Garwood--Detroit Truck Equipment, Inc.

National Labor Relations Board - Board Decisions

Feb 19, 1985

274 N.L.R.B. 113 (N.L.R.B. 1985)

GARWOOD-DETROIT TRUCK EQUIPMENT
Garwood-Detroit Truck Equipment , Inc. and Inter-
national Union , United Automobile , Aerospace
and Agricultural Implement Workers of Amer-
ica and Local Union No 189, UAW. Case 7-
CA-20528
19 February 1985
DECISION AND ORDER
BY CHAIRMAN DOTSON AND MEMBERS
HUNTER AND DENNIS
On 11 July 1983 Administrative Law Judge
Thomas E. Bracken issued the attached decision.
The Respondent filed exceptions and a supporting
brief.
The Board has considered the decision and the
record in light of the exceptions and brief and has
decided to affirm the judge's rulings, findings, and
conclusions only to the extent consistent with this
Decision and Order.
1. The judge found that the Respondent violated
Section 8(a)(1) and (5) and Section 8(d) of the Act
by unilaterally subcontracting its mounting and
service work without prior notice to the Union and
without affording the Union an opportunity to bar-
gain about the subcontracting decision. The Re-
spondent has excepted to this finding, contending
that it had no duty to bargain about the subcon-
tracting decision. We find merit in the Respond-
ent's exceptions.
The facts, as more fully set forth by the judge,
are as follows. Until January 1982 the Respondent
was in the business of mounting (or installing) and
servicing equipment on trucks and also selling
parts. Since the 1950s the Respondent's employees,
who were classified as mechanic-welders, painters,
and utility men, were covered by successive collec-
tive-bargaining agreements with the Union.' It is
undisputed that the Respondent's business was
losing money steadily since 1979, and by December
1981, three of the four remaining unit employees
were on layoff status.2
In early December 1981, the Respondent was ap-
proached by two individuals, Essig and Childress,
who previously had performed some subcontract-
ing work for the Respondent, about the possibility
of their taking over the Respondent's mounting and
service work. After several meetings, an agreement
was worked out whereby the Respondent agreed
to retain Essig and Childress as an "independent
contractor" for the providing of mounting and
1 The most recent agreement was entered into on 17 August 1981 as a
1-year addendum to the prior 3-year agreement which contained an auto-
matic renewal clause
2 As of 1 September 1978, there had been eight employees on the se-
niority list
113
service work to the Respondent's customers, and to
lease its facilities and equipment to them. Essig and''
Childress agreed to pay a specified percentage of
the Respondent's rent and utility bills and to pro-
cure various kinds of liability and other insurance
for the benefit of the, Respondent. The agreement
also specified that the Respondent reserved the
right to hire other subcontractors but that it re-
served no right to exercise control over the em-
ployees of Essig and Childress. The agreement was
to be effective 4 January 19823 and could be termi-
nated by either party on 60 days', written, notice.
By letters dated 5 January, the Respondent noti-
fied its employees and the Union about the subcon-
tracting agreement with Essig and Childress. The
letter to the Union stated as follows:
By reason of the present dire economic condi-
tions presently prevailing in the, Metropolitan
Detroit area and throughout the State of
Michigan, we have been required to enter into
an agreement with an independent contractor
to perform the service and mounting required
by our customers.
We are eliminating our service and mounting
departments in order to prevent economic
chaos.
We contemplate within the very near future of
divesting ourselves of our shop equipment in
order to recapitalize the company apd intend
to sub-lease a large portion of our building in
order to enable us to pay exhorbitant [sic]
rental requirements provided for in our present
lease.
Our losses this year have been astronomical
and we are unable to continue our normal op-
erations which ultimately could lead to bank-
ruptcy proceedings.
We are this day advising our employees, me-
chanics-welders-painters, to pick up their tools
and personal effects.
As to the utility man, we will make every
effort to utilize him depending upon economic
conditions.4
After receiving the letter on 11 January, the
Union's president Terry called the Respondent's
vice president and general manager Connor and
protested that the Respondent was violating the
collective-bargaining agreement. Terry also told
employee Schroeder, who was the Union's chair-
person, to file a grievance. Schroeder immediately
a All dates hereinafter are in 1982 unless otherwise indicated
4 The letter to the employees was virtually identical except that the
last paragraph requested them to pick up their tools by 15 January
274 NLRB No. 23
114 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
filed a grievance protesting that "outside employ-
ees are performing work normally done by mem-
bers of the bargaining unit." Connor, in denying
the grievance that same day, wrote, "This griev-
ance has no basis in fact. . . . Past procedure has
been to contract out work as necessary."
About 2 weeks later, Schroeder, who formerly
had worked as a mechanic-welder, was recalled to
work as a utility man, which was a lower paid clas-
sification. As such, his duties included picking up
truck parts from vendors as well as doing janitorial
work. No other laid-off employee was recalled by
the Respondent, although one other employee later
went to work for Essig and Childress as a mechan-
ic-welder.
Meanwhile, in February the Union conducted an
audit of the Respondent's books and confirmed that
the Respondent's financial condition was poor. In
March, the parties met at the Union's request to
discuss the subcontracting in the context of the
grievance procedure. The Union stated it would
consider concessions in order to get the laid-off
employees back to work, but the Respondent
viewed such concessions as insufficient to solve its
cash flow problems. There also was some discus-
sion about the possibility of employees buying into
the corporation or working on a piece rate basis.
