Hartmann Luggage Co.

National Labor Relations Board - Board Decisions

Feb 7, 1964

145 N.L.R.B. 1572 (N.L.R.B. 1964)

1572 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Hartmann Luggage Company and International Leather Goods,
Plastics and Novelty Workers Union , Local Union No . 57, AFL-
CIO. Case No. 13-CA-4945. February 7, 1964
DECISION AND ORDER
On May 13, 1963, Trial Examiner Frederick U. Reel issued his In-
termediate Report in the above case, finding that the Respondent had
not engaged in any unfair labor practices which warrant the issuance
of a remedial order and recommending that the complaint be dismissed
in its entirety, as set forth in the attached Intermediate Report.
Thereafter, the General Counsel, the Charging Party, and the Re-
spondent filed exceptions to the Intermediate Report. The General
Counsel and the Respondent also filed supporting briefs.
The Board has reviewed the rulings of the Trial Examiner made
at the hearing and finds that no prejudicial error was committed. The
rulings are hereby affirmed. The Board has considered the Intermedi-
ate Report and the entire record in this case, including the exceptions-
and the briefs, and hereby adopts the findings, conclusions, and recom-
mendations of the Trial Examiner, except as modified below.'
We agree with the Trial Examiner that the Respondent was under-
an obligation before subcontracting its Racine operations to notify and
consult with the Union concerning its plan to subcontract, and we also
agree that in the circumstances of this case the negotiations culminat-
ing in the August 1961 collective-bargaining agreement were not alone-
sufficient to discharge that obligation. We do not, however, adopt the
particularity of the Trial Examiner's somewhat narrow delineation of
the Respondent's bargaining obligation-reflected in footnote 3 of the
Intermediate Report-as one which necessarily required the Respond-
ent to give the Union notice of the specific proposed subcontracting
agreement just "at the time the Company was prepared to make a firm
offer to [the subcontractor] or to accept a counter-offer from [it]," and
to furnish the Union at that moment an opportunity to bargain pre-
cisely with reference thereto before consummating that subcontract-
ing agreement.
The Trial Examiner found that the General Counsel, by establish-
ing that the Respondent signed the subcontracting agreement with
North Bay before advising the Union of the pendency of its negotia-
tions with that company, made out "at least a prinna facie case of re-
fusal to bargain." But he concluded nonetheless that that violation
was "cured" by reason of the Respondent's subsequent conduct, as set
out in the Intermediate Report. We agree with the Trial Examiner's
ultimate conclusion that any prima facie showing of a violation in this
1 Member Brown finds it unnecessary to reach and therefore does not pass on the matter-
contained in footnote 4 of the Intermediate Report
145 NLRB No. 151.
HARTMANN LUGGAGE COMPANY 1573
case is overcome by other evidence, but, unlike the Trial Examiner, we
rest our decision upon our evaluation of the Respondent's overall con-
duct, both prior and subsequent to the execution of the subcontracting
agreement.
[The Board dismissed the complaint.]
MEMBER JENKINS, concurring :
I concur in the result.
MEMBER LEEDOM, concurring specially :
My colleagues find, in essence, that the General Counsel established
-at least a prima facie case of an unlawful refusal to bargain but that
the prima facie case was overcome by other evidence "curing" or negat-
ing the existence of a refusal-to-bargain violation.
I join my colleagues in dismissing the complaint, but for different
reasons. I have consistently held to the view that an employer is
under no duty to bargain concerning an economically motivated de-
cision to subcontract its operations and that its sole bargaining duty in
such a situation is to deal with the representative of the employees con-
cerning matters as they affect termination and post-termination rights
.and obligations.2 As the Respondent's decision to subcontract its oper-
ations was economically motivated and as the Respondent did bargain
with the Union concerning the effects of subcontracting on the em-
ployees, I find no violation of Section 8 (a) (5).
2 Fibreboard Paper Products Corporation, 130 NLRB 1558. See my concurring opinion
in Adams Dairy, Inc., 137 NLRB 815, and the decision of the Court of Appeals for the
Eighth Circuit thereon, 322 F 2d 553 See also my separate opinion in Northwestern
.Publishing Company, 144 NLRB 1069, footnotes 16 and 17.
