Flowserve Corp.

National Labor Relations Board - Administrative Judge Opinions

Jul 11, 2003

22-CA-025250 (N.L.R.B. Jul. 11, 2003)

JD(NY)–37-03
Phillipsburg, NJ

UNITED STATES OF AMERICA
BEFORE THE NATIONAL LABOR RELATIONS BOARD
DIVISION OF JUDGES
NEW YORK BRANCH OFFICE

FLOWSERVE CORPORATION

and Cases Nos. 22-CA-25250
22-CA-25261
22-CA-25352

UNITED STEELWORKERS OF
AMERICA, LOCAL 9404, AFL-CIO, CLC

Brian Monroe, Esq., Newark, NJ,
for the General Counsel.
David Tykulsker, Esq., Montclair, NJ,
for the Union.
John M. Skonberg, Esq. (Littler Mendelson, P.C.),
San Francisco, CA, for the Respondent.

DECISION

Statement of the Case

STEVEN DAVIS, Administrative Law Judge: Based on charges and amended charges
filed by United Steelworkers of America, Local 9404, AFL-CIO, CLC, (Union or Local 9404), a
complaint was issued on October 30, 2002, against Flowserve Corporation (Respondent or
Flowserve).1

The complaint alleges essentially that on May 15, 2002 during contract renewal
negotiations, the Respondent unlawfully insisted, as a condition of reaching any collective-
bargaining agreement (a) that the Union and certain of its members agree to refrain from filing
lawsuits over the pension plan and withdraw all pending lawsuits over the pension plan and (b)
that the Union agree to changes in the retiree medical plan. The complaint alleges that
inasmuch as these changes are not mandatory subjects of bargaining and the Respondent
bargained to impasse on them on May 15 in support of the above condition, it refused to bargain
in violation of Section 8(a)(1) and (5) of the Act. The complaint further alleges that on about May
15, the unit employees engaged in an unfair labor practice strike, and that the Union made on
their behalf an unconditional offer to return to work which was refused by the Respondent,
which thereby engaged in an unlawful lockout of those employees.

The Respondent’s answer denied the material allegations of the complaint and asserts
as an affirmative defense that during bargaining it offered and maintained an active proposal
containing only mandatory subjects of bargaining. On December 3, 16, and 17, 2002, a hearing
1 The docket entries are as follows: The charge in Case No. 22-CA-25250 was filed by the
Union on June 20, 2002, the charge and first amended charge in Case No. 22-CA-25261 were
filed on June 26 and August 20, respectively, and the charge in Case No. 22-CA-25352 was
filed on August 20.

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was held before me in Newark, New Jersey.2

Upon the evidence presented in this proceeding3 and my observation of the demeanor of
the witnesses and after consideration of the briefs filed by all parties, I make the following:4

Findings of Fact

I. Jurisdiction

The Respondent, a corporation having its primary office and place of business in Irving,
Texas and a facility in Phillipsburg, New Jersey, has been engaged in the manufacture of
pumps for submarines and aircraft carriers. During the past 12 months, the Respondent derived
gross revenues in excess of $500,000, and during the same period of time, purchased and
received goods and materials in excess of $50,000 directly from suppliers located outside New
Jersey. The Respondent admits, and I find that it is an employer engaged in commerce within
the meaning of Section 2(2), (6) and (7) of the Act. The Respondent also admits, and I find that
the Union is a labor organization within the meaning of Section 2(5) of the Act.

II. The Alleged Unfair Labor Practices

A. Background

Prior to the early 1990’s, the facility at issue here in Phillipsburg, New Jersey was owned
by Ingersoll-Rand Company. At that time it had a collective-bargaining agreement with United
Steelworkers Local 5503, which is the predecessor to Local 9404, the Charging Party Union
here. Thereafter, Ingersoll-Rand and Local 5503 entered into a series of collective-bargaining
agreements. In the early 1990’s, the facility was sold to Ingersoll-Dresser Pump Company,
known as IDP. That company assumed the contract with the Union, and thereafter entered into
a further agreement with the Union.

Flowserve acquired the facility from IDP in August, 2000 by its purchase of the shares of
2 Prior to the opening of the hearing, the Respondent filed with the Board a motion for
summary judgment on the ground that the “undisputed facts … fail to constitute a violation of the
Act.” The motion was denied on the ground that it was not timely filed. The Respondent
renewed its motion at the hearing and it is hereby disposed of by virtue of this Decision.
3 The Respondent’s unopposed motion to correct the transcript is granted. It has been
received in evidence as Respondent’s exhibit number 4.
4 After briefs were filed, the Union moved to supplement its brief by including the citations of
three cases, Monroe Feed Store, 112 NLRB 1336, 1337 (1955); Pergament United Sales, 296
NLRB 333, 334 (1989), enfd. 920 F.2d 130 (2nd Cir. 1990); Johnstown America Corp., JD-40-03,
2003 NLRB LEXIS 144 (April 4, 2003). The Respondent opposes the motion. The Board will
permit parties in unfair labor practice cases to call to the Board’s attention “pertinent and
significant” authorities that come to a party’s attention after the party’s brief has been filed.
Reliant Energy a/k/a Etiwanda, LLC, 339 NLRB No. 13 (2003). However, I reject the Union’s
argument made therein that additional violations must be found in that (a) the Respondent
unlawfully sought to condition bargaining on the elimination of the 75/80 pension enhancement
program and (b) unlawfully threatened plant closure. The complaint did not contain these
allegations, and accordingly, the General Counsel, who determines the legal theory in an unfair
labor practice case, has not embraced the Union’s theory. Sunland Construction 311 NLRB 685,
706 (1993).

