Contract Services, Inc.

National Labor Relations Board - Board Decisions

Apr 3, 1973

202 N.L.R.B. 862 (N.L.R.B. 1973)

862 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Contract Services , Inc. and National Maritime Union
of America, AFL-CIO, Petitioner. Case
4-RC-8995
April 3, 1973
DECISION AND ORDER
BY CHAIRMAN MILLER AND MEMBERS
KENNEDY AND PENELLO
On January 11, 1971, the National Maritime Union
of America, AFL-CIO (herein called the NMU),
filed a petition with the Regional Director for Region
4 seeking an election in a unit of certain employees
employed by the Employer in its bus transportation
operation in the Panama Canal Zone (herein called
the Canal Zone). All of the employees in the
proposed unit are Panamanian nationals. After the
petition was filed the Regional Director administra-
tively dismissed the petition in reliance on United
Fruit Co,' and the Board sustained the dismissal.
Thereafter, on April 14, 1971, NMU filed suit in
the United States District Court for the Eastern
District of Pennsylvania seeking review of the
Board's decision in declining to assert jurisdiction
and an order directing the Board to conduct a
hearing in the matter. Subsequently, the General
Counsel filed a motion to dismiss the complaint on
the grounds that the district court lacked jurisdiction
over the subject matter of the action and that the
complaint failed to state a claim on which relief
should be granted. The court, on November 9, 1971,
issued a memorandum and order denying, without
prejudice, the Board's motion to dismiss the NMU's
complaint and ordering a hearing before the Court to
determine (1) whether the effect on foreign relations
is a valid factor for the Board to consider in deciding
to decline jurisdiction; (2) if so, whether the assertion
of jurisdiction would adversely affect the United
States-Panamanian relations; (3) whether the Canal
Zone is a state, foreign country, or territory within
the definition of commerce in the National Labor
Relations Act, as amended; and (4) whether there are
any other reasons why the Court should decline to
order the Board to comply with its alleged statutory
duties in this case.
After the Court issued its order, the Board
reconsidered its decision denying NMU's appeal
from the Decision of the Regional Director and, by
order dated December 10, 1971, the Board reinstated
the petition. Moreover, so that it could articulate its
position on the issues raised by the Court, the Board
directed a hearing which was held before Hearing
Officer Solomon S. Spector on April 4, 1972. All
parties appeared at the hearing and were afforded
full opportunity to be heard, to examine and cross-
examine witnesses , and to adduce evidence bearing
on the issues. Pursuant to the Board' s Rules and
Regulations, the case was thereafter transferred to
the Board for decision.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the
National Labor Relations Board has delegated its
authority in this proceeding to a three-member panel.
The Hearing Officer's rulings made at the hearing
are free from prejudicial error and are hereby
affirmed. Upon the entire record in this case,
including the briefs filed with the Board by the
Employer and the Petitioner, the Board, for the
reasons set forth hereinafter, answers in the affirma-
tive each of the foregoing questions posed by the
court with the exception of the last question which
we find unnecessary to reach in light of our decision
to decline to exercise jurisdiction at this time based
upon foreign policy considerations.2
The Employer, a Delaware corporation, is engaged
in the operation of a local bus system transporting
U.S. military dependents to and from school within
the Canal Zone, pursuant to a fixed-cost contract with
the U.S. Navy for a 5-year period.3 The current
contract is effective from August 1, 1971. The dollar
volume of such service exceeds $250,000 per annum.