INTERMEDIATE REPORT AND RECOMMENDED ORDER
STATEMENT OF THE CASE
This case, heard at Racine, Wisconsin, on March 19 and 20, 1963, originated
with a charge and complaint filed June 13 and November 29, 1962, respectively,
and presents essentially the question whether Respondent (herein called the Com-
pany) violated the Act by failing to bargain with the Charging Party (herein called
the Union) over the subcontracting of certain manufacturing operations in the
winter of 1962. Upon consideration of the entire record, including my observation
of the witnesses, and after due consideration of the briefs filed by the Company
and by General Counsel, I make the following:
FINDINGS OF FACT
1. THE BUSINESS OF THE COMPANY AND THE LABOR ORGANIZATION INVOLVED
The Company, a Delaware corporation, operated at the time of the events here
in question a plant at Racine, Wisconsin, where it manufactured luggage and from
which it annually shipped in excess of $50,000 worth of goods and materials to
points outside the State. Respondent is engaged in an activity affecting commerce
within the meaning of Section 2(6) and (7) of the Act. The Union, which at all
times material herein represented a majority of the Company' s employees, is a
labor organization within the meaning of the Act.
1574 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
IT. THE ALLEGED UNFAIR LABOR PRACTICES
A. Background-events prior to 1961
In 1955, Ben and Ira Katz, father and son , purchased the assets of Hartmann
Company, a well-known luggage manufacturer in Racine , and formed Respondent
corporation to continue the operations in the old Hartmann plant. The Union,
which had been the bargaining representative of the employees under the prior
operation , continued to be their representative , and the new corporation recognized
and dealt with the Union on that basis . Collective-bargaining agreements were
executed in 1955, 1958, and 1961 ; negotiations leading to the last of these are
discussed more fully, infra.
The business suffered severe financial losses during the course of its operation
under the new owners . These losses , which the new owners attributed in part to
the high wages and allegedly low productivity of the employees, and which the
employees attributed to mismanagement by the new owners , led the latter from
time to time to warn the employees that the Company would be forced to cease
operations in Racine if conditions did not improve. Since 1956, the Company has
operated a plant in Lebanon , Tennessee (where the employees are not represented
by the Charging Party, by any affiliate of its International, or, so far as appears,
by any pother labor organization ), and from time to time various operations origi-
nally performed at the Wisconsin plant have been transferred to Tennessee. The
Union attempted unsuccessfully in 1958 and 1959 to secure a contractual provision
against transferring work out of the Racine plant to another company plant or to
other contractors.
B. 1961-the March threat to close the Racine plant, the June offer to sell
to the Union, and the August contract
In March 1961, the Company informed the Union that unless a substantial re-
duction of all costs, including labor costs, could be immediately effected, the
Company would have but two alternatives: (1) to move its operations out of
the plant, transferring some to Lebanon and "farming out" the others to a small
plant which it would control or operate as a subsidiary; or (2) to sell the entire
operation to the Union which could take over the manufacturing operation as its
own business and buy or rent the plant. The Union rejected the Company's sug-
gestion that the employees take 'a wage cut of 20 to 331/3 percent, and the Company
shortly thereafter implemented the other alternatives it had mentioned: i e. it
transferred the production of some lines of merchandise to its Tennessee plant,
initiated efforts to find 'a subcontractor or another plant to which it could move,
and prepared a detailed 12-point plan for the Union's taking over, which plan was
presented to the Union in June and eventually rejected by it after some deliberation
Meanwhile, in the spring and summer of 1961, negotiations ensued over a new
contract to succeed the agreement which expired July 31, 1961. The Union's
opening proposal contained no reference to any clauses against moving work out
of the Racine plant, such as had been unsuccessfully proposed in 1958 and 1959_
During negotiations, the Company made certain proposals which it insisted were
necessary or the plant would close down. The union negotiators, who had heard
ultimatums of this nature on several occasions during recent years, replied that if
the Company was going to shut the plant, "there is no use negotiating." Negotia-
tions were thereupon broken off, but at the Company's instigation were renewed a
day or two later. Considerable progress was made toward reaching final agree-
ment; the Company, for example, agreed to an increase in basic wage rates and to
further increases in the next 2 years (notwithstanding its demand the preceding
March that the Union accept a 20 to 331/3 percent cut), and the Union agreed to
various company proposals, among them the Company's demand for another 3-year
contract although the Union had proposed a 1-year term.
