Opinions of the United 1994 Decisions States Court of Appeals for the Third Circuit

9-27-1994

Furniture Renters of Amer. v. NLRB Precedential or Non-Precedential:

Docket 93-3336

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Recommended Citation "Furniture Renters of Amer. v. NLRB" (1994). 1994 Decisions. Paper 143. http://digitalcommons.law.villanova.edu/thirdcircuit_1994/143

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Nos. 93-3336, 93-3395

FURNITURE RENTORS OF AMERICA, INC. Petitioner/Cross-Respondent v. NATIONAL LABOR RELATIONS BOARD, Respondent/Cross-Petitioner

ON APPEAL FROM THE NATIONAL LABOR RELATIONS BOARD (5--CA--20933, 21021, 21038)

Argued: February 28, 1994 Before: STAPLETON, and SCIRICA, Circuit Judges and SMITH, District Judge*

(Opinion Filed: September 27, 1994)

Larry J. Rappoport, Esquire (Argued) Stevens & Lee Four Glenhardie Corporate Center P. O. Box 236 Wayne, Pennsylvania l9087-0236

Attorney for Petitioner/Cross-Respondent

David A. Fleischer, Senior Attorney (Argued) Charles P. Donnelly, Esquire Jerry M. Hunter, Esquire Yvonne T. Dixon, Esquire Nicholas E. Karatino, Esquire Aileen A. Armstrong, Esquire National Labor Relations Board Washington, D. C. 20570

Attorneys for Respondent/Cross-Petitioner * Honorable D. Brooks Smith, United States District Judge for the Western District of Pennsylvania, sitting by designation.

OPINION OF THE COURT

SMITH, District J.

Petitioner Furniture Rentors of America, Inc. ("FRA")

appeals from a National Labor Relations Board ("NLRB" or "the

Board") order holding that it violated Sections 8(a)(1) and (5)

of the National Labor Relations Act,

(a)(1) and

(5) ("NLRA" or "the Act") by withdrawing recognition from its

union without having reasonable grounds for doubting its majority

status, and by failing to notify and bargain with the union

before subcontracting out delivery services. Cross-petitioner

NLRB seeks enforcement of its order. We will enforce the Board's

order only in part.

I. Background

Withdrawal of Recognition

Furniture Rentors of America, Inc. ("FRA"), a Delaware

corporation, is a regional renter of residential and office

furniture in Virginia, Maryland, and Delaware. The company

negotiated its initial collective bargaining agreement ("CBA")

with International Brotherhood of Teamsters Union Local Nos. 639

and 730 ("Union") on November 1, 1986. As drafted, the CBA was to expire on October 31, 1989; however, on October 21, 1987, a

side-letter agreement was reached which increased wages and

extended the CBA until December 31, 1989, and provided that the

contract could be reopened "only to discuss wages."

In October 1988, FRA leased a warehouse in Jessup,

Maryland, implementing its decision to move its center of

operations from Alexandria, Virginia to a point between

Baltimore, Maryland and Washington, D.C., more centrally located

within its market. FRA continued to operate from its Alexandria

warehouse until late 1989 because its lease there did not expire

until the summer of 1990 and its Jessup facility was being

renovated. Due to the longer commute from northern Virginia to

Jessup, Maryland, FRA lost several Washington area employees and

hired new ones from Baltimore, including Calvin Wilson, who was

hired as a new warehouse manager.

FRA and the Union began negotiating their next CBA in

the autumn of 1989. Petitioner contends that by that time, fewer

of FRA's employees than ever before were Union members, as

evidenced by dues check-off records. On October 6, 1989, a

decertification petition was filed by Frederick Brown, one of the

new employees who had been hired by warehouse manager Wilson.

Prior to the filing of the petition, Brown had posted a notice in

the Alexandria warehouse which asked employees to sign "for the

Union" or "not for the Union." Only six employees signed "for

the Union." There were also discussions between warehouse

manager Wilson and other employees regarding their lack of

interest in Union representation and discontent over having to pay Union dues and initiation fees. At a December 7, 1989

bargaining session, FRA Vice-President James Senker ("Senker")

questioned the Union's majority status. The Union

representatives responded that they did enjoy majority support.