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IDP, and thereby assumed all rights and obligations of the collective-bargaining agreement with
the Union. That contract ran from January 1, 1997 to May 15, 2001. The admitted appropriate
collective-bargaining unit is as follows:

All production and maintenance employees, including truck
drivers, employed by the Employer at its Phillipsburg, New Jersey
plant, excluding supervisory employees, clerks, foremen, assistant
foremen, guards, watchmen, timekeepers, first-aid workers,
salaried employees and pattern checkers.

Shortly after Flowserve’s acquisition of the facility there was a reduction in force. There
had been 4000 employees working at the facility in 1975, but by the events at issue here there
were only 23 active unit employees.

Four documents were entered into between the Respondent and the Union: (a) “Final
Agreement” regarding the work force reduction, referred to as the “effects bargaining
agreement” dated August 29, 2000 (b) Letter of agreement dated September 20, 2000 relating
to seniority, bumping and work rules (c) Supplemental retiree medical benefits agreement dated
December 8, 2000 and January 4, 2001 and (d) Letter of Understanding dated August 1, 2001
regarding retiree medical benefits.

The Supplemental retiree medical benefits agreement also provided that the collective-
bargaining agreement would be extended to May 15, 2002.

B. Events Prior to the Bargaining

Ray Peters, the unit chairman of the Union, stated that in April, 2000, he first became
aware that Flowserve was buying the facility. At that time, he received a document from
Ingersoll-Rand, which stated that “Flowserve has agreed to establish a pension plan which will
provide [the unit] employees with the same benefits that the Plan provides consistent with the
obligations under the current collective-bargaining agreement.”

On August 8, 2001, one year after the sale of the facility to the Respondent, the
employees received a “draft” of a pension plan adopted by the Respondent and effective on
August 8, 2001, referred to as B-11. The document contained modifications to the old pension
plan, but retained the “75/80” pension language, which provided for an early, larger pension if
the plant or a department closed.5

Prior to January, 2002, Peters was told by Michael Salamon, an attorney for the
Respondent, that he (Peters) had the authority to resolve any outstanding issues, including a
lawsuit that had been brought by the Union against the Respondent. Peters said that he did not
have that authority.

On January 16, 2002,6 Salamon sent a letter to Peters, urging him to reach agreement in
the upcoming contract renewal negotiations, and stating that Peters had the authority to
negotiate in behalf of the retired employees as well as the current workers with respect to
5 “75/80” relates to eligibility to receive the early pension: in the event of a plant closing, an
employee over age 55 must have enough years of service, when added to his age, to equal the
number 75; workers under age 55 must have enough years of service to equal 80.
6 All dates hereafter are in 2002 unless otherwise stated.

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pension methodology and medical benefits for retirees. The letter concluded:

I have seen too many plants closed where the senior members of
the workforce negotiated to reserve some retirement benefit,
demanded that it be locked in, and in so doing lock in a huge cost
burden for the facility – a burden that no subsequent concession
on the part of the active employees could mitigate.

On February 22, Harvey Geib, the chief negotiator for the Respondent, while visiting the
facility to speak about certain pending grievances, met with Peters and Union bargaining
committee members Manuel Mirailh, and Nick Fitzco.They spoke about bargaining procedure.
Peters testified that Geib took the current contract, held it over a garbage can and said that he
was going to throw it in the garbage, completely change the contract, and create a whole new
agreement. Geib admitted being present at the site at that time, but denied saying that he was
going to throw the contract in the garbage can. Neither Mirailh nor Fitzco testified.

Geib testified that the expiring collective-bargaining agreement was “cumbersome” and
costly, having been in effect when there were thousands of employees. He sought to
“streamline” the agreement and reduce or eliminate the costly items. Specifically, the
Respondent’s goals were to (a) eliminate the 75/80 pension enhancement (b) eliminate the no-
subcontracting clause and (c) modify the retiree medical plan toward which the retiree
contributes no money, and which costs the company $600,000 per year. Geib stated that if the
Respondent could not obtain modifications to these costly items, it would seek a reduction or
pay-back through wage concessions from the current 23 unit members.

The Union’s strategy was to avoid an economic strike “at all costs” because it believed
that a strike of 23 workers would not have an impact on the Respondent’s operations.

C. The Lawsuit

In February, 2002, the Union and Peters filed a Section 301 lawsuit in U.S. District Court
against Flowserve and Ingersoll-Dresser and their respective pension plans. The suit alleges
that the 1980 pension agreement was applicable to the employees, and that the defendants
violated that agreement and collective-bargaining agreements by applying a different definition
of pensionable wages, and by not granting service credits for layoff as agreed, and by failing to
apply the correct provisions of those agreements. It was alleged that the defendants’ actions
failed to afford Peters the pension benefits to which he is entitled. The suit seeks to compel
arbitration to determine whether the 1980 pension agreement is currently binding on the parties
regarding pensionable wages and credited services for pensions, and to clarify Peters’ future
rights to pension benefits.

D. The Negotiation Sessions

Negotiations were held from April 30 through September 26. The Respondent was
represented by Geib, its labor relations manager and chief negotiator. The Union’s negotiators
were Peters, Mirailh who was the Union International’s representative, and Fitzco, the local
union’s secretary.7 The parties met for seven bargaining sessions until the ratification vote on
May 16, and nine sessions thereafter.
7 There was some question, which need not be resolved, as to whether the chief spokesman
for the Union was Peters or Miralh.

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1. April 30

At the April 30 negotiation session, the Respondent presented a written proposal. It
provided, inter alia, for a modification to the retiree medical benefit plan, and other changes. The
proposal did not contain a wage offer or a proposal concerning the 75/80 pension language.
The Union submitted a list of 34 items it wanted changed, including a “substantial” wage
increase and no change in the 75/80 pension plan.

Mirailh told the Respondent that “the lawsuits should not be included. This is the current
employees’ contract and no one else’s,” adding that he wanted to focus on the 23 active
employees. Geib said that when he “passes the company’s proposal it will be in the form of a
contract. Flowserve has a prototype contract that is used at all companies. .. everything in it is
negotiable and …. is patterned after their (union’s) current contract. Some things are included,
some are not.”
2. May 6-9

On May 6, the parties discussed the Respondent’s proposal in detail. There was no
discussion of the 75/80 pension plan, retiree medical benefits or wages. Union agent Peters
stated that the Union probably asked why the 75/80 pension language, present in the expiring
contract, was not in the Respondent’s proposal. Brian Bohunicky, the plant manager, said that
the costs were too high, there was no flexibility in the plan, and that it was “counterproductive” to
its business.

On May 8, the Respondent distributed a copy of “Plan B-7”, its proposed pension
language. The parties spoke about the possibility of a strike. The last strike, nine years earlier,
lasted 17 weeks. Geib mentioned that a strike over this contract “would be a lot longer.” Mirailh
said that the Union did not want to strike. They discussed the Union’s proposal. In speaking
about the Union’s demands, Geib said that a majority of them were too costly, a few of the
Union’s proposals were already in the Respondent’s proposal, and others were held in
abeyance. Geib estimated that the Union’s proposals would result in an expense of $9.6 million.

On May 9, the Respondent submitted its second written contract proposal.8 The
proposal sought to modify Article 16, insurance and pensions (as defined in the Insurance
Appendix in the contract), by changing the retiree medical benefits plan by enrolling the retirees
in the Respondent’s Flowserve Flex Medical and Dental Plan, in which those enrolled make
contributions toward their medical insurance. Under the expiring contract, the retirees did not
have to contribute any money toward this coverage, and the coverage was generous –
providing for 100% hospital coverage for 365 days; 100% reasonable and customary surgical
coverage; and major medical coverage including 100% coverage after reaching annual
deductible.

The Respondent’s proposal did not contain a wage proposal or language relating to the
75/80 pension plan. The parties discussed retiree medical benefits, set forth above, and also
they spoke about “Letter M.” That document, an addendum to the expiring contract, is dated
October 16, 1980 and states as follows:

It is understood by the parties that any retired employee receiving
8 The parties discussed holidays, personal days, and a temporary work assignment plan.
Geib told the Union that the Respondent would consider a severance pay plan and a vision
plan.

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benefits, or any person receiving surviving spouse benefits, as
provided by the Agreement, shall not have such existing benefits
terminated or reduced, regardless of the existence, or lack
thereof, of the Labor Agreement, unless such reduction or
termination is mutually agreed upon by the Company and the
Union.

Peters stated that the Union made it “perfectly clear”, throughout the negotiations, that it
did not want to speak about retiree medical benefits. During a caucus at the May 9 session,
Mirailh called the Union International office which directed that retiree medical benefits had to
“stay off the table – there was no way we could remove Letter M from the contract.” Mirailh told
this to the company negotiators.

3. May 14

Geib presented to the Union’s negotiators certain news articles concerning the rising
cost of medical insurance and efforts by other companies to pass on part of that cost to
employees.

Plan B-7, the proposed pension plan, contained language concerning the 75/80
program, which Geib said was erroneously included, and would be omitted from the
Respondent’s proposal.

The parties agreed to certain issues including four floating holidays; distribution of
overtime, the number of shop stewards; the number of hours of training for non-unit employees;
the purging of disciplinary records; the selection of one arbitrator instead of three; time limits for
filing grievances; and posting of awarded jobs.

Mirailh repeated that the Union would not discuss the retiree medical plan or the 75/80
pension plan. Geib told him that if he did not want to discuss the retiree medical plan or 75/80,
both of which are costly items, he would prepare an alternate proposal that would attempt to
save money for the Respondent in other areas, including wage concessions from the current
employees. Geib testified that at the end of this session, he was trying to learn if the Union was
willing to bargain about modifying the retiree medical plan and eliminating the 75/80 provision.
He stated that if the Union was willing to speak about these issues, he would offer a modest
wage increase, and if not, he would propose a wage reduction for the current employees to
cover the cost of those costly items. He predicted that the latter proposal would be “ugly” and
may be “unacceptable” to the Union.

4. May 15

This was the day that the contract was due to expire. The parties met at 9:00 a.m. They
spoke about the 75/80 plan and the Respondent requested that the Union agree to eliminate the
Letter M provision and enroll the retirees in the Flowserve Flex Plan. Geib said that the retiree
medical plan was a high cost item and that either the retirees or the active employees would
have to pay for the retirees’ medical insurance.

Geib orally presented two proposals referred to as Alternative A and Alternative B.9 He
Continued
9 In their testimony, Geib and Peters often interchanged the two proposals, misidentifying
them as “A” or “B”. For the sake of consistency, I will refer to the two Alternatives as they were

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_________________________
said that if the Union was willing to bargain about the modification of retiree medical benefits
and the elimination of the 75/80 pension plan, Alternative A would include an offer of a wage
increase. If, however, the Union did not agree to those changes, Alternative B would provide for
the retention of those benefits, but the active employees would have to take wage concessions
of 15% the first year, an additional 15% the second year, and 10% the third year. Both
alternatives would include the items already agreed upon.

Geib testified that the wage reductions were computed based upon an anticipated
recouping of some of the costs from the retention of the retiree medical benefits and 75/80
pension plan, but he realized that even the proposed reductions in wages would not result in a
sufficient recoupment of the retiree medical cost. Nevertheless, he did not want to reduce the
wages drastically since he wished to achieve agreement on a renewal contract.

The Union said that Alternative B which includes a wage decrease, was unacceptable,
adding that it did not want to speak about a wage reduction. Following a caucus by the Union,
Mirailh then said “let’s talk about retiree medical.” Geib stated that that comment “shocked” him
because of the Union’s unwillingness to talk about that issue for 1½ days. The Union then
suggested that the retirees could pay $40 per month toward their medical plan as they had in
the past. Geib said that such a payment was not enough. Peters asked if the Respondent was
willing to offer a severance package in return for the elimination of the 75/80 pension
enhancement. Geib said he could “take a look at it.”

According to Geib, Mirailh asked hypothetically, if the Union accepted a modification of
retiree medical benefits and the elimination of the 75/80 pension enhancement, what offer would
be made. Geib asked if B-7, the Respondent’s pension plan proposal, would be part of the
package. They then discussed B-7 and Peters spoke about the pending lawsuit concerning the
Ingersoll-Rand pension plan variation and B-11, the current pension plan. Geib said that there
appears to be a conflict if the Union accepted the B-7 pension plan with a lawsuit pending on
the B-11 plan. “It seems like they’re in conflict, you can’t have two plans.” There was further
discussion of B-7 and the lawsuit. For example, Geib learned that the pensionable wages which
affected the current employees pursuant to the change in the pension plan amounted to $500
per current employee. He told Peters that the Respondent would offer $1000 per worker “just to
sign out of the suit.” Peters replied that he did not believe that he could withdraw the suit. Geib
testified that Mirailh told Peters that he could do so, and later asked for more time to look into
that issue. Geib testified that he did not condition his offer of B-7 upon the withdrawal of the
lawsuit, and in any event, Peters did not specifically say that he was willing to withdraw the suit.

Geib further testified that he asked Mirailh whether he was willing to bargain over the
modification of the retiree medical benefits, and loss of 75/80. Mirailh said that he was willing to
bargain over those matters. Geib stated that for the remainder of the day the discussion related
to Alternative A which included a wage increase.10

According to Peters, at about 8:00 p.m., the Union sought to continue bargaining that
written by the Respondent in G.C. Exhibit 10, with Alternative A including a wage increase and
Alternative B including a reduction in wages.
10 The Respondent’s bargaining notes quote Geib: “If you are saying you accept the loss of
75/80, retiree medical, etc., there are funds available for your people. If you’re willing to say that,
I can reevaluate. Mirailh responded: “What you give me, I’ll take to membership.” Later, Geib
asked Mirailh, whether “in order to move on are you now saying you can accept the loss of
75/80, retiree medical ….” Mirailh said “yes.”

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evening until a contract was reached. Mirailh suggested to Geib that they agree to a 60 day
extension of the contract while the employees continued working during the bargaining. Peters
stated that Geib replied that Flowserve “does not give extensions.”

Geib testified that Mirailh wanted to continue negotiations the next day. Geib did not
understand him to mean that he wanted to continue negotiations past the contract’s expiration,
with the employees continuing to work. He denied telling Mirailh that he was unwilling to bargain
the following day. He replied that there was “plenty of time tonight. Let’s take a dinner break and
continue.” Mirailh asked that they not “nickel and dime” each other, expressing a preference to
“get this done.” He told Geib to give him his best offer which included a wage raise, and he
would take it to the employees.11

The parties then took a dinner break at 10:00 p.m., and when they returned Peters noted
that the Respondent’s representatives had removed all of its materials from the table. Geib then
distributed a written document which he called the Respondent’s “best and final” offer. It
included changes in the retiree medical plan and in the 75/80 pension enhancement. Geib’s
definition of a “last and best offer” is that it was a complete, final package ready to take to the
membership for a vote. Geib told the Union agents “I told you that I would let you know when it
was my last best and final offer, this is it.”

Specifically, the offer included, inter alia, wage raises of 3% in each year of the three
year contract, improvements in vacation, 11 holidays, two personal days, and a no-cost vision
plan. The document also contained the following: “In consideration for this best and final offer,
the Union must accept without modification: the attached Union Contract.” Despite that
language, Geib testified that the Union could have offered a modification to the contract. Indeed,
he stated that he offered a modification immediately thereafter, which was the offer of a signing
bonus of $1500 per employee if the Union committee recommended acceptance of the
proposal. A comprehensive collective-bargaining agreement was attached. The document also
included a four paragraph statement of “settlement and release” which was to be signed by
Peters and four other workers who apparently were the only ones affected by the pensionable
wage part of Plan B-7. The statement set forth that each agreed to accept a payment of $1,000.
This refers to Geib’s offer earlier that evening that the Respondent would pay each employee
$1000 “just to sign out of the suit.” The statement also provided:

1. I recognize that the Pension Plan B-7 (as modified and
approved May 15, 2002, is the sole and exclusive document
governing the pension for all current bargaining unit members
represented by Local 9404.

2. I, on behalf of myself and USWA Local 9404 agree to dismiss
with prejudice the matter captioned United Steelworkers, et al
v. Flowserve Corp., et al, Civil Action No. 02-0765, to the
extent I, and USWA Local 9404 are plaintiffs.

3. I, myself, and on behalf of my heirs, administrators, assigns,
and agents, release and discharge Flowserve Corporation,
present and former directors, officers, agents and employees,
11 Mirailh’s alleged request for the Respondent’s “best offer” was not mentioned in Geib’s
pre-trial affidavit or in the Respondent’s notes of the bargaining session. Nevertheless, I credit
Geib’s account inasmuch as Mirailh did not testify.

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from any claims, causes of action, suits, damages, rights to
monetary or equitable relief, known or unknown for anything
up to and including the date on which I sign this Settlement
and Release relating to or arising from the Pension Plan B-7,
the negotiation of Pension Plan B-7, the modifications
approved on May 15, 2002.

4. For this Settlement and Release to be valid and binding, each
of the following: Richard Vitko, Howard Kuhns, Frank Turdo
and Charles Hawk must each execute a parallel agreement.