At a late stage in the negotiations, agreement was reached on a clause dealing with
"vacation pay" in the event of a discontinuance of operations. The testimony is in
some dispute as to whether the possibility of discontinuance had been discussed fre-
quently during the negotiations or merely at the outset as noted above, and also as
to whether the impetus for this clause came from the Company or from the Union.
I regard these conflicts as immaterial, and do not resolve them. Suffice it to note
that the parties eventually agreed to the following provision
In the event the Company shall permanently discontinue production operations
at its Racine plant, then all employees who performed any work since the
July 1st preceding the shut down shall receive vacation pay based on the follow-
ing schedule: [the schedule provided for 2, 4, or 6 percent of the employee's
post-July 1 earnings, depending on his length of service.]
HARTMANN LUGGAGE COMPANY 1575
The 3-year contract was executed August 1, 1961, in an atmosphere of good feel-
ing. The Company considered it a better contract than the one that had just ex-
pired, notwithstanding the wage increases provided, because the Union had made
"some concessions that revolved around the internal operations of the plant." The
Company's chief negotiator told the union shop chairman, ". . . we have a nice
contract, nothing to worry about, everything is forgotten. We will get along real
well ...." In the same month in which this contract was executed, however, and
continuing throughout the fall of 1961 and into the winter of 1962, the Company
(without further advising the Union) continued to make plans to shut down the
Racine plant and subcontract the production work. Its ultimately successful effort
to do so is discussed in the following section of this report.
C. Respondent executes a contract with North Bay, notifies the Union, and
starts to shut down operations
In the course of otherwise abortive efforts to interest other concerns, in Wisconsin,
in Chicago, and in the East, to take over the production of Hartmann luggage, the
Company in late December or early January commenced negotiations with North
Bay Leather Goods Company (herein called North Bay), a Racine firm which pro-
duced instrument cases. These negotiations reached fruition in a contract executed
on the morning of February 9, 1962, some details of which are discussed below.
Although the Union was not formally apprised of the pending negotiations with
North Bay, rumors that the plant was to be closed were rife during late January and
early February 1962.1 On or about February 3, Union Shop Chairman Charnon
asked Company President Ira Katz about the rumors, and Katz replied that there
was nothing definite, but that various possibilities, including moving to a smaller
plant or subcontracting, were under consideration
On the morning of February 9, immediately after signing the contract with North
Bay, Ira Katz summoned the appropriate union representatives to his office and
notified them of the Company's action and decision. He advised them that the plant
would gradually shut down as work in progress was completed, that subsequent
production of certain lines of merchandise would be handled by North Bay, and
that production of other lines would be done at the Company's Tennessee plant.
He also advised them that some portion of the work might be subcontracted to a
plant in the East (a reference to pending negotiations, which proved abortive, with
a Philadelphia concern). Katz offered to answer questions at that meeting, and
indicated a readiness to meet with the Union and its attorney at some future date.
The sole question asked at the time concerned payments on an insurance plan; Katz
answered this, and the meeting (which had lasted only a few minutes) broke up as
Katz left to catch a plane.