On January 17, 1990, Senker sent a letter to the Union

withdrawing recognition based on his doubt that the Union

represented a majority of FRA employees. The Union failed to

respond. A January 20, 1990 bargaining session was cancelled,

and the parties did not meet again.

Decision to Subcontract Delivery Services

Senker knew first-hand that FRA had experienced serious

problems with employee theft and carelessness. In May and June

of 1989, FRA investigated the theft of furniture by Union members

at a loss to the company of $10,000. The investigation led to

arrests and resignations of employees. Delivery service also was

the cause of numerous customer complaints, and FRA experienced

problems with furniture packing, delivery of damaged furniture,

insurance claims and late deliveries. FRA delivery teams

averaged three deliveries per day, compared to the industry

standard of four or five deliveries per day. In August 1989, FRA

fired three employees who raided a customer's refrigerator while

relaxing in his apartment during what was supposed to be a

routine delivery.

In mid-February 1990, Senker accepted a proposal by

Sullivan Services, a contractor who provides trucking services,

to share delivery services on a trial basis. For approximately

one week, Sullivan Services made deliveries using a single crew and its own truck. Senker gave the Sullivan Services crew the

hardest jobs, monitored their performance, spoke daily with

Sullivan Services' President, Kent Sullivan, and visited job

sites in order to talk with customers about the Sullivan Services

crew's work. Senker did not retain Sullivan Services beyond that

trial period.

On February 27, 1990, Senker received a tip that

several FRA employees planned to steal furniture early the next

morning. With the assistance of the Howard County (Maryland)

Police, Senker apprehended a driver, a helper and a supervisor

attempting to load furniture onto a delivery truck. The next

day, without notifying the Union, Senker retained Sullivan

Services to perform FRA's delivery work on an exclusive basis.

FRA then terminated four drivers and three helpers, but continued

to employ its warehousemen, several of whom were Union

supporters. By using Sullivan Services to perform delivery

services, FRA's delivery costs increased from $160 to $210 per

day.

Union member Alvin Jones, Jr. and the Union filed

charges against FRA on March 2, 1990 and March 12, 1990

respectively. On March 28, 1991, the NLRB issued Complaints

against FRA in 5--CA--20933 and 5--CA--21038. These Complaints,

which were subsequently consolidated for hearing, alleged that

FRA committed unfair labor practices when it posted a petition

requesting that its employees indicate their union sympathies,

unlawfully withdrew recognition from the Union, and subcontracted its delivery work to Sullivan Services without first notifying

and bargaining with the Union.

An Administrative Law Judge ("ALJ") held a hearing from

October 1-3, 1991. On May 13, 1992, the ALJ issued a decision

that FRA had committed unfair labor practices in violation of

Section 8(a)(1) and (5) of the NLRA when it interrogated

employees about their union sympathies and withdrew recognition

of the Union on January 17, 1990. The ALJ, however, relying upon

the NLRB's decision in Dubuque Packing Company, Inc.,

(1991), concluded that FRA's decision to subcontract its

delivery work was not a mandatory subject of collective

bargaining and that therefore FRA did not violate Section 8(a)(5)

of the Act when it decided to subcontract without first

bargaining with the Union. The ALJ's decision with respect to

mandatory bargaining particularly hinged upon his finding that

FRA's decision to subcontract delivery services "did not turn on

labor costs in any way." App. 684

On May 28, 1993, the Board issued a Decision and Order

reversing the third part of the ALJ's decision, holding that FRA

violated Sections 8(a)(1) and (5) of the Act by failing to

provide notice and to bargain with the Union concerning its

decisions to subcontract delivery work and to lay off seven

employees as a result of that decision. The Board also held that

FRA violated Section 8(a)(1) through statements made by warehouse

manager Wilson to new employee Alvin Jones, Jr. threatening to

fire Wilson because of his association with the Union. FRA petitioned for review of the Board's order and the Board cross-

petitioned for enforcement of its order.

II. Discussion

Withdrawal of Recognition

FRA argues that its proper withdrawal of recognition

from the Union ended any duty to bargain over its decision to

subcontract delivery services. Whether petitioner properly

withdrew recognition from the Union turns on the factual question

whether FRA had reasonable grounds for doubting the Union's

continued majority status.1

FRA avers that its move from Alexandria, Virginia to

Jessup, Maryland caused considerable employee turnover, and by

January 17, 1990, the date Senker withdrew recognition, only six

of 17 employees, all transferees, were members of the Union. No

newly hired employee had executed a dues checkoff or expressed an

interest in union representation. Therefore, FRA argues, the

composition and attitude of its workforce had changed, supporting

Senker's good faith doubt about continued majority status.

Employee turnover alone, however, is not sufficient to establish

good-faith doubt, NLRB v. Oil Capital Elec., Inc.,

(10th Cir. 1993), for without objective evidence of

1 After one year beyond the date the NLRB certifies a union as the collective-bargaining representative of employees, the presumption of the union's continued majority status becomes rebuttable; the employer may withdraw recognition if it can show that the union has lost majority support or that it has a good faith, reasonable doubt of the union's continued majority status. NLRB v. Wallkill Valley Gen. Hosp.,

(3d Cir.l989). dissatisfaction, "there is nothing to rebut the presumption that

the [company's] newly hired employees supported the Union in the

same ratio as the employees they replaced." Spillman Co. and

Sheet Metal Workers' Int'l Assoc., Local Union No. 24, AFL-CIO,

. See also NLRB v. W.A.D. Rentals Ltd.,

(2d Cir. 1990)(500 percent employee turnover did not

overcome presumption of majority employee support for union where

employer was found to be "stalling" to avoid bargaining with the

union). Therefore, petitioner must adduce evidence of

dissatisfaction with Union representation among its employees.

Petitioner's evidence of FRA employees' dissatisfaction

with Union representation consists of the low number of employees

who executed the dues checkoff and the petition signed by a

majority of employees stating that they were "not for the Union."

Instantly, only six of 17 or 20-262 employees had executed dues

checkoffs at the time petitioner withdrew recognition. A high

number of resignations or a low number of dues checkoff

authorizations will not without more justify withdrawal of

recognition, although they may be considered when assessing

majority support for a union. Bickerstaff Clay Prods. Co. v.

NLRB,

(11th Cir. 1989), cert. denied

(1989). As this court has said, "the issue is 'not how many

employees belong to the union or paid dues but rather whether the

2 Petitioner's brief is not consistent with respect to the number of employees working for FRA on January l7, l990. Compare Petitioner's Brief at 7 (20-26 employees) with Petitioner's Brief at 36 (l7 employees). majority desired union representation for purposes of collective

bargaining.'" NLRB v. Walkill Valley General Hosp.,

(quoting Retired Persons Pharmacy v. NLRB,

(2d Cir. 1975)). As the ALJ noted, the fact that less than a

majority of employees have dues checked off does not ipso facto

indicate opposition to union representation. See Colonna's

Shipyard,

, 139 (1989). In order to overcome the

presumption of majority union support, the employer must produce

affirmative evidence of dissatisfaction sufficient to ground a

good faith doubt of continued majority status.

Substantial evidence supports the Board's determination

that FRA's petition was tainted because it was posted by FRA,

albeit indirectly, rather than spontaneously by the employees

themselves. An employer may only conduct polls to determine

whether a union's majority status still exists if it "possesses

substantial, objective evidence to establish that it reasonably

doubts the union's majority status before conducting the poll."

Hajoca Corp. v. NLRB,

(3d Cir. 1989)(emphasis

added). An employer may not use its petition/poll as evidence of

its good faith doubt, because in order not to engage in unfair

labor practices, it must have had such doubt supported by

independent evidence before posting the petition. Cf. NLRB v. Laverdiere's Enterprises,

, 1051 (1st Cir.

1991)(employee contact with employer regarding union

representation lessens finding of taint).

Management Rights Clause The employer argues that the original CBA contained a

broad management rights clause giving FRA the absolute right to

subcontract work at any time until December 31, 1989, the date of

contract expiration. Furthermore, FRA avers, when the CBA was

reopened in October 1987, the parties to the contract agreed that

renegotiations on December 31, 1989 would be limited to the

discussion of wages only, and that all other contract terms were

to continue beyond the expiration date. Therefore, petitioner

concludes, FRA's contractual right to subcontract continued

beyond December 31, 1989, the Union having waived its right to

bargain over subcontracting.

We conclude that when the CBA was reopened in October

1987, the Union did not waive its right to bargain after December

3l, l989 over every contract term except wages. The 1987

reopener language states in pertinent part that, "The contract

shall ... remain in effect through December 31, 1989, but the

parties will agree to meet to reopen the contract to discuss only

wages." This language can most sensibly be read to mean that

prior to the expiration of the contract on December 31, 1989,

only wages could be changed, but when the contract expired, all

terms were subject to bargaining. Although it is possible to

derive FRA's construction from the reopener langugage, we decline

to make the inference, for waivers of statutorily protected

rights must be clearly and unmistakably articulated.

Metropolitan Edison Co. v. NLRB,

(1983).

Without such a clear waiver, the management rights clause does not survive the expiration of the CBA. Control Services, Inc.,

, 484 (1991), enforced

(1992).

Statutory Duty to Bargain

Finally, FRA argues that the Board employed the wrong

legal standard and thus erred when it determined that FRA's

decision to subcontract its delivery work was a mandatory subject

of bargaining. Sections 8(a)(5) and 8(d) of the Act,

(a)(5) and 158(d), require employers to bargain in good

faith with employee representatives about, inter alia, "wages,

hours, and other terms and conditions of employement." Relying

on its recent decision in Torrington Industries,

(1992), the Board held that FRA's decision to subcontract

delivery work fell within the range of decisions that require

bargaining.

Subcontracting may be a mandatory subject of collective

bargaining under the Act, but it is not necessarily so. In

Fibreboard Paper Prods. Corp. v. NLRB,

(1964), the

Court determined that an employer violated Section 8(a)(5) of the

Act when it contracted out maintenance work in order to reduce

labor costs without first bargaining with its maintenance

workers' union. The Court noted that the employer subcontracted

its maintenance work in order to reduce costs by "reducing the

work force, decreasing fringe benefits, and eliminating overtime

payments," and stressed that these factors were customarily

regarded within the industry as "peculiarly suitable for

resolution within the collective bargaining framework."

. The Supreme Court further defined the requirements for

mandatory bargaining over subcontracting when it held, in First

National Maintenance Corp. v. NLRB,

(1981), that an

employer is not obligated to bargain with the union before

closing a part of its business and discharging the employees who

worked in that part of the operation. In First National, the

Court identified three types of management decisions: (1) those

with "only an indirect and attenuated impact on the employment

relationship"; (2) those that "are almost exclusively 'an aspect

of the relationship' between employer and employee," such as "the

order of succession of layoffs and recalls ... [and] work rules";

and (3) those "that [have] a direct impact on employment ... but

have as [their] focus only the economic profitability of" non-

employment-related concerns.

. Because the First

National employer's decision to terminate one part of its

business affected employment but was motivated by considerations

unrelated to the employment relationship, it fell into the third

category of management decisions. Whether decisions within that

category require mandatory collective bargaining, the Court

reasoned, depends upon the extent to which "the subject proposed

for discussion is amenable to resolution through the bargaining

process."

. Accordingly, bargaining over "management

decisions that have a substantial impact on the continued

availability of employment should be required only if the

benefit, for labor-management relations and the collective

bargaining-process, outweighs the burden placed on the conduct of

the business."

. The First National balancing test was not conceptually

novel, and the Court noted that the Fibreboard Court performed

the same analysis "implicitly."

The Court in First

National, reached the opposite result from Fibreboard because the

employer's decision to close part of its business was not driven

by labor costs. The Court concluded that because the union had

no control over the factors motivating the company's decision to

subcontract, collective bargaining would have been futile and was

therefore not required.

In Otis Elevator Co.,

(1984), and Dubuque

Packing Co.,

(1991), the Board followed the teaching

of Fibreboard and First National by fashioning standards for

mandatory bargaining that focused generally on the amenability of

the disputed issue to resolution through the collective

bargaining process, and specifically on the role of labor costs

in the employer's decision. See Dubuque Packing Co., 303 NLRB at

391; Otis Elevator Co., 269 NLRB at 892, 897 (Dennis,

concurring). The Dubuque decision in particular contained a

thoughtful discussion of the bargaining obligation imposed by the

Act that accurately reflected the framework established by

Fibreboard and First National, see United Food and Commercial Workers Int'l Union, Local No. 150-A v. NLRB,

, 32 (D.C.

Cir. 1993)(NLRB's finding that the Dubuque test "accords with

precedent is fully defensible"), but its holding was expressly

limited to decisions to relocate unit work. Dubuque Packing Co.,

303 NLRB at 390 n.2. In the matter sub judice, the ALJ applied the Dubuque

burden-shifting test,3 concluding that because labor costs did

not prompt FRA to subcontract, its decision was not a subject of

mandatory bargaining. App. 684-86. Within days after the ALJ

issued his opinion, however, the Board issued its decision in

Torrington Industries,

(1992), which abandoned the

flexible approach of Dubuque for a more rigid standard in

subcontracting cases. When the ALJ's decision was appealed to

the Board, therefore, the panel applied the more recent

Torrington standard.

In Torrington, the employer unilaterally replaced two

union truck drivers with non-bargaining unit drivers and

independent contractor haulers. The Board rejected the

employer's argument that its decision to replace the union

truckers was entrepreneurial and did not turn on labor costs,

holding that Dubuque's burden-shifting analysis is limited to

relocation decisions and does not apply to "other types of

management decisions that affect employees." Torrington, 307

NLRB at 810. Finding that "all that is involved is the

3 Under the test announced by the Board in Dubuque, the General Counsel must initially establish a prima facie case for mandatory bargaining by showing that the employer's decision involved a transfer of unit work unaccompanied by a basic change in the nature of its operation. Then, the burden of production shifts to the employer, who can rebut the prima facie case by showing that its decision involved a change in the direction of the business, or by showing "(l) that labor costs (direct and/or indirect) were not a factor in the decision or (2) that even if labor costs were a factor in the decision, the union could not have offered labor cost concessions that could have changed the employer's decision... ." Dubuque, 303 NLRB at 39l. substitution of one group of workers for another to perform the

same work at the same plant under the ultimate control of the

same employer," id. (quoting Fibreboard), the Board held that the

employer had an obligation to bargain. In so doing, the Board

established the following test for subcontracting cases: [W]hen the record shows that essentially [Fibreboard] subcontracting is involved, there is no need to apply any further tests in order to determine whether the decision is subject to the statutory duty to bargain. The Supreme Court has already determined that it is....

Id. (citation omitted). The Torrington Board did not reject

outright the employer's argument that Fibreboard could be

distinguished because labor costs were not a factor in its

decision; rather, it chose not to reach that issue, "because the

[employer's] reasons had nothing to do with a change in the

'scope and direction' of its business. Those reasons, thus, were

not matters of core entrepreneurial concern and outside the scope

of bargaining." Id. (citation omitted). Unwilling to consider

the specific facts of the case, the Board simply determined that

FRA had engaged in "Fibreboard subcontracting," triggering the

mandatory duty to bargain.

Inflexibly applied, the holding in Torrington is at

odds with the principles of Fibreboard and First National. Those

cases discussed the statutory duty to bargain as a means of

obtaining, when appropriate, the benefits presumed to attend the

collective bargaining process, see Fibreboard,

(bargaining over particular economies potentially derived from subcontracting deemed "peculiarly suitable for resolution within

the collective bargaining framework"); First National,

(relevant question is "whether requiring bargaining over

this sort of decision will advance the neutral purposes of the

Act"), not as an end in itself.

The Board's decision in Torrington to limit the scope

of Dubuque to relocations of unit work is essentially a policy

choice "subject to limited judicial review." NLRB v. Local Union

No. 103, Int'l Ass'n of Bridge, Structural & Ornamental Iron

Workers,

(1978)(citations omitted). However,

the Board's virtual per se rule that subcontracting decisions

must be the subject of bargaining is fundamentally an

interpretation and application of Supreme Court precedent, and

while it must be upheld if reasonably defensible, we may not give

it "rubber stamp" approval if it is "inconsistent with a

statutory mandate or ... frustrate[s] the congressional policy

underlying [the NLRA]." Bureau of Alcohol, Tobacco & Firearms v.

FLRA,

(1983)(quoting NLRB v. Brown,

(1965)).

Under the Torrington standard, if an employer

subcontracts some work to nonunion workers without changing the

scope and direction of its enterprise, and the nonunion workers

perform essentially the same work as the bargaining unit workers

did, the Board labels the employer's action "Fibreboard

subcontracting" and requires bargaining. But the Torrington

manner of examining the decision to subcontract only to see

whether it is analogous to Fibreboard's general factual framework is simplistic and, as this case demonstrates, potentially ham-

handed.4 The focus in determining whether a particular

management decision requires bargaining under Section 8(a)(5) is

not the employer's decision to subcontract, but whether

"requiring bargaining over this sort of decision will advance the

neutral purposes of the Act." First National,

.

In order to determine that, it is necessary to look behind the

subcontracting decision itself to the reasons motivating the

decision. If the employer's decision was prompted by factors

that are within the union's control and therefore "suitable for

resolution within the collective bargaining framework,"

Fibreboard,

, then bargaining is mandatory. As

the Board recognized in Dubuque, 303 NLRB at 392 n. 14, it is

therefore imperative to "evaluate the factors which actually

motivated the employer's" decision.

Fibreboard itself counsels against strict

categorization according to the form of subcontracting. The

4 Although conceptually simple, the Torrington approach is not well-fitted to the statutory duty to bargain, which, after all, is not simply a theoretical catchphrase, but implies real give and take negotiations. If during a bargaining session an employer were to broach the subject of contracting work out (whether or not in a manner similar to what the Board calls "Fibreboard subcontracting"), the negotiations would necessarily turn to the employer's reasons for wanting to contract the work out. The contracting out decision itself, regardless of what form it might take, is just a response to some underlying cost or other challenge that makes doing the work with bargaining unit employees relatively less attractive. Therefore, focusing on the form that the employer's decision takes (does it fit into the Fibreboard piegonhole?) is unhelpful, for the form of subcontracting bears little on the bargaining process encouraged by the Act. Fibreboard Court expressly noted that the employer's decision to

subcontract turned on its desire to lower "the high cost of its

maintenance operation," which, independent contractors had

promised, could be reduced by eliminating employees and benefits.

Fibreboard,

. In determining whether a

subcontracting case is legally similar to Fibreboard, it is

important to consider not just the employer's decision to

contract work out, and how that decision affects its operations,

but whether, as in Fibreboard, the employer's decision was driven

by labor costs or some other difficulty that can be overcome

through collective bargaining. Those courts that have held an

employer's decision to subcontract unit work was a mandatory

subject of collective bargaining under Fibreboard have invariably

made this finding. See e.g., Olivetti Office U.S.A., Inc. v.

NLRB,

, 186 (2d Cir. 1991), cert. denied

,

(1991)(employer transferred work in order to

"reduce manufacturing costs by $2.6 million, $2 million of which

would be directly attributable to cheaper labor.... Obviously,

labor costs were the driving force behind the Company's action");

NLRB v. Plymouth Stamping Div., Eltec Corp.,

(6th Cir. 1989), cert. denied

(1989)(decision to

subcontract motivated by failure to successfully negotiate

economic concessions); W.W. Grainger, Inc. v. NLRB,

(7th Cir. 1988)(decision to subcontract delivery services

motivated by the desire to reduce the cost of "branch time," or

time drivers' spent at depots rather than in truck, and thus was

a "direct labor cost"); NLRB v. Westinghouse Broadcasting and Cable,

(1st Cir. 1988)(decision to subcontract

prompted by a directive from employer's parent company to reduce

its "body count" by eleven persons).

In this case, the ALJ found that, From the time [FRA Vice-President] James Senker started with [petitioner] he noted that [petitioner] had a serious employee theft problem. Indeed two employees, Payton Finch and Terry Walls, were arrested in mid- 1989 for larceny from [petitioner]. In addition, service was, in Senker's opinion, horrible and Senker demonstrated part of the basis for this conclusion by producing correspondence from three customers, TravCorps, NV Property and North Park Ave, complaining about Respondent's services. In August 1989 three employees were fired for misconduct during a delivery, i.e., they "hung out" in the customer's residence and ate food which they took from the customer's refrigerator. Senker also observed that because of careless handling of furniture and improper padding of furniture by [petitioner's] delivery crew employees that too much of the furniture [petitioner] rented was being damaged. It was also Senker's opinion that [petitioner's] delivery crews were unreasonably slow in doing their job since they were making an average of three and one-half stops per day rather than four or five which was the industry standard.