____________
Mr. Ray Peters

In an e-mail sent on May 28 from Salamon to the Union’s attorney, he explained that,
following the Union’s raising the issue of the pension at the bargaining table, Geib said that it
was “unwise to build a castle on sand, i.e., he was uncomfortable bargaining on provisions
when there was pending litigation arising from a long standing dispute regarding the underlying
pension plan.” Salamon also stated that in attempting to resolve the pension issue, the
Respondent offered to modify the 24-month aggregate absence provision regarding layoff and
make a payment to the five affected current employees, adding that “as a condition, Flowserve
did seek a release from these five employees.”

Geib further testified that the litigation was discussed as a “cleanup item” in terms of
whether a withdrawal of the suit should be part of the final proposal. He stated that his only
concern was whether the suit would affect the 23 current employees, and whether B-7, the
proposed pension plan was “inconsistent” with the suit. He told the Union “you can’t accept B7
going forward and keep the 1980 pension plan. That’s all I said.”

It is undisputed that the parties then spoke about the employees conducting a ratification
vote on this package. There is some dispute as to who suggested a vote, with each party
attributing the first mention of a vote to the other, but according to Peters, when the Respondent
gave the Union its written offer “the Union started talking about the mechanics of how the
employees would vote on that.”

Geib then said that if the Union’s bargaining committee recommended approval of the
offer the Respondent would add an additional $1500 per employee as a signing bonus. Mirailh
said that he would recommend it to the workers. It should be noted that although the Union
initially said that any changes to the retiree medical plan and 75/80 pension enhancement was
unacceptable, the Union at this point said that it would recommend that these changes be
accepted. It was agreed that the employees could work the following morning and then would
be dismissed from work to vote at the Union hall.

Geib testified that Mirailh asked what would happen if the contract was rejected. Geib
replied that he assumed that the Union would be on strike, but “let me know what you’re doing.”
The Respondent’s representatives then shook hands with the Union’s agents, told them “thanks
for being professional, thanks for being gentlemen” and left. Peters testified that at the
conclusion of the session he and Fitzco were in “shock”. They thought that “something was
going to happen … with the five outstanding issues – that we’d get half and the company would
take the other half, and there’d be … wage proposal there, and everybody would walk away the
winner. But that didn’t happen and it kind of shocked us.”

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Geib stated that when negotiations concluded on May 15, Alternatives A and B were still
outstanding. Alternative B which provided for the retention of retiree medical benefits and the
75/80 plan, and a wage decrease, did not include a provision that the lawsuit be withdrawn or
for employees to sign a release. He stated, however, that he did not give the Union a best and
final offer on Alternative B that evening because Mirailh asked for a best offer which included a
wage increase.

E. The Ratification Vote and Subsequent Events

On May 16, a meeting was held at the Union office. The employees asked whether the
subcontracting clause and the 75/80 pension enhancement program were included in the
proposed contract. When they were told that those provisions had been eliminated from the
contract, they reacted angrily, throwing the proposal on the floor and stepping on it. They voted,
20 to 3, to reject the proposed contract. Mirailh stated that he phoned Geib with the results, and
was told that the employees had 30 minutes to return to the plant and remove their tools. Peters
testified that he told Geib that the workers did not want to strike, and asked to continue
negotiations while the employees worked. Geib replied that he had other contracts to negotiate
and would not be able to meet for four weeks.

Geib testified that after being told that the contract was rejected basically because of the
removal of the subcontracting and 75/80 provisions, Mirailh asked that the employees be
permitted to retrieve their tools. From this, Geib assumed that the Union was on strike. When
Geib met Mirailh at the plant, they discussed continuing the negotiations. Mirailh told Geib that
he was not available to meet until May 24, and would be unavailable for the month of June but
would try to make some dates available. Geib denied being asked whether the workers could
continue working, and he denied telling the Union that the employees could not work on May 16
or 17.

F. The Offers to Return to Work

The employees obtained picket signs at the Union hall which had been prepared the
previous day, and began picketing.

On May 17, Peters told plant manager Bohunicky that the employees wanted to work.
Bohunicky told him to put it in writing. That day, Peters sent the following letter to Bohunicky:

Local 9404 still strongly feels, as discussed at the bargaining
table and again at the guard shack (main entrance) today, we
should be at the plant doing our own work while negotiations
proceed. Therefore we as a union are asking again for a sixty-day
extension to our current contract, to resolve our issues. Please
respond in writing.

On May 24, Geib replied as follows:

Like Local 9404, Flowserve is willing to pursue continuing
negotiations. However, the proposal contained in your letter of
May 17, 2002 is not the ‘unconditional offer to return to work under
the terms of the expired CBA’ that striking unions make to assert
the end of a strike and a willingness to return to employment. Your
offer contains a specific condition. If the Union is willing to make
an unconditional offer to return to work under the terms of the

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expired CBA, Flowserve will respond promptly.

On June 13, the Respondent’s attorney Michael Salamon sent a letter to Peters which
stated that Flowserve invited the Union to make an unconditional offer to return to work and it
had not replied. He also noted that immediately before the strike, the Union rejected the
Respondent’s “last best and final offer.”

After being told that the improper “condition” in his letter was the request for a 60 day
extension to the contract, on June 18, Peters sent the following letter to the Respondent:
“U.W.W.A. Local 9404 on behalf of its members, hereby unconditionally offers to return to work
immediately.” On the same day, Mirailh sent a letter to Geib requesting continued negations and
asking for available dates for bargaining.

On June 21, Geib sent the following letter to Peters:

Because it was sent by facsimile after business hours, Flowserve
was first able to review your letter dated June 18, 2002 (containing
the Union’s unconditional offer to return to work), on June 19.
Since that time, Flowserve has evaluated present business
conditions, the negotiation process, the Union’s subsequent
conduct, the distance between the Union’s position and
Flowserve’s positions, and most importantly, the necessity to meet
the needs of our customers, including the Department of Defense.