The contract with North Bay recited that Respondent "desires to terminate its
manufacture of the products at its present Racine plant and to subcontract a portion
of its present and future luggage production to North Bay." The contract provided
for the removal of certain specified machinery, equipment, patterns, and dies from
Respondent's plant to that of North Bay "as soon as possible following the execution
of the agreement," and recited the terms under which North Bav was to rent the
articles in question. The contract also prescribed the prices which Respondent would
pay North Bay for the various items which North Bay was to produce for Respondent,
and provided that Respondent would, from time to time. issue purchase orders at
those prices and that North Bay would accept and execute such orders North
Bay agreed not to manufacture similar articles for anyone but Respondent during
the life of the contract. The contract was for an indefinite period, terminable after
9 months on 4 months' notice 2
After execution of the contract with North Bay, Respondent immediately began
to curtail its Racine operations Some employees were laid off at once, and others
were laid off as work in progress was completed. Even prior to execution of this
agreement employment dropped off; of 52 employees in the bargaining unit at the
turn of the year, only 34 were on the payroll when the contract was executed This
figure remained fairly constant for the balance of February, but dropped off rapidly
in the following month, and since April 1962 the bargaining unit has normally con-
sisted of two employees as the plant is used for storage or warehouse purposes The
machinery transferred pursuant to the contract did not comprise all the machinery
I Unless otherwise indicated, all dates hereinafter mentioned refer to 1982
2 The foregoing discussion of the contract terms does not purport to be exhaustive
Numerous details and subjects treated in the contract are not discussed here because in my
judgment they have no bearing on the issues before me.
1576 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
in Respondent's Racine plant; sufficient machinery was retained there so that Re-
spondent could have continued some production had it so desired.
D. Subsequent negotiations between the Company and the Union
On February 19, 1962, the Union wrote the Company, reciting that the Union had
been informed of the contract with North Bay "to perform work normally performed
by members of our bargaining unit" and of the Company's "plans to sub-contract or
transfer the remainder of the work" to Tennessee. The letter continued:
It is our position that this contracting is in violation of our labor agreement be-
tween our Union and your Company. We file this as a policy grievance pro-
vided for under the contract and inform the Company that we will hold it
responsible for any loss of wages that is incurred by the individual members of
our bargaining unit as a result of sub-contracting work and transferring work
out of this shop.
The letter concluded with a request for an immediate meeting to "discuss this matter
to avoid losses." Such a meeting was held on February 26, attended by Ira Katz
and Plant Superintendent Christiansen on the part of the Company, and by Union
Counsel Schwartz, various officers and members of the Union's bargaining committee,
and a representative of the Union's International.
The witnesses were in substantial agreement as to what was said at this meeting,
which lasted over an hour, and their recollections are confirmed by the notes there
taken by the Union's recording secretary, Marie Koleske. According to the testi-
mony, the greater part of the meeting was, as union counsel put it, "exploratory,"
and only at "the tail end of it" did the parties get to concrete proposals. At this
point, Ira Katz asked the Union what it wanted, and the Union made certain de-
mands or requests relating to severance pay, vacation pay, and a contract with
North Bay. Somewhat earlier in the discussion the Union had also asked about
employment possibilities at the Tennessee plant. The Company stated its position
on these matters (namely, that the employees could apply for jobs in Tennessee, that
the Company had no control over North Bay's labor policy, and that the Com-
pany could not afford any vacation or severance pay beyond that already required
by the existing contract), and the meeting then broke up after a brief discussion of
whether newspaper publicity was to be given the matter.
Although Union Counsel Schwartz characterized the meeting as "a wake," stated
that "every answer [Ira Katz] gave was short," and said that Katz "cut off" the
meeting by saying "there was nothing to talk about" so that "it was a wall," the
record is clear that Katz placed no limitation on the subjects the Union might dis-
cuss. Schwartz himself testified that he utilized the "exploratory" portion of the
meeting to get "the information I felt was sufficient to form a basis of our position,
to know where we were standing," and then made the demands listed above. Ac-
cording to Schwartz, he was "hoping at that time to go into bargaining on the shut-
ting down of the plant and obtaining for these people certain things," but nothing
in the record indicates that he or any other union representative was foreclosed from
raising any subject. Indeed, Koleske's notes indicate that some mention of can-
celing the North Bay contract may have occurred during the "exploratory" discus-
sion. Her somewhat cryptic notes read in part as follows:
IRA [Katz] : What does Union want?
BEN [Schwartz] : Want people to work.-Continued with name, with ma-
chinery-responsible-name-plant-pick choice people. Cancellation of con-
tract by North Bay-thing to die-die in piece [sic].