Nothing was resolved at that meeting, however, or
at a subsequent meeting in April, which also was
called by the Union to discuss ways to get the em-
ployees back to work. In December, at a meeting
called by the Respondent, the parties continued to
discuss different ways to get the employees back to
work, but again the discussion was to no avail.
The judge, finding that the instant case was con-
trolled by Fibreboard Corp. v. NLRB,5 concluded
that the Respondent was obligated to bargain with
the Union about the decision to subcontract the
service work. The judge found that, as in Fibre-
board, which involved "the replacement of employ-
ees in the existing bargaining unit with those of an
independent contractor to do the same work under
similar circumstances," the Respondent merely re-
placed its own employees with those of Essig and
Childress to do the same work, using the same
tools and equipment, and in the same working area.
Thus finding that the Respondent did not engage in
a major shift in the direction of the Company and
that the nature of its business was not substantially
altered by the subcontracting, the judge rejected
the Respondent's contention that the Essig and
Childress agreement amounted to a "partial clos-
ing" which was not subject to mandatory bargain-
ing under the Court's holding in First National
5 379 U S 203 (1964)
Maintenance Corp. v. NLRB.6 In this regard, he
also relied on his findings that the subcontracting
decision did not require any restructuring or invest-
ment of capital and that the shop area leased to
Essig and Childress still was subject to the Re-
spondent ' s control as the primary lessee of the
premises. Moreover , the judge found that the
Union could have engaged in "significant bargain-
ing" to alleviate the Respondent 's financial situa-
tion before the Essig and Childress agreement was
executed . Finally , because the Respondent 's unilat-
eral subcontracting occurred during the term of an
existing collective -bargaining agreement , the judge
concluded that the Respondent modified the terms
and conditions of that agreement in violation of
Section 8(a)(1) and (5) and Section 8(d) under Mil-
waukee Spring Division , 265 NLRB 206 ( 1982).
At the outset , we note that the Board recently
reversed its original Decision and Order in Milwau-
kee Spring 7 on which the judge relied . In its sup-
plemental decision the Board stated that , before it
may conclude that an employer has violated Sec-
tion 8(d), it first must identify a specific term "con-
tained in" the contract which the employer ' s deci-
sion modified . In the instant case, the record does
not reveal any term contained in the collective-bar-
gaining agreement that restricts the Respondent's
decision making regarding subcontracting . There-
fore, contrary to the judge, we find that the Re-
spondent 's decision to contract out the service
work did not modify the collective -bargaining
agreement in violation of Section 8(d)
Further, the Board recently held in Otis Elevator
Co.8 that management decisions which affect the
scope, direction, or nature of the enterprise are not
subject to mandatory bargaining under Section
8(d). As stated in Otis Elevator, the critical factor in
determining whether a specific management deci-
sion is subject to mandatory bargaining is "the es-
sence of the decision itself, i.e., whether it turns
upon a change in the nature or direction of the
business or turns upon labor costs; not its effect on
employees nor a union ' s ability to offer alterna-
tives." Further , in Otis Elevator, the Board specifi-
cally stated that Fibreboard "subcontracting" is sub-
ject to mandatory bargaining not because the deci-
sion is labeled subcontracting but because the deci-
sion turns on a reduction of labor costs. Applying
that analysis to the facts of the instant case, we find
for the reasons set forth below that the Respond-
ent's decision to contract out its service work to
Essig and Childress turned not on labor costs but
6452US 666(1981)
7 268 NLRB 601 (1984)
8 269 NLRB 891 (1984)
GARWOOD-DETROIT TRUCK EQUIPMENT
on a significant change in the nature and direction
of the Respondent's business and that, therefore,
the Respondent had no duty to bargain about the
subcontracting decision.
It is clear from the record that the Respondent's
essential purpose in executing the agreement with
Essig and Childress was to reduce its overhead
costs across-the-board so as to be able to remain in
business. Looking at the agreement itself, the pre-
amble states that the Respondent "is desirous of
eliminating its service and mounting departments in
order to reduce costs." Towards that end, Essig
and Childress agreed to pay a specified percentage
of the rent paid by the Respondent for use of the
premises plus a monthly fee for the rental of the
Respondent's equipment. In addition, Essig and
Childress agreed to pay a specified percentage of
the Respondent's monthly gas, electric, and water
bills; to procure various types of liability insurance
for the Respondent's benefit; and to maintain any
workmen's compensation insurance required by
state law. Thus, aside from the obvious savings in
payroll costs resulting from the layoff of unit em-
ployees, the terms of the Respondent's agreement
with Essig and Childress covered the gamut of
overhead costs and afforded the Respondent a
wide variety of financial relief. Moreover, as indi-
cated above, the Respondent reserved the right to
hire other subcontractors if necessary. Thus, al-
though the agreement could be terminated by
either party on 60 days' notice, it is evident from
all these arrangements that the Respondent had no
intention, at least in the foreseeable future, of per-
forming the service work with its own employees.
The Respondent's cost-reduction objectives in
contracting out the service work are spelled out
even more clearly in its 5 January letter to the
Union, set forth above. Thus, in that letter, the Re-
spondent stated, "We are eliminating our service
and mounting departments in order to prevent eco-
nomic chaos," and "Our losses this year have been
astronomical and we are unable to continue our
normal operations . . . ." The letter also indicated
that the Respondent was contemplating divesting
itself of its shop equipