Earle Equipment Co.

National Labor Relations Board - Board Decisions

May 21, 1984

270 N.L.R.B. 827 (N.L.R.B. 1984)

EARLE EQUIPMENT CO.
Earle Equipment Company and Local 324, Interna-
tional Union of Operating Engineers, AFL-
CIO. Case 7-CA-22538
21 May 1984
ORDER DENYING MOTION
BY CHAIRMAN DOTSON AND MEMBERS
ZIMMERMAN, HUNTER, AND DENNIS
Upon a charge filed by the Union 26 August
1983 the General Counsel of the National Labor
Relations Board issued a complaint, backpay speci-
fication, and notice of hearing 30 September 1983
against the Company, the Respondent, alleging that
it has violated Section 8(a)(5) and (1) of the Na-
tional Labor Relations Act and that it owes speci-
fied amounts of backpay. Although properly
served copies of the charge and complaint and
backpay specification, the Company has failed to
file an answer to the complaint or backpay specifi-
cation. By letter dated 9 December 1983 the
Acting Regional Attorney informed the Respond-
ent that unless it filed an answer to the complaint
and backpay specification by 22 December 1983 or
otherwise obtained an extension of time to file an
answer, the General Counsel would file a Motion
for Default Judgment. By letter dated 19 Decem-
ber 1983 Daniel N. Pevos, an attorney for the
Company, informed the Acting Regional Attorney
that the Respondent was a debtor in Chapter 11
proceedings, No. 82-00489-BE, and did not intend
to defend the pending complaint.
On 30 December 1983 the General Counsel filed
a Motion for Default Judgment. On 5 January 1984
the Board issued an order transferring the proceed-
ing to the Board and a Notice to Show Cause why
the motion should not be granted. The Company
filed no response.
Ruling on Motion for Default Judgment
The complaint alleges that 19 August 1983 the
Company violated Section 8(a)(5) and (1) of the
Act by bypassing the Union by informing unit em-
ployees of a 10-percent pay reduction and the
elimination of all fringe benefits except hospitaliza-
tion insurance coverage. Further, the complaint al-
leges that the Company, on the same date, violated
Section 8(a)(5) and (1) by repudiating its collective-
bargaining agreement with the Union by laying off
employee Henry Roggenbeck and hiring a new em-
ployee at a lower pay rate than that specified in the
contract to avoid the contract's economic provi-
sions.
On 22 February 1984 the United States Supreme
Court decided NLRB v. Bildisco & Bildisco, 115
LRRM 2805, 100 LC ¶ 10,771 (1984). The Court
270 NLRB No. 121
held that the Bankruptcy Court should permit re-
jection of a collective-bargaining agreement if the
debtor in Chapter 11 proceedings can show that
the agreement burdens the estate and that the equi-
ties balance in favor of rejection. The Court also
held that a debtor-in-possession does not commit an
unfair labor practice when it unilaterally rejects or
modifies a collective-bargaining agreement before
the Bankruptcy Court approves formal rejection.
In connection with this second holding, the Court
stated, in pertinent part:
[T]he Board is precluded from, in effect, en-
forcing the contract terms of the collective-
bargaining agreement by filing unfair labor
practices against the debtor-in-possession for
violating § 8(d) of the NLRA. Though the
Board's action is nominally one to enforce §
8(d) of the Act, the practical effect of the en-
forcement action would be to require adher-
ence to the terms of the collective-bargaining
agreement. But the filing of the petition in
bankruptcy means that the collective-bargain-
ing agreement is no longer immediately en-
forceable, and may never be enforceable again.
Consequently, Board enforcement of a claimed
violation of § 8(d) under these circumstances
would run directly counter to the express pro-
visions of the Bankruptcy Code and to the
Code's overall effort to give a debtor-in-pos-
session some flexibility and breathing space.
See H.R. Rep. No. 95-595, p. 340 (1977). We
conclude that from the filing of a petition in
bankruptcy until formal acceptance, the collec-
tive-bargaining agreement is not an enforcea-
ble contract within the meaning of NLRA §
8(d). Cf. Allied Chemical Workers, supra, at
187; Dowd Box Co. v. Courtney, 368 U.S. 502,
510-513 (1962). [Id. at 2815.]
Although the Respondent failed to file an answer
to the complaint and backpay specification, it
stated in its 19 December 1983 letter to the Region
that it is a debtor in Chapter 11 proceedings. Noth-
ing before us, however, informs us when the Re-
spondent filed the bankruptcy petition, whether the
alleged violations occurred before or after the
filing date, whether or when the Respondent for-
mally accepted the collective-bargaining agreement
after filing the petition, or whether the Bankruptcy
Court permitted the rejection of the contract. Such
information is critical in deciding whether the Re-
spondent has violated the Act. Accordingly, in
light of Bildisco, further investigation by the Re-
gional Director into the circumstances surrounding
the filing of the bankruptcy petition is necessary.
The General Counsel's Motion for Default Judg-
827
DECISIONS OF NATIONAL LABOR RELATIONS BOARD
ment must therefore be denied and the case re-
manded to the Regional Director.
The General Counsel's motion must also be
denied for an additional reason. On 30 September
1983 the General Counsel issued a combined com-
plaint, backpay specification, and notice of hearing
against the Company. Section 102.52 of the Board's
Rules and Regulations, however, clearly authorizes
the issuance of a backpay specification only:
[a]fter the entry of a Board order directing the
payment of backpay or the entry of a court
decree enforcing such a Board order, if it ap-
pears to the regional director that a controver-
sy exists between the Board and a respondent
concerning the amount of backpay due which
cannot be resolved without a formal proceed-
ing .... [Emphasis added.]
Accord, Section 101.16 of the Board's Statements
of Procedure. Because there has been no prior
Board order requiring backpay or an enforcing
court decree, issuance of a backpay specification is
inappropriate in the instant case.
ORDER
The General Counsel's Motion for Default Judg-
ment is denied, and the proceeding is remanded to
the Regional Director for further investigation and
consideration.
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