BEN: Hartmann luggage a contract with N. Bay & you buy from them.
Violation of labor agreement
IRA: Nothing in contract that we can't sub-contract-we say-not farm
out.-we had request from union for no farm out during negotiations--but
was turned down,-not farm out-close plant because it is not economical.-
once plant is closed. Keep alive.-1. Racine Wis. operation-should of [sic]
closed a long time ago-asked many times to take the thing over.-kept them
3 times longer than.
Koleske's notes also indicate that Katz told the Union his reasons for closing down,
including such information as the unprofitable nature of the operation, the fact
that it had suffered a loss each year, and his views as to the impact of high wages
HARTMANN LUGGAGE COMPANY 1577
and the inadequacy of the building . Also, Union Shop Chairman Charnon, who
attended the meeting , testified as follows:
Q. (By the TRIAL EXAMINER ) : Did anyone at that meeting discuss the pos-
sibility of continuing on at the Hartmann plant and having Mr . Katz change
his mind about this deal with North Bay?
A. I don 't recall . I can't recall if anything like that was brought up. Of
course, the idea was with us at all-well, all of the time, but to pinpoint when
it was brought up, I am lost.
Three days after the meeting, i .e., on Thursday , March 1 , 1962, counsel for the
Union wrote the Company, in an apparent followup of the letter of February 19,
and the conference of February 26. The letter stated:
The Union and the Company have met to discuss the grievance filed per-
taining to farming out work to North Bay Leather Goods and the transferring
of the "Tallyho" operation to the Lebanon plant . After discussing the matter
at length , you were only willing to pay 2%, 4%, and 6% of the vacation pay.
The Union is not satisfied with the disposition of the grievance , and, there-
fore, refers this matter to arbitration as provided for under our Labor Agree-
ment in Article 5 (4).
We respectfully ask that an immediate meeting be arranged to select an
Umpire. Failure so to do, we shall then ask the Federal Mediation and
Conciliation Service for a list of names of their panel who can be selected as
provided for by contract as the Umpire.
Company counsel replied on March 6 as follows:
Your letter of March 1 to Hartmann has been forwarded to me.
Since I do not know precisely what the Local is grieving or what relief it is
requesting , it is somewhat difficult for me to counsel the Company with respect
to the request in your letter. Ira has told me of his recent meeting with you
in which you requested full vacation pay, severance pay and seniority for the
employees at North Bay.
Would you please have one of the Local officials-or would you on its
behalf-advise me in writing of what action of the Company the Local is
protesting , what sections of the Agreement are claimed to be violated, and
what relief is being requested.
The matter was dropped at that point , until the filing of the charge in this proceeding
the following June 13.
E. Concluding findings
General Counsel 's complaint alleges not only that the Company subcontracted its
operations , closed its plant, and discharged its employees without bargaining with
the Union (paragraph IX of the complaint ), but also that it discharged them because
of their union activity and to avoid its bargaining obligation (paragraph VIII). I
find that the allegations of paragraph VIII are not supported by a preponderance
of the evidence . The sole evidence of antiunion motivation to which General Coun-
sel points is the testimony of Johnson , another Racine luggage manufacturer and a
former employee of the Company , who testified that both in August and in Sep-
tember 1961 , Ben Katz asked him if he would manufacture luggage for Hartmann,
and in the course of both conversations adverted to the Company 's inability "to
work with the Union ." I cannot regard this testimony as establishing the truth of
the allegations of paragraph VIII . The Company had had contracts with the Union
throughout the Company 's existence , and had recently concluded a new agreement.
The record is devoid of any suggestion of conduct independently violative of Sec-
tion 8 ( a)(1). Unquestionably , the bargaining relationship had been difficult at
times in the sense that contracts were hard to negotiate and also in the sense that
the Company had found it necessary from time to time ( and with varying degrees
of success ) to seek concessions from the Union in midterm periods, but this explana-
tion of Katz' remarks falls far short of establishing that the decision to subcontract
was the result of union animus. In short , I find that Katz' statement to Johnson
amounted to nothing more than a recognition that high labor costs were a factor
in the Company 's determination to stop its Racine production . The record is clear
that other factors were also prominent . I do not find that the fact of employee
organization, as such , played any role in the Company 's decision.
