Citing Fifth Circuit precedent, the court stated the uncontroversial, but limited, principle that an employer violates the Act by failing to notify the union or to give it "a meaningful chance to offer counter-proposals and counter-arguments." In neither Ralph Printing nor Carbonex was the court required to choose between the Board's bargain-to-impasse rule and the Fifth Circuit's view that providing the union notice and an opportunity to respond always licenses the employer's unilateral action. 2. Respondent contends (Br. in Opp. 4) that certiorari is not warranted because the decision below presents a somewhat different issue from that addressed in NLRB v. Katz, 369 U.S. 736 (1962), and is therefore "entirely consistent" with the Court's decision in that case. In Katz, the question was whether an employer violated its duty to bargain by making unilateral changes during bargaining negotiations without ever notifying or consulting the union. If this case presented that precise question, summary reversal, not consideration on a petition for certiorari, would be in order. As the petition points out (Pet. 11-13), and as the Board has explained in Winn-Dixie Stores, Inc. 243 N.L.R.B. 972, 974-975 (1979), the reasoning of Katz and the realities of collective bargaining support the Board's view that, where the union has been notified and given a limited opportunity to respond to the proposed change, it is inconsistent with the duty to bargain under the Act for an employer to make a unilateral change prior to impasse. /5/ The Board's position, we submit, is reasonable and thus is entitled to deference by the courts. Moreover, statements in decisions of this Court since Katz are consistent with the Board's position that an impasse is ordinarily required. See Pet. 13-14. 3. Respondent also contends (Br. in Opp. 5) that, in view of the recognized exceptions to the Board's rule that an employer ordinarily must bargain to impasse before making unilateral changes, guidance by this Court is unnecessary in the absence of a "genuine" circuit conflict. As shown above, pp. 1-3, however, there is a genuine conflict in the circuits on the issue presented in the petition. Moreover, the Board recognizes only extremely limited exceptions to its rule. Thus, the Board recently reiterated that when * * * the parties are engaged in negotiations, an employer's obligation to refrain from unilateral changes extends beyond the mere duty to give notice and an opportunity to bargain; it encompasses a duty to refrain from implementation at all, unless and until an overall impasse has been reached on bargaining for the agreement as a whole. The Board has recognized two limited exceptions to this general rule: "(w)hen a union, in response to an employer's diligent and earnest efforts to engage in bargaining, insists on continually avoiding or * * * delaying bargaining," and when economic exigencies compel prompt action. Master Window Cleaning, Inc., 302 N.L.R.B. No. 63 (Mar. 29, 1991), slip op. 5-6. /6/ 4. Finally, respondent contends (Br. in Opp. 6-7) that the facts of this case provide no support for the Board's position that allowing an employer to make unilateral changes in working conditions before impasse, but after notice and some opportunity to comment, is inimical to the bargaining process. Thus, respondent contends that its conduct was not inimical to the bargaining process because discussions continued after it implemented the wage decreases. But good faith bargaining is more than discussion; it is negotiation for the purpose of reaching a mutually acceptable agreement. Here the parties met six times over a five-month period after the unilateral wage decreases were implemented (Pet. 6), but the meetings ultimately proved unproductive. It cannot be said that, absent respondent's unilateral action, a final agreement would not have been reached, since, as noted in the petition (Pet. 12), "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." For the foregoing reasons, and the reasons stated in the petition, the petition for a writ of certiorari should be granted. Respectfully submitted. KENNETH W. STARR Solicitor General JERRY M. HUNTER General Counsel National Labor Relations Board APRIL 1991 /1/ In only three of the eight cases cited -- American Federation of Television & Radio Artists v. NLRB, 395 F.2d 622, 624 (D.C. Cir. 1968); NLRB v. H & H Pretzel Co., 831 F.2d 650, 656-657 (6th Cir. 1987); and NLRB v. U.S. Sonics Corp., 312 F.2d 610, 615 (1st Cir. 1963) -- did the courts find that an impasse justifying unilateral action had occurred. /2/ Relying on Local 777, Democratic Union Org. Comm. v. NLRB, 603 F.2d 862, 890 n.77 (D.C. Cir. 1978), respondent asserts (Br. in Opp. 3) that the D.C. Circuit has "specifically endorsed" the Fifth Circuit's Citizens Hotel standard. As we noted in the petition (Pet. 15 n.8), the court's dictum to that effect in Local 777 has been superseded by its decision in Local 175. Although, as respondent notes (Br. in Opp. 2), the D.C. Circuit found it unnecessary squarely to decide the Citizens Hotel issue in its earlier decision in American Federation of Television & Radio Artists v. NLRB, 395 F.2d 622, 629 (1968), the decision in Local 175 necessarily rests on the court's rejection of the rule adopted in Citizens Hotel. /3/ Respondent errs in suggesting (Br. in Opp. 3) that the Fourth Circuit's earlier decision in NLRB v. Cone Mills Corp., 373 F.2d 595, 600-602 (1967) (Cone Mills I) turns on the rule in Citizens Hotel. There, the Fourth Circuit found that the union was aware of the change implemented by the employer and had waived its right to bargain about it. See pp. 5, 7-8, infra. /4/ The Board has recognized such avoidance or delay as one of the extenuating circumstances that can justify unilateral action in the absence of an impasse. See Pet. 11 n.7, and pp. 7-8, infra. /5/ Respondent errs in asserting (Br. in Opp. 4 n.4) that the Court in Katz "approvingly cited" NLRB v. Bradley Washfountain Co., 192 F.2d 144 (7th Cir. 1951), and NLRB v. Landis Tool Co., 193 F.2d 279 (3d Cir. 1952) -- cases in which the courts of appeals found that the employer's unilateral implementation before impasse of wage increases that had been rejected by the union as too low did not disparage the union's status as bargaining representative. The Court in Katz simply pointed out that those cases were distinguishable on their facts from the case before it, but said nothing about their continued validity. 369 U.S. at 745 n.12. In any event, although there might be some question whether pre-impasse unilateral wage increases disparage the union's status as bargaining agent, see NLRB v. Cromptton-Highland Mills, Inc., 337 U.S. 217, 224 (1949), it is clear that unilateral wage decreases prior to impasse -- as occurred here -- would have that effect. /6/ Respondent cites (Br. in Opp. 5) three cases for the proposition that the Board has recognized other exceptions to the general rule. But one of these cases, M & M Building & Electrical Contractors, Inc., 262 N.L.R.B. 1472 (1982), is an example of the "avoidance or delay" exception recognized by the Board in Master Window Cleaning and discussed at Pet. 11 n.7. See also Auto Freight, p. 4, supra. The other two cases cited by respondent involve totally inapposite situations. Darling & Co., 171 N.L.R.B. 801 (1968), enforced sub nom. Lane v. NLRB, 418 F.2d 1208 (D.C. Cir. 1969), does not sanction unilateral changes in working conditions prior to impasse; rather, it holds that, like employee strikes, employer lockouts in support of a bargaining position are permissible prior to impasse. 171 N.L.R.B. at 802-803. And the Board's position that an employer may unilaterally set the terms of employment for striker replacements, see Corson & Gruman Co., 284 N.L.R.B. 1316 (1987), enforced, 899 F.2d 47 (D.C. Cir. 1990), is based on the special type of relationship that the union has with those employees during the strike. See Capital-Hustings Co., 252 N.L.R.B. 43, 45 (1980), enforced, 671 F.2d 237 (7th Cir. 1982).