All buses and related equipment used by the
Employer pursuant to the current contract are
purchased from continental United States and
exceed $50,000 in value per annum. It is clear from
the above that the Employer's volume of business,
purchases, and relationship to our national defense
bring it within our standards for the assertion of
jurisdiction.4
The Employer, however, contends that the Board
should not assert jurisdiction over its transportation
enterprise in the Canal Zone. In support of its
position the Employer argues (1) that the Canal Zone
is not a "territory" within the "commerce" definition
of the National Labor Relations Act, as amended,
1 159 NLRB 135, direct review denied, National Maritime Union of
America v NLRB, 267 F Supp 1 17 (D C N Y)
2 In addition to declining to assert jurisdiction because of foreign policy
considerations, Member Kennedy would also decline jurisdiction based on
the fact that the Board has consistently refused to assert jurisdiction over
school bus enterprises S L Lines, Inc, d/b/a Pacific-Scenic-Lines, 164
NLRB 1179, Community Enterprises, Inc, d/b/a Community Charter Bus
System, 164 NLRB 1186, Brothers Coach Corp, 158 NLRB 931, Camp
Baumann Buses, Inc and VS Buses, Inc, 142 NLRB 648, Raybern Bus
Service, Inc, 128 NLRB 430 Thus, in accordance with the foregoing cases,
he would not assert jurisdiction over such enterprises in the Canal Zone
3 The Employer's only other enterprise, also conducted solely in the
Canal Zone, is under a 3-year contract with the U S Army to perform
environmental testing
a Charleston Transit Company, 123 NLRB 1296, Siemons Mailing Service,
122 NLRB 81 But for such services the U S Navy might be obligated to use
military personnel to fulfill such tasks instead of other essential duties
pertaining to the maintenance , operation, and protection of the Panama
Canal See Gerommo Service Co, 129 NLRB 366
202 NLRB No. 156
CONTRACT SERVICES , INC 863
and (2) that, in any event, the Board should adhere to
its decision in United Fruit, supra, and decline to
assert jurisdiction so as not to interfere with
international affairs involving United States-Pana-
manian relations. Accordingly, the Employer re-
quests that the petition be dismissed.
Legislative history does not shed any light on
whether business operations conducted by U.S.
employers in the Canal Zone are to be included
within the meaning of "commerce" as that term is
defined by Section 2(6) of the National Labor
Relations Act.5 Reference is made to Puerto Rico,6
the Virgin Islands, 7 and Guam8 in Section 14(c) of
the Act9 as examples of territories, but such
reference is not meant to be exhaustive.10 Thus, the
Board and the courts have interpreted the term
"Territory" as used in the Act to include not only
Puerto Rico, the Virgin Islands, and Guam but also,
before statehood, Alaskaii and Hawaii.12
In Star-Kist Samoa, Inc., supra, the Board found
that American Samoa is not a "Territory," relying
particularly on the fact that Congress has not
established any form of self-government for Ameri-
can Samoa, that is to say, American Samoa is not an
"organized" territory.13 However, we note that the
Canal Zone, unlike American Samoa, possesses a
highly organized form of self-government which was
initially established by the Panama Canal Act of
1912.14 Laws of the Canal Zone were incorporated
into the Canal Zone Code which was adopted by
Congress in 1934 and revised effective January 2,
1963.15 Under the Canal Zone Code, a governor
appointed by the President as his designee is
empowered with "official control and jurisdiction"
over the Canal Zone and performs "all duties in
connection with the civil government of the Canal
Zone . . . ." 16 A system of Magistrate's Courts is
established with its own rules of procedure and
5 Sec 2(6) of the Act provides that
The term "commerce" means trade , traffic , commerce, transporta-
tion , or communication among the several States , or between the
District of Columbia or any Territory of the United States and any
State or other Territory, or between any foreign country and any State,
Territory, or the District of Columbia, or within the District of
Columbia or any Territory , or between points in the same State but
through any other State or any Territory or the District of Columbia or
any foreign country
6 See Ronrico Corporation, 53 NLRB 1135
7 See Caribe Lumber and Trading Corp, 148 NLRB 277
8 See RCA Communications , Inc, 154 NLRB 34
9 Sec 14(c)(2) of the Act provides that
Nothing in this Act shall be deemed to prevent or bar any agency or
the courts of any State or Territory ( including the Commonwealth of
Puerto Rico , Guam , and the Virgin Islands), from assuming and
asserting jurisdiction over labor disputes over which the Board declines
to assert j urisdiction
10 See Star-Kist Samoa, Inc, 172 NLRB 1467
11 International Longshoremen 's & Warehousemen 's Union v Juneau
Spruce Corp, 342 U S 237
12 American Factors, Lid (Hilo Branch), 104 NLRB 199, and Pacific
Laundry Co, Ltd, 99 NLRB 1011
provision for appeal to the United States District
Court for the District of the Canal Zone.17 This
Federal district court is imbued with all the powers
of any U.S. district court and appeals from the
district court are within thejurisdiction of the United
States Court of Appeals for the Fifth Circuit.18
Although we are mindful of provisions of the Canal
Zone Code, the body of law enacted by Congress to
govern the Canal Zone, we find no specific provision
of the Canal Zone Code, nor do we find any other
specific delegation by Congress to the Canal Zone
government, which pertains to matters covered by
our Act. In the absence of such provision or
delegation we must assume, at least , that Congress
intended no specific exemption from "commerce" of
the operations of U.S. employers in the Canal Zone.