The absence of such antiunion motivation , however, does not dispose of the
allegation that the Company subcontracted its Racine operations without bargaining
with the Union . The law is well settled that unilateral action by an employer with
1578 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
respect to bargainable matters (i.e., changing terms or conditions of employment
without first negotiating in good faith with the statutory bargaining representative)
constitutes a refusal to bargain, and neither bad faith nor union animus is an element
in showing the offense N.L.R.B v. Benne Katz, etc., d/b/a Williamsburg Steel
Products Co, 369 U.S. 736. Under such cases as Town & Country Manufacturing
Company, Inc., and Town & Country Sales Company, Inc., 136 NLRB 1022, enfd.
316 F. 2d 846 (C.A. 5), the subcontracting of part of an employer's operations (as
distinguished from going out of business altogether) is such a "bargainable matter"
and unilateral action with respect thereto is accordingly violative of Section 8(a) (5)
and (1) of the Act. In this case, General Counsel by establishing that the Company
signed the agreement with North Bay before advising the Union of the pendency
of such negotiations has established at least a prima facie case of refusal to bargain.3
To meet this case, the Company presses numerous defenses, some of which need
not detain us long. The Company alleges that at the time of the subcontracting,
the Board's Town & Country decision, supra, had not yet issued, and the Boaid's
latest pronouncement on the duty to bargain over subcontracting had held that no
such duty existed. The record does not affirmatively establish that the Company
acted in reliance on the then outstanding Board cases, but even if it did, the Board
is not estopped from applying in this case what it now believes to be a correct con-
struction of the statute. For a recent discussion of this matter, see N L R.B. v.
A.P.W. Products Co, 316 F. 2d 899 (C.A. 2). See also S.E.C. v. Chenery, 332 U.S.
194, 203; Great Northern Ry. v. Sunburst Co., 287 U.S. 358, 364-365, and cases
there cited; Davis, Administrative Law Treatise (West Pub. Co., 1958), sec. 17 07
The Company contends that it had notified the Union the preceding March of the
Company's intention to subcontract if the Union did not accept a substantial wage
cut. This discussion can scarcely be said to have fulfilled the Company's obligation
to bargain over the situation 11 months later, particularly as during the interval the
parties executed a 3-year contract, providing for certain wage increases The Com-
pany also seeks to derive comfort from the Union's failure in the 1961 negotiations
to seek a provision against subcontracting such as the Union had unsuccessfully
sought in prior negotiations. But this without more would simply leave the subject
open for bargaining at the appropriate time, whereas under the Union's previous
proposals the subject would have been foreclosed during the life of the contract.
The Company further contends that the provision in the 1961 contract covering
the payments to be made in the event of subcontracting constituted a waiver by the
Union of its right to bargain over subcontracting. I find no "clear and unmistakable"
waiver of a statutory right. Cf. N.L R B. v. The Item Company, 220 F. 2d 956,
958-959 (C.A. 5), cert. denied 350 U.S. 836, and cases cited in footnote 3 thereof.
All the provision in question accomplishes is to remove one subject from bargaining
in the event of an ultimate decision to subcontract. To be sure, the clause evidences
union recognition that subcontracting might occur during the life of the contract, but
it falls far short of waiving the right to bargain over the decision to subcontract.