At the present time, Flowserve respectfully declines the Union’s
offer. Flowserve understands the labor law implications of this
action, and hopes that the Union will vigorously pursue the
commitment to reopen negotiations that is tacitly contained in the
offer to return to work. Flowserve is presently trying to contact Mr.
Mirailh and schedule renewed negotiation sessions.

Geib testified that the Respondent’s June 21 letter constituted a lockout of the
employees. He stated that he declined the Union’s offer to return to work because he wanted to
return to the bargaining table and achieve a contract. He believed that the Union would have a
greater incentive to bargain if the employees were not working.

On June 24, Geib wrote to Mirailh, setting forth various dates that he was available for
negotiations, and asking him to respond. Thereafter, bargaining dates were agreed upon.

G. Subsequent Negotiation Sessions

Eight bargaining sessions were held thereafter, from July 1 through September 26.
Agreement was reached on certain matters, including the 24-month service credit for layoffs
relating to the retiree pension plan, two-hour call in requirement, and eligibility for holiday pay.
At the bargaining session on July 19, Geib told the Union that Alternatives A and B were still
available. At the session of July 30, the Respondent agreed to extend the amount of time an
employee could be laid off without affective his service credits for pension purposes.

On August 13,12 the Respondent modified its Alternatives A and B proposals, and
Continued
12 There was disagreement as to whether these events occurred on July 31 or August 13. I

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presented them in writing. Alternative A offered the employees a 3% wage increase in each of
the three years of the contract. It also provided that the Union shall (a) accept Pension Plan B-7
(b) accept the elimination of the 75/80 early retirement enhancement (c) accept the elimination
of Letter M (d) accept the company proposals on current retiree medical benefits and
subcontracting and (e) withdraw with prejudice all pending lawsuits, grievances and claims on
behalf of current employees regarding pensions, subcontracting, and the retiree medical plan.
The proposal also required that the Union and Peters recognize that B-7 is the correct
applicable pension plan, thereby waiving any claims under ERISA or the NLRA, based on the
provisions of any other pension plan, regarding the calculation of pensionable earnings, service
credits for layoffs, or any other item. It further provided for a one-time payment to current unit
employees of 16 weeks of their base wage provided, inter alia, that they accept or reject this
offer within 30 days of the ratification of the new contract. The acceptance of such payment was
conditioned upon those employees making a voluntary resignation and signing a Settlement and
Release, and assisting in the “transition of his duties or the training of his replacement, if
necessary, by continuing his employment for a period not to exceed 90 days.”

Alternative B proposed that the employees’ wages be reduced by 15%, 15% and 10% in
each of the three years of the contract. It also required that the Union accept (a) all provisions of
the company’s proposal previously accepted by the Union and those items “left open” (b) the
company’s proposal on subcontracting (c) the elimination of Letter M (d) Plan B-7 as the
applicable pension plan and (e) the elimination of the 75/80 early retirement enhancement.

Geib testified that Alternatives A and B presented on August 13 were not the same as
those offered on May 15. He stated that the Alternative A proposal presented on August 13 did
not include a $1500 signing bonus, and that Alternative B differed on August 13 in that it
proposed the elimination of 75/80, whereas Alternative B offered on May 15 did not propose the
elimination of 75/80. Geib conceded that from the Union’s perspective, both Alternatives
presented on August 13 were worse than the ones offered on May 15.

On August 19, Geib wrote to Mirailh, summarizing the status of the negotiations. He
stated that the employees are locked out, and outlined the five outstanding issues: medical
benefits for active employees; subcontracting; Letter M; 75/80; wages. As to Letter M, the letter
states:

Letter M, although an attachment to the collective bargaining
agreement from 1980, purports to exist without respect to the
CBA, and attempts prevents [sic] the employer from amending the
“existing“ retiree medical benefits without Union approval. Does
this document act as a contract in the absence of a CBA?
Flowserve is uncertain. What was the consideration offered by the
Union in exchange for this commitment? Flowserve is uncertain.
Does this convert a permissive subject to a mandatory subject?
Flowserve is uncertain.
Flowserve is certain that it needs flexibility to amend retiree
medical benefits for future retirees. Letter M must be rendered null
and void.

In the September 10 bargaining session, the Union agreed to modify its position
concerning medical benefits for current employees, and in return the Respondent agreed to
find that, consistent with the Respondent’s detailed notes, they occurred on August 13.

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modify Alternative B so that the reduction in wages would be 15%, 10% and 5%. Mirailh told
Geib that Letter M “is a subject we can’t move on.” Geib replied that the parties were at impasse
on that matter and also on subcontracting, which the Union refused to eliminate from the
contract.

At the last bargaining session on September 26, the outstanding issues were (a) Letter
M (b) pension (c) wages and (d) subcontracting. Mirailh told Geib that the Union was “adamant
on two issues: Letter M and 75/80,” but he would speak about subcontracting. Geib repeated
that the company “must have Letter M and 75/80 out of the contract.” The Union refused to talk
about Letter M.

Geib testified that currently the parties are not at impasse since each time the parties
met there was movement in their bargaining positions. He conceded, however, that the
Respondent’s position has not changed concerning retiree medical benefits. Further, there has
been no movement in the parties’ positions on subcontracting. The Respondent has not
implemented any of its proposals. The locked out employees have not been replaced. Their
work is being performed by management personnel.

III. Analysis and Discussion

A. The Alleged Insistence to Impasse on Nonmandatory Subjects of Bargaining

The complaint alleges that the Respondent violated the Act by insisting to impasse on
two nonmandatory subjects of bargaining – that the Union and its members agree to changes in
the retiree medical plan, and refrain from filing lawsuits over the pension plan and that the
Union.