The straw that broke the camel's back and motivated Senker to subcontract all the delivery work began in late February 1990 when Senker received information from a confidential informant that some of his employees were planning to steal some furniture....

The cost of delivery services by Sullivan Services was more expensive than the cost to [petitioner] of doing the delivery work with its own employees, i.e., $160 per day for one of [petitioner's] crews versus $210 per day for a Sullivan Services Crew.... Labor costs were not a factor in the subcontracting decision. The decision was made because of [FRA Vice-President] Senker's dissatisfaction with the delivery crews, e.g., lower than expected productivity, unacceptable damage to furniture, complaints by customers, and thievery.

App. 685-86. The Board purported to leave these findings

unchanged, App. 691, n.1, but stated that because all of

petitioner's stated reasons for subcontracting delivery services

"involved employee conduct, an issue which would be of concern to

the Union as well as to [petitioner] and an issue over which the

Union was in a strong position to take action," App. 692,

petitioner's decision to subcontract delivery services was

subject to mandatory bargaining. The ALJ's phrase

"lower than expected productivity," standing alone, rings of

labor costs, a subject suitable for resolution through collective

bargaining. However, the ALJ's decision read as a whole

indicates that Senker's principal reason for turning to Sullivan

Services was his exasperation over the irresponsibility and

dishonesty of some of his delivery employees, not labor costs as

traditionally understood. Petitioner argues that labor costs

could not possibly have been the basis of its decision since it

paid fifty dollars per day more to contract out its delivery

services than it paid to employ its own delivery crews. The

Board responds by characterizing even "employee work habits and

conduct" as "labor costs in the broad sense of the term" because

they "affect the employer's costs and thus the profitability of

the business." NLRB Brief at 38-39. Anything employees do, or do not do, that ultimately

bears on their employers' economic condition may be designated a

"labor cost" in some broad sense, but there is no reason to so

expand the term beyond its ordinary meaning as used in Fibreboard

and First National, which contemplates subjects such as wages,

fringe benefits, overtime payments, size of workforce and

production goals. As the United States Court of Appeals for the

Fourth Circuit recognized in Arrow Automotive Indus., Inc. v.

NLRB,

(4th Cir. 1988), employers may make business

decisions based on general "economic reasons," which "are not

reasons distinct and apart from a desire to decrease labor

costs," but that does not mean that labor costs are somehow

implicated by every employer's decision intended to improve the

business's bottom line. Id. at 228.

Similarly, that an employer's decision is based on

factors "involv[ing] employee conduct" does not necessarily imply

that labor costs or other concerns amenable to resolution through

collective bargaining are central to the decision. The factors

that principally motivated FRA Vice-President Senker to contract

out delivery services were, as found by the ALJ and as supported

by the record, FRA's continuing problems with delivery workers'

carelessness, misconduct, untrustworthiness and thievery. The

Board suggests that "education," or the implementation of "an

effective anti-theft program" would serve the same purpose as the

wage and benefit concessions discussed in Fibreboard and First National. We do not read Fibreboard and First National as

requiring employers to automatically bargain with employee representatives over the inviolability of their own property,

without regard to the benefit likely to be obtained from that

process. Nor are we able to perceive any likelihood of benefit

to be derived from subjecting the problem of employee thievery to

collective bargaining.

Our purpose in making these observations is not to

substitute our judgment for that of the Board's on the possible

benefits to be derived from collective bargaining in a situation

like the one in this case. We intend only to convey our concern

that the Board has not exercised the judgment that Fibreboard and

First National require of it. We believe the Board needs to

acknowledge that FRA's decision to subcontract its delivery work

was primarily based on factors arguably not as amenable to

collective bargaining as direct labor costs. The Board then

needs to make a judgment about the likelihood and degree of

benefit, if any, to be derived from collective bargaining in a

situation of this kind and to weigh that benefit against the

employer's considerable interest in taking prompt action.

III. Conclusion

We will grant the Board's petition to enforce with

respect to those provisions of its order designed to remedy the

unfair labor practices related to FRA's withdrawal of

recognition. We will deny its petition in all other respects.

We will grant FRA's petition for review and remand for further

proceedings on the charge that FRA violated sections 8(a)(1) and

(5) of the Act by failing to provide notice and bargain with the Union concerning its decisions to subcontract its delivery work

and lay off employees.