Finally, it is plainly immaterial that the decision to subcontract was economically
motivated and that the business had consistently lost money. Managerial decisions
are normally economically motivated and may well be sound, but the statutory viola-
tion which inheres in a failure to negotiate with the bargaining representative is not
cured by a showing that the unilateral decision was sound or was the product of
economic necessity. The Union's right to bargain over subcontracting is the same,
whether the employer's desire to do so is born of a desire to diminish losses or of
a desire to increase profits. To be sure, it may be that in the latter event some
question may also be raised as to the employer's good faith, but this as the Katz
case shows, is not an element of a "unilateral action" violation. Indeed, if bad
faith is shown, the statute may be violated even where the action is not unilateral
3 The Company, of course, had apprised the Union of the Company's general intention
to seek a subcontractor. But the duty to bargain over subcontracting arises, at least in
part, from the concept that the bargaining might produce a better solution to the situa-
tion, and such bargaining cannot be productive or even proceed on an informed basis unless
the details of the one solution (the terms of the subcontract) are known Mere notice of
a general intention to look for a subcontractor does not, therefore, discharge the employer's
duty to bargain By the same token, however, the employer cannot be expected to bargain
intelligently until he has a firm idea of the terms he will offer and to which his potential
subcontractor will agree in the instant case, the testimony establishes that those terms
were not fully set until the morning the agreement was signed. The duty to bargain on
whether to subcontract to North Bay arose at the time the Company was prepared to make
a firm offer to North Bay (or any other subcontractor) or to accept a counteroffer from
North Bay Prior to this point, bargaining would be uninformed, and hence premature ;
after execution and implementation of the subcontract "bargaining" may come too late.
HARTMANN LUGGAGE COMPANY 1579
In short, I find no merit to any of the Company's defenses directed at the point
that the Company was not obligated to bargain with the Union over the subcontract-
ing of the Racine production. But the Company also argues that it fulfilled its legal
obligations to the Union by notifying the Union immediately after signing the North
Bay contract, and by negotiating with the Union 2 weeks later, particularly in view
of what the Company terms the "executory" nature of its contract with North Bay.
In the ordinary case, notification to a union after execution of a subcontract
would not achieve compliance with the bargaining obligation. The employer may
enter into negotiations with the intended subcontractor and may legitimately desire
to keep such negotiations secret from the rest of the community. But, if a statutory
bargaining representative exists, the employer is precluded from executing a binding
subcontract, affecting the jobs of the employees, without first notifying their bar-
gaining representative and giving it an opportunity to be heard. In this case, the
opportunity was given after, not before, the execution of the agreement. I find
some force, however, in the Company's contention that its contract with North Bay
was executory, and that the Company could have kept on with its production activi-
ties in Racine without violating that contract To be sure, the intent of the parties
to the contract was that North Bay would receive purchase orders from the Com-
pany and would handle the production operations, but intent is not the critical ele-
ment, for the employer always intends to make the change about which he (if he
conforms to the statutory requirement) consults the Union. At the time of the
February 26 bargaining session, employment at the company plant was at the
same level that had prevailed at the time the North Bay contract was executed; the
record does not reveal when the first purchase orders were sent to North Bay. To
some extent, of course, the Union was confronted with a fait accompli at the meeting
of February 26: the North Bay contract had been signed; the movement of some
machinery, if not already begun, was committed; North Bay was bound not to
produce competing merchandise (quaere, whether that clause would have been
binding if Respondent had never placed any orders of its own with North Bay); the
Company had told the Union of its plans to finish work in progress and so gradually
curtail its Racine operations; and at least some layoffs had occurred or were sched-
uled On the whole, it seems fair to conclude that by the time of the meeting of
February 26, the Company was committed in its mind to effectuation of the North
Bay contract, but that if the company officials had been otherwise dissuaded from
that course, the contract would not have required them to adhere to it.