The Respondent argues that, at all material times, it had two alternative sets of
proposals on the bargaining table, only one of which, Alternative A, contained allegedly
nonmandatory subjects of bargaining. It asserts that the Union could have accepted Alternative
B, which contained only mandatory subjects. The Respondent further asserts that inasmuch as
the Union recommended Alternative A to its members, it cannot be claimed that the Union
expressly rejected those proposals or that the Respondent unlawfully insisted on those terms.

A party to negotiations violates the Act by insisting on a nonmandatory subject of
bargaining as a condition precedent to entering an agreement. NLRB v. Borg-Warner Corp., 356
U.S. 342, 349 (1958); Latrobe Steel Co. v. NLRB, 630 F.2nd 171,179 (3rd Cir. 1980). A
respondent is entitled to initially make proposals concerning nonmandatory subjects, but cannot
“continue to insist upon acceptance of the proposal to the point of impasse ‘in the face of a clear
and express refusal by the union to bargain about the nonmandatory subject.’” Pleasantview
Nursing Home, 335 NLRB No. 77, slip op. at 4 (2001) citing Union Carbide Corp., 165 NLRB
254, 255 (1967). The first question therefore becomes whether either of the two proposals are
nonmandatory subjects of bargaining.

In Allied Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971),
the Supreme Court held that pensioners are not employees under the Act, and that matters
involving them do not “vitally affect the terms and conditions of employment of active
employees.” 404 U.S. at 176. The Court held that the parties were not required to bargain
regarding retirees’ health benefits, as it was a permissive or nonmandatory subject. 404 U.S. at
188-189. Accordingly, as applied here, the issue of retiree medical benefits was a
nonmandatory subject as to which the Respondent could not insist to impasse.

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Similarly, I find that the Respondent’s a proposal concerning the withdrawal of the
pension lawsuit is also a nonmandatory subject of bargaining as to which the Respondent could
not insist to impasse. Plattdeutsche Park Restaurant, 296 NLRB 133, 137 (1989); Stackpole
Components Co., 232 NLRB 723, 732.

The principal question therefore is whether the Respondent insisted on either of the two
proposals as a condition precedent to entering an agreement or whether the Respondent has
insisted to impasse on the nonmandatory subjects of bargaining.

The parties bargained during seven sessions including the meeting of May 15, the date
of the alleged violations. During those sessions, the Respondent and the Union were firm in
their positions regarding retiree medical benefits. The Respondent sought to modify those
benefits in order to reduce its costs and the Union did not want to discuss it.

On May 14, the Respondent informed the Union that if it continued to be unwilling to
discuss retiree medical benefits it would make a proposal which would include wage
concessions, but that if the Union wished to discuss that issue, the Respondent was prepared to
offer a wage raise. The following day, the day the contract was to expire, the Respondent
presented both proposals to the Union.

The Union rejected the Respondent’s offer of Alternative B, a wage reduction and the
retention of retiree medical benefits.13 The Union then agreed to “talk about retiree medical” and
suggested that retirees pay $40 per month toward their medical plan. Later, the Union agent
said that he was willing to bargain over retiree medical benefits, and finally told Geib to give the
Union his “best offer” which included a wage raise and he would take it to the workers. At the
end of the session, the Respondent presented Alternative A, its last and best offer which
included a wage raise and a modification of the retiree medical benefits. Union agent Mirailh
said that he would recommend this proposal to the membership.

That proposal voted on by the employees also contained a requirement that the five
affected employees agree to withdraw the lawsuit over the pension plan. This provision resulted
from a discussion on May 15 in which the parties spoke about the Union accepting the
Respondent’s proposal of a pension plan to replace the old one. There was movement in the
Respondent’s position regarding the pension plan, During that discussion, the Respondent
offered to modify the 24-month service credit provision, which was, according to Peters, “fairly
important” to it, and was one of the issues in the lawsuit. Also, based on the credited testimony
of Geib, Mirailh suggested to Peters that the Union could withdraw its lawsuit and asked for
more time to explore that possibility.14

I find that based on all the facts in this case, the Respondent did not insist on either of
the two proposals as a condition precedent to entering an agreement, and did not insist to
impasse on the nonmandatory subjects of bargaining.

“An impasse occurs whenever negotiations reach that point at which the parties have
13 Regressive bargaining is not per se unlawful. Telescope Casual Furniture, Inc., 326 NLRB
588, 589 (1998).
14 In this connection I recognize that Peters quoted Mirailh early in the negotiations as
saying that the lawsuit should not be a part of these negotiations. However, I find that at the end
of the negotiations on May 15, Mirailh’s attitude changed and he expressed a willingness to
conclude the negotiations and accordingly modified his position concerning the lawsuit issue.

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exhausted the prospects of concluding an agreement and further discussions would be
fruitless.” Walnut Creek Honda, 316 NLRB 139, 141 (1995). The Board in Taft Broadcasting
Co., 163 NLRB 475, 478 (1967) stated:

Whether a bargaining impasse exists is a matter of judgment. The
bargaining history, the good faith of the parties in negotiations, the
length of the negotiations, the importance of the issue or issues as
to which there is disagreement, the contemporaneous
understanding of the parties as to the state of negotiations are all
relevant factors to be considered in deciding whether an impasse
in bargaining existed.