On the other hand, we note no specific inclusion of
the Canal Zone as being covered by our Act, as is
found, for example, in the Fair Labor Standards
Act,19 the Labor-Management Reporting and Dis-
closure Act,20 the Welfare and Pension Plans
Disclosure Act,21 and the Equal Employment Oppor-
tunity Act.22 In these circumstances, we conclude
that while there is no specific evidence of congres-
sional intent, nevertheless business operations con-
ducted in the Canal Zone by U.S. employers appear
to fall within the definition of the term "commerce"
as defined in the National Labor Relations Act,
Section 2(6), and we believe, therefore, that we have
the statutory authority to assert jurisdiction.
This Board, however, has the discretionary power
to decline to exercise its statutory jurisdiction to the
fullest extent.23 Such discretion has been recognized
by the Supreme Court when it stated in Denver
Building and Construction Trades Council, "[e]ven
when the effect of activities on . . . commerce is
sufficient to enable the Board to take jurisdiction of a
complaint, the Board sometimes properly declines to
13 We note, in passing, the Supreme Court's decision in U S v Standard
Oil of California, 404 U S 558, rehearing denied 405 U S 969 , wherein the
Court held that'Amencan Samoa was a "Terntory" within the meaning of
Sec 3 of the Sherman Act (I5 US C § 3 ) since both organized and
unorganized "Territories" are within the meaning of that term as used in the
Sherman Act
14 37 Star 560
15 76A Stat 1
16 2 Canal Zone Code § 33
17 5 Canal Zone Code § 711 et seq
18 See 28 U S C §§ 1404, 1406, 1869, and 28 U S C §41
19 29 U S C § 213( f) See, e g , James v Contract Services, Inc, Civil No
6725, U S District Court for the District of the Canal Zone , Balboa,
Division , December 23, 1969, wherein the Employer herein was the subject
of an action brought for its failure to comply with the terms of the FLSA
20 29 U S C § 402(b)
21 29 U S C § 302(a)(9)
22 42 U S C § 2000 e (i)
23 See , e g, N L R B v Denver Building and Construction Trades Council
[Gould & Preisner], 341 U S 675, 684 (1951), N L R B v WGOK, Inc, 384
F 2d 500, 502 (C A 5, 1967), N L R B v Jones Sausage Company, 257 F 2d
878, 880 (C A 4, 1958), N L R B v W B Jones Lumber Company, Inc, 245
F 2d 388, 390-391 (C A 9, 1957)
864 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
do so, stating that the policies of the Act would not
be effectuated by its assertion of jurisdiction in that
case."24 In declining to act in such cases the Board is
merely exercising its "complete discretionary power
to determine in each case whether the public interest
requires it to act."25 Moreover, the Board has
continually exercised this discretion, with judicial
approval, and has declined to assert jurisdiction in
certain representation as well as unfair labor practice
cases. Thus, even though a petition has been filed
alleging that a question concerning representation
affecting commerce exists, the Board has declined to
exercise jurisdiction where employees of foreign
nationalities and international considerations are
involved.26 As the court in N.M. U. v. N.L.R.B.
stated, "the opinion of the Supreme Court in
McCulloch v. Sociedad Nacional [372 U.S. 10] makes
it perfectly clear that considerations of international
relations are highly relevant-indeed, indispensa-
ble-in determining the extent of the Board's
jurisdiction. This court perceives no reason why such
considerations are not equally relevant to the Board's
determination whether to assert jurisdiction."27
Inasmuch as we agree with the court's interpretation
of McCulloch v. Sociedad Nacional, supra, and in
agreement with prior Board decisions, we hold that
in deciding whether or not to exercise our discretion
to assert jurisdiction herein, the effect thereof on
foreign relations is a necessary and proper factor to
be considered.