At the meeting of February 26, the Company bargained with the Union on every
matter the Union raised. The Company further set forth the considerations which
impelled it to subcontract its Racine operations. There is some hint in the record
that the Union even raised the suggestion that the Company cancel its contract with
North Bay, and to the extent, if any, that this was raised, the Company did not re-
fuse to discuss it. The primary union demands at this conference, however, con-
•cerned the effects of the subcontract, and not its abrogation. Cf. N.L.R.B. v. Rapid
Bindery, Inc., & Frontier Bindery Corp., 293 F. 2d 170, 176 (C.A. 2). Even the
Union's subsequent suggestion of arbitration was not accompanied by any conten-
tion that the Union sought to overturn the decision to subcontract.4
In view of the somewhat executory nature of the contract with North Bay, and in
view of the full opportunity to bargain which the Company afforded the Union on
February 26, I am of the view that the Company effectively cured the statutory
violation inherent in its unilateral action on February 9. Stated otherwise, the
Union's failure to ask that the North Bay contract be rescinded or not effectuated,
and the Union's concentration on other aspects of the situation, amounted -to an
acquiescence in the Company's determination, and removed the unilateral character
with which that determination had been tainted. The executory nature of the North
Bay contract serves to distinguish this case from Adams Dairy, Inc., 137 NLRB
815, where the Board held that the employer could not "retroactively remedy its
41 reject the Company's contention that the existence of arbitration provisions in the
contract furnishes an independent ground for dismissing the complaint. Whatever inroads
may have been made on the simple principle set forth by Congress that the Board's power
to prevent unfair labor practices "shall not be affected by any other means of adjustment
or prevention that has been or may be established by agreement, law, or otherwise," this
power is properly invoked where no arbitration award has been made and what is involved
is essentially construction of the statute rather than of a contract A mere claim that
contract construction is involved cannot oust the Board of jurisdiction any more than a
bare claim of constitutional issue automatically requires the convening of a three-judge
district court. Assuming, arguendo, that the matter could have been arbitrated under the
contract, Section 10(a) of the Act makes it clear that the Union could choose to go to
the Board.
1580 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
default by pointing out that in its meeting with the employees ... when the sub-
contracting operation and the consequent discharge of the driver-salesmen was.
already a fait accompli, neither the Union nor the employees sought to bargain.
concerning that action ." I conclude , in short , that the Company which violated
the Act on February 9 effectively cured that violation on February 26, and that it
would not effectuate the policies of the Act to issue any remedial order .5 Cf. Carl'
Rochet and Charles Rund, partners, doing business as The Renton News Record,.
et al., 136 NLRB 1294 , 1297-1298 ; Motoresearch Company and Kems Corporation,.
138 NLRB 1490.
CONCLUSIONS OF LAW
1. Respondent is engaged in activities affecting commerce within the meaning of
Section 2(6) and (7) of the Act.
2. Respondent has engaged in no unfair labor practices which warrant the issuance
of a remedial order.
RECOMMENDED ORDER
The complaint herein should be, and hereby is, dismissed.
5 As Respondent has only two employees in its Racine plant, a further violation of simi-
lar nature is not to be anticipated , and a cease-and-desist order is therefore not warranted'.
Local 5, United Association of Journeymen and Apprentices of
the Plumbing and Pipe Fitting Industry of the United States
and Canada, AFL-CIO and Arthur Venneri Company. Case
No. S-CD-42. February 7, 196.E
DECISION AND DETERMINATION OF DISPUTE
This is a proceeding under Section 10(k) of the Act following a
charge filed on May 6, 1960, by Arthur Venneri Company, herein
called Venneri or the General Contractor, alleging a violation of Sec
tion 8(b) (4) (D) by Local 5, United Association of Journeymen and
Apprentices of the Plumbing and Pipe Fitting Industry of the
United States and Canada, AFL-CIO, herein called the Respondent,,
Local 5, or the Plumbers. A hearing was held before Hearing Officer
Edward J. Gutman on August 29, 1960, at Washington, D.C. All
parties participated in the hearing and were afforded full opportunity
to be heard, to examine and cross-examine witnesses, and to adduce
evidence bearing on the issues.
On February 19, 1962, the Board issued an Order reopening the
record and remanding the proceeding for further hearing, for pur-
poses of receiving evidence to enable it to make a determination of
dispute consistent with the principles contained in the decision of
the United States Supreme Court in N.L.R.B. v. Radio d Television
Broadcast Engineers Union, Local 1212, International Brotherhood"
of Electrical Workers, AFL-CIO (Columbia Broadcasting System).'
A further hearing upon due notice to all parties was held before
Hearing Officer David Sachs on various dates between September 24,
1962, and March 29, 1963. All parties who appeared were afforded
1364 U.S. 573.
145 NLRB No. 157.