I cannot find that an impasse occurred. On May 15, the Respondent altered its
bargaining position, moving from its initial position demanding the modification of retiree medical
benefits to a position in Alternative B where it agreed to leave those benefits intact. Thus, it
cannot be said that the Respondent insisted to impasse on this issue. It changed its position,
offering the Union an alternative which left retiree medical benefits intact. The Union could have
accepted Alternative B and kept retiree medical benefits unimpaired, but it chose not to.
Alternative B did not include the provision concerning the withdrawal of the pension lawsuit.
Thus, by accepting Alternative B, the Union could have maintained its position that the lawsuit
go forward. The use of an alternative proposal to pressure a union to agree to the primary
proposal is not unlawful. Telescope Casual Furniture, Inc., 326 NLRB 588, 589 (1998).15

In making this finding, I recognize that Geib said that all of his proposals would be in
writing and in the form of a contract, and that Alternative B was orally presented. This however,
does not make the presentation of Alternative B any less valid or meaningful. On May 15, both
alternatives were presented orally, and the Union could have accepted Alternative B. The fact
that it was not presented in writing at that time was due to the Union’s refusal to consider it.
After the dinner break the Respondent presented its written offer of Alternative A, which was the
only alternative proposal the Union was willing to consider.

The Union argues that there was no discussion of Alternative B at the first five
bargaining sessions following the strike vote, with Alternative B being discussed for the first time
at the August 13 session. However, rather than showing that Alternative B was never
considered an alternative proposal by the parties, this fact demonstrates that the Union
continued to be unalterably opposed to Alternative B with its wage reduction terms.

In addition, it cannot be said that the Union clearly and expressly refused to bargain
about the two proposals on the critical date of May 15. Union Carbide, above. Although the
Union did express its opposition to bargaining about retiree medical benefits prior to May 15, on
that date Union agent Mirailh agreed to recommend the proposal to the employees. The Union
contends that it was “shocked” at the conclusion of events that evening. I acknowledge that in
the late evening of May 15 the Union sought to continue bargaining the following day but the
Respondent urged it to proceed. However, following the last Union caucus that evening when
the Respondent gave the Union its written offer, according to Peters, “the Union started talking
about the mechanics of how the employees would vote on that.” Clearly, as testified by Geib,
15 Greensburg Coca-Cola Bottling Co., 311 NLRB 1022, 1028 (1993), cited by the Union, is
inapposite. In that case, the union “repeatedly expressed its opposition to the nonmandatory
subject, and the employer continued to insist on the proposal. Here, the Union rejected an
alternative proposal containing no nonmandatory subjects.

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Mirailh was anxious to conclude the bargaining and accordingly agreed to recommend the
Respondent’s proposed agreement to the unit workers. Based on the above, I cannot find that
the Union expressly refused to bargain about the two proposals.

Following May 15, nine bargaining sessions were held during which agreement has
been reached on certain terms. Although it is true that no agreement has been reached on other
major items, there is no reason to believe that further negotiations would be futile.

B. The Strike and Lockout

The complaint alleges that on May 15, the employees engaged in an unfair labor
practice strike, and that the Union made on their behalf an unconditional offer to return to work
which was refused by the Respondent, thereby unlawfully locking out those employees.

Inasmuch as I have found that the Respondent engaged in no unfair labor practices by
allegedly insisting to impasse on nonmandatory subjects of bargaining, I cannot find that the
strike which resulted from the rejection of the contract was caused by the alleged unfair labor
practices of the Respondent.

It should also be noted that even assuming that the Respondent engaged in unfair labor
practices as alleged, there is no nexus between those alleged violations and the strike. Thus,
the reason for the strike apparently was the failure of the proposed contract to include
provisions for 75/80 pension enhancement and subcontracting. Upon learning that the contract
contained neither term, the employees immediately voted to reject it and to strike. There was no
evidence that the retiree medical benefits or withdrawal of the lawsuit was mentioned at the
strike vote meeting.

“It has been settled law for over 35 years that an employer does not violate the Act by
locking out its bargaining unit employees temporarily for the sole purpose of pressuring them to
accept its bargaining proposals.” Tidewater Construction Corp., 333 NLRB 1264 (2001) citing
American Ship Building Co. v. NLRB, 380 U.S. 300 (1965). Both pre-impasse and post-impasse
lockouts are thus permissible. Darling & Co., 171 NLRB 801 (1968); Harter Equipment Co., 280
NLRB 597 (1986).

On June 18, the Union made an unconditional offer on behalf of the striking employees
to return to work. Its prior offer was not unconditional since it contained the condition that the
employees return to work during a 60-day extension of the parties’ expired contract. On June
21, the Respondent timely responded to the offer, stating that it had received it on June 19. The
Respondent rejected the offer based upon, inter alia, the “distance” between the parties’
positions, but welcomed further negotiations.

It is clear, as testified by Geib, that the lockout was lawfully intended to achieve the
Respondent’s economic goals in support of its bargaining position. The lockout was announced
in a timely manner in response to the unconditional offer to return so that the strikers could
“knowingly reevaluate their position and decide whether to accept the employer’s terms and end
the strike or to take other appropriate action.” Eads Transfer, 304 NLRB 711, 712 (1991).

I accordingly find and conclude that the employees have not engaged in an unfair labor
strike and that the Respondent has not violated the Act by locking them out.

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Conclusions of Law

1. Flowserve Corporation, is an employer engaged in commerce within the meaning of
Section 2(2), (6) and (7) of the Act.

2. United Steelworkers of America, Local 9404, AFL-CIO, CLC, is a labor organization
within the meaning of Section 2(5) of the Act.

3. The Respondent has not engaged in unfair labor practices within the meaning of
Section 8(a)(1) and (5) of the Act in any manner, as alleged in the complaint.

On these findings of fact and conclusions of law and on the entire record, I issue the
following recommended16

ORDER
The complaint is dismissed.

Dated, Washington, D.C.

_____________________
Steven Davis
Administrative Law Judge
16 If no exceptions are filed as provided by Sec. 102.46 of the Board’s Rules and
Regulations, the findings, conclusions, and recommended Order shall, as provided in Sec.
102.48 of the Rules, be adopted by the Board and all objections to them shall be deemed
waived for all purposes.