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09/30/88 Shipbuilders, Blacksmiths, v. National Labor

September 30, 1988




Robinson, D.H. Ginsburg, and Boggs,* Circuit Judges.


Petition for Review of an Order of the National Labor Relations Board.



This case raises the issue that the Supreme Court expressly reserved in American Ship Building Co. v. NLRB, 380 U.S. 300, 308 n. 8, 13 L. Ed. 2d 855, 85 S. Ct. 955 (1965): Does an employer that has lawfully locked out its permanent employees violate sections 8(a)(1) and (3) of the National Labor Relations Act by operating with temporary replacement workers in order to bring economic pressure to bear in support of its bargaining position? The National Labor Relations Board held that it does not, and we agree. I. FACTS

The Gold Bond Building Products Division of the National Gypsum Company, Inc., manufactures and distributes wallboard at 18 plants nationwide. The International Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, Forgers and Helpers represents employees at nine of those plants, including the one in Portsmouth, New Hampshire.

Over the course of a nearly 40-year relationship at Portsmouth, both the Company and the Union have periodically resorted to economic pressure to support their respective positions in collective bargaining. On several occasions, the Union has attempted to maximize its bargaining power by coordinating its efforts with unions representing other Gold Bond plants, seeking common contract terms and expiration dates at each of the plants. In support of their ultimately unsuccessful demand for coordinated bargaining, the Portsmouth employees and those at three other Gold Bond plants went out on strike in 1969. In 1973, the Company locked out employees at Portsmouth and at several other plants over the same issue. After another lockout in 1975, however, the Company and the Union were able to reach agreement on the next three biennial contracts without resort to strikes or lockouts.

The last of those contracts was due to expire on April 1, 1983; preliminary negotiations for a new agreement began on March 15 of that year. The Union submitted 67 proposals, but its principal demands were for a "$1 per hour across the board" wage increase, a 100% increase in the multiplier used to compute pension benefits, increases in vacations and paid holidays, and a one-year contract term. The Company's major proposals, among 41, were for a more specific (or, per the Union, a "more pervasive") management rights clause, and for an insurance cost containment clause, which would have capped at the existing rate the Company's obligation to pay for employee health insurance.

Because the Union's chief negotiators were not available to meet with the Company earlier, no substantive bargaining occurred until March 28, just four days prior to the expiration of the contract. As of March 30, the parties had still not resolved any of the major substantive issues that divided them. That day, the Company informed the Union that it would lock the employees out unless a new agreement was reached before the old contract expired at midnight the next night.

The following morning, the Company submitted its "final offer," which still contained the troublesome management rights and insurance cost containment clauses, but included a slight increase in pension benefits and a wage increase of $.32 per hour upon ratification, and an additional $.32 per hour during the second year of the contract. That afternoon, the employees overwhelmingly rejected the Company's final offer. Later that day, at a final pre-expiration meeting, the Union proposed a two-year agreement, with an immediate wage increase of $.50 per hour and another of $.50 at the beginning of the second year. The Company, however, continued to insist upon the management rights and insurance cost containment provisions.

The next day, April 1, the Company made good its threat and locked out its union employees. During the first four days of the lockout, it used supervisory and non-union salaried employees to perform major maintenance work on its equipment. Then, for the next six weeks, the plant operated on a truncated schedule with supervisory and non-union salaried employees from various Gold Bond plants. Near the end of that period, the Union further modified its bargaining position--by reducing its wage increase demand from $.50 to $.495 each year.

Faced with the possibility of strikes at other plants, and a substantial increase in the cost of bringing non-union employees from other locations to Portsmouth during the busy resort season there, the Company began to hire temporary employees to operate the Portsmouth plant. It specifically informed them that their jobs would last only until an agreement could be reached with the Union.

Meanwhile, the Union and the Company continued to bargain. On July 29, they agreed to a new contract. It provided for an immediate $.35 per hour wage increase, another $.35 per hour raise beginning on April 1 of the next year, and a modest increase in the pension multiplier; and although it did authorize the Company to switch to a health insurance plan that was less costly initially, it required the Company to pay any cost increases necessary to maintain the plan during the term of the agreement. The Company dropped its proposed management rights clause. Immediately after the agreement was reached, the replacements were dismissed, and the regular employees, after a four-month lockout, returned to work on August 1.

Seeking to recover the wages lost during the lockout, the Union filed an unfair labor practice charge against Gold Bond. The General Counsel of the NLRB issued a complaint alleging that, by continuing to operate with temporary replacements during an otherwise lawful lockout, the Company had violated sections 8(a)(1) and (3) of the Labor Act, 29 U.S.C. 158(a)(1), (3) (1982).

