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District 1199P v. National Labor Relations Board

filed: January 4, 1989.


On Petition for Review from the National Labor Relations Board, No. 4-CA-15452.

Becker, Hutchinson and Scirica, Circuit Judges.

Author: Becker


BECKER, Circuit Judge:


As briefed and argued, this petition by District 1199P, National Union of Hospital and Health Care Employees ("Union"), for review of a final order of the National Labor Relations Board presents the important question whether an employer has a duty to bargain with a union when, after a bona fide closing of a facility for economic reasons, the employer reopens the facility as a different operation but employs former workers to perform jobs similar to those they performed while members of the bargaining unit.*fn1 However, in addressing the petition, this opinion will ultimately focus upon the issue of what deference is due by a reviewing court when the agency has failed to supply a reasoned explanation of its actions.

For several years, Morton Development Corporation ("Morton") operated an intermediate care facility for mentally retarded adults at which the Union was the exclusive bargaining agent for service and maintenance employees. In 1983 or 1984, due to adverse business conditions, Morton decided to close the facility with a view to converting it to a nursing home or selling it. The plant was closed in June 1985. However, an agreement to sell the plant to a third party fell through, and in November 1985, Morton reopened the plant as a nursing home and reemployed many members of the original bargaining unit. The Union demanded recognition. When Morton refused, the Union filed an unfair labor practice complaint.

Notwithstanding that the employer who opened the nursing home was the same employer who operated the predecessor facility for the mentally retarded at the same plant, and that the reemployed workers were performing similar jobs, the administrative law judge declined to apply the normal presumption of continuation of the bargaining relationship when a business changes character but not ownership. He essentially analyzed the case under the successorship doctrine, which is ordinarily applied only when there has been a change of ownership. He ruled that, in view of the change in operations and the uncontradicted evidence that Morton had acted in good faith in severing the bargaining relationship, it had no obligation to bargain with the Union. However, the ALJ did not confront the overriding question relevant to successorship cases -- whether the business had so changed that it would have affected the employees' "legitimate expectations in continued representation." Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 107 S. Ct. 2225, 2236, 96 L. Ed. 2d 22 (1987). Nor did the AlJ make clear why, in the absence of a change of ownership, successorship jurisprudence should apply, or, assuming that it may apply, how great the change in the business operation must be in order for an employer to free itself from its obligation to bargain with the union.

In a cursory opinion, containing a cryptic footnote, a divided panel of the NLRB adopted the ALJ's recommended order based on the "specific and unique facts of this case." Morton, slip op. at 1 n.1. The NLRB failed to explain, however, what was "specific and unique" about this case, and did not articulate the rationale of its affirmance.

While a court must defer to the NLRB's interpretation of the Act as long as that interpretation is rational and consistent with the Act, the overarching principle of agency review is that the agency must provide a reasoned explanation of its actions. See Local 825, International Union of Operating Engineers v. NLRB, 829 F.2d 458, 460 (3d Cir. 1987). Only then is it clear that the agency applied its expertise to the issue and only then can a reviewing court assess the rationality of the agency's interpretation.

In view of the failure of the NLRB to state what rule of law it applied in this case, or why, we will grant the petition for review and remand the case so that the NLRB may give it fuller consideration and provide an adequate explanation of its decision.


From November 1979 to June 27, 1985, Morton operated an intermediate care facility for mentally retarded adults in Easton, Pennsylvania. The Commonwealth of Pennsylvania provided all of the facility's revenue. On June 7, 1983, the NLRB certified the Union as the exclusive bargaining agent for about fifty-five of Morton's employees, including living-unit aides, therapeutic recreation aides, transportation aides, occupational therapy aides, diet aides, cooks, maintenance assistants, and housekeeping aides. Members of the bargaining unit performed a variety of services for the facility's mentally retarded residents. For example, living-unit aides, the largest group of employees, helped the residents to master such life skills as bedmaking. dressing and bathing. Diet aides and cooks helped prepare and serve family-style meals. While the positions had a vocational component, all were service-oriented and low-paying.

In March 1984, Morton, doing business as Praxis, entered into a one-year collective bargaining agreement with the Union that Morton and the Union later agreed to extend the contract to June 30, 1985. In late 1983 or early 1984, however, Morton decided to cease operations as a facility for the mentally retarded because of economic problems. Morton considered both converting the Easton facility to a nursing home and selling it. In ...

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