In determining whether the assertion of jurisdiction
herein would adversely affect United States-Panama-
nian relations, we note that the issue of Panamanian
sovereignty over the Canal Zone has long been a
sensitive topic of negotiations between the two
governments. In 1903 the United States negotiated a
treaty which ceded to the United States the right in
perpetuity to maintain, operate, and defend a canal
in Panama and the right to act in the 10-mile strip
surrounding the canal with "all the rights, power and
authority" which "it would possess and exercise if it
were the sovereign." 28 Thus, the United States use of
the Canal Zone and jurisdiction there are treaty
rights which may be modified or terminated by
another treaty with Panama. We noted in 1966 in
United Fruit Company29 that the United States and
Panama were at that time "negotiating the terms of a
new treaty, to replace the 1903 treaty and its
24 Id, 341 U S at 684
25 N L R B v Newark Morning Ledger Company, 120 F 2d 262, 268 (C A
3, 1941)
26 United Fruit, supra, in 1, and see British Rail-International, Inc, 163
NLRB 721 (1967)
27 Supra, in 1, 267 F Supp at 126
28 Art III of Convention for the Construction of a Ship Canal, 33 Stat
2234, TS 431
29 159 NLRB 135, 136
amendments, which will govern the relationship
between them with respect to the area of the Canal
Zone. The President of the United States has
announced that the two countries have already
agreed that the 1903 treaty will be abrogated; that
the new treaty will effectively recognize Panama's
sovereignty over the area of the present Canal Zone
. . " It was the existence of those negotiations and
the legitimate and prudent concern that such
negotiations might be disturbed that led the Board in
United Fruit, supra, to deem it inappropriate to assert
jurisdiction at that time. The Board's decision was
fully upheld by the Federal district court.30 The
negotiations, which began in 1964, resulted in the
initialing of three draft treaties in 1967. After neither
government took any action to have the treaties
ratified, further negotiations came to a halt.
Intensive negotiations for a new Panama Canal
treaty to replace the treaty of 1903 resumed in June
of 1971.31 Although by year's end all major treaty
issues had been explored, it was contemplated that
agreement would require further intensive negotia-
tion. To this end congressional subcommittees held
hearings on the negotiations, giving rise to consider-
able criticism in Panama of some of the views
expressed. In appearing before the Subcommittee on
the Panama Canal of the House Committee on
Merchant Marine and Fisheries on November 29,
1971, then U.S. Ambassador Mundt stated32 that
"Panama seeks the application of its laws to various
activities in the present Canal Zone. Certain jurisdic-
tional rights and activities, including commercial
operations, not necessary for the administration,
operation and defense of the canal, can be trans-
ferred to Panama without adversely affecting the
United States interests . . . . There is widespread
support in Latin America," he noted, "for Panama's
efforts to obtain greater practical exercise of its
sovereignty and to terminate the objectionable
aspects of the U.S. presence in the Canal Zone,
which," he stated, "is exactly one of the U.S.
objectives in the current negotiations." Negotiations
were being conducted at the time when Ambassador
Mundt was making his statement before the House
Committee. Thereafter, between June 1971 and
January 1972, negotiators have held some 40 formal
negotiating sessions in addition to a number of
subcommittee meetings.33 Moreover, we are present-
30 National Maritime Union v N L R B, 267 F Supp 117(1967)
31 See Report of the Secretary of State, United States Foreign Policy 1971
(Department of State Publication 8634) at 149 (March 1972)
32 Vol LXV, No 1696, Department of State Bulletin (December 27,
1971) at pp 734-735, Department of State Press Release "Information On
Panama Canal Treaty Negotiations." January 12, 1972, at p 2
33 Department of State Press Release "Information on Panama Canal
Treaty Negotiations," January 12. 1972, at p 4
CONTRACT SERVICES , INC 865
ly advised by the Office of Interoceanic Canal
Negotiations of the United States State Department
that the negotiations are continuing.
In light of the foregoing facts, we are of the opinion
that we ought not at this time reach out to inject
further U.S. governmental regulation of matters
affecting Panamanian citizens employed in the Canal
Zone, when the entire matter of the scope and effect
of this country's presence in that zone is a matter
undergoing international negotiations. To assert
jurisdiction for the first time in this Board's history at
this particular juncture would be to risk a negative
impact on negotiations. Having refrained thus far
from exercising the full extent of our statutory
jurisdiction by asserting jurisdiction in this distant
area, we see no compelling reason to do so now, and
have no desire to take any action which might be a
factor in jeopardizing the prospects for a negotiated
settlement of the respective rights and duties of the
United States and the Panamanian government with
respect to Canal Zone matters.
Based upon the foregoing, we conclude that the
Canal Zone is a state, foreign country, or territory
within the definition of "commerce" as defined by
Section 2(6) of the National Labor Relations Act, but
that it would not effectuate the policies of the Act to
assert jurisdiction in the instant case since such
action might at this time adversely affect United
States-Panamanian relations. Accordingly, we shall
dismiss the petition.
ORDER
It is hereby ordered that the petition in Case
4-RC-8995 be, and it hereby is, dismissed.