An Administrative Law Judge held in favor of the Union. The ALJ found that, although the Company's actions were not "inherently destructive" of protected employee rights, they nevertheless had an adverse impact on those rights. Therefore, he reasoned, the case turned on whether the Company had a substantial business justification for hiring replacements during the lockout. The ALJ rejected the Company's contention that, in view of the Union's "dilatory" bargaining tactics, the employees appeared to be gearing up for another coordinated bargaining effort, and therefore, that Gold Bond's actions had been "defensive." The ALJ determined, instead, that Gold Bond's actions were "strictly an offensive maneuver designed to force the Union to capitulate" in the face of the Company's bargaining demands. On the view that the use of economic pressure in order to secure more favorable contract terms is not itself a substantial business justification, he concluded that the Company had violated sections 8(a)(1) and (3) of the Labor Act.

The NLRB reversed on the basis of its decision in Harter Equipment, Inc., 280 N.L.R.B. No. 71 (June 24, 1986), enforced sub nom. Local 825, International Union of Operating Engineers v. NLRB, 829 F.2d 458 (3d Cir. 1987), which had issued after the ALJ filed his decision in this case. In Harter, the Board concluded that "using temporary employees after a lawful lockout in order to bring economic pressure to bear in support of legitimate bargaining demands (1) is a measure reasonably adapted to the achievement of a legitimate employer interest and (2) has only a comparatively slight adverse effect on protected employee rights." 280 N.L.R.B. No. 71 at 10. Accordingly, it held, such an action is unlawful only if it is shown to be the product of an "antiunion motivation." In this regard, the Board agreed with the ALJ that, after locking out its employees, the Company had continued to operate with temporaries for the sole purpose of strengthening its bargaining position. There being no proof that the Company had been motivated by antiunion animus, the Board dismissed the complaint.

The Union petitioned for review in this court, and the Company has intervened. II. ANALYTIC FRAMEWORK

The NLRB argues that we must defer to its decision in this case unless we find it to be "'fundamentally inconsistent with the structure of the [Labor] Act.'" Ford Motor Co. v. NLRB, 441 U.S. 488, 497, 60 L. Ed. 2d 420, 99 S. Ct. 1842 (1979) (quoting American Ship Building, 380 U.S. at 318). Of course, we cannot gainsay that cases such as this one, requiring a proper construction of that Act, are peculiarly within the province of the NLRB. See NLRB v. United Food and Commercial Workers Union, Local 23, 484 U.S. 112, 108 S. Ct. 413, 421, 98 L. Ed. 2d 429 (1987) (applying the analysis of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984), to review of the NLRB's interpretation of the Labor Act). Judicial deference is not a necessary factor in our resolution of this case, however, inasmuch as the conclusion reached by the NLRB appears to be compelled by the logic of the relevant Supreme Court decisions.

A. Background

The question whether an employer may lawfully lock out its employees has arisen in three types of recurring situations. In each, it was first established that a lockout is lawful. In each, the corollary question then arose: is an employer that has locked out its employees required to shut down its operations or may it lawfully continue to operate with temporary replacements until it reaches a settlement with its permanent employees? In two of these recurring situations, the right of an employer to hire temporary replacements is clear. It is the third situation that is now before us.

The first situation involves "economic" lockouts, i.e., lockouts necessary to protect an employer from some peculiar economic harm that it would suffer if its employees, who have threatened to strike, were to have sole control over the timing of any work stoppage. For many years, it has been clear that such a lockout is not an unfair labor practice. See Duluth Bottling Association, 48 N.L.R.B. 1335 (1943) (lockout to protect against spoilage of materials that would be caused by a sudden strike); Betts Cadillac Olds, Inc., 96 N.L.R.B. 268, 286 (1951) (lockout to avert possibility of strike occurring while unfinished work was in the shop: "The pedestrian need not wait to be struck before leaping for the curb."). It has now been established as well that an employer engaged in such a lawful "economic" lockout may continue to operate with temporary replacements. See Inter-Collegiate Press, Graphic Arts Division v. NLRB, 486 F.2d 837 (8th Cir. 1973) (lockout and hiring of temporary replacements not an unfair labor practice where employer in highly seasonal business threatened with strike during peak season).

The second situation involves the so-called "whipsaw strike." In such a strike, the union strikes against one member of a multiemployer bargaining unit, but allows the other employers to continue operating in order to maximize the competitive pressure brought to bear upon the struck member, while minimizing the burden of joblessness on the employees' resources; the idea is thereby to force each employer individually to capitulate through a series of such strikes, thus defeating their attempt to stand together. In NLRB v. Truck Drivers Union, 353 U.S. 87, 1 L. Ed. 2d 676, 77 S. Ct. 643 (1957), the Supreme Court held that it is not an unfair labor practice for the nonstruck members to lock out their employees in order to defend against the tactic. Then, in NLRB v. Brown, 380 U.S. 278, 13 L. Ed. 2d 839, 85 S. Ct. 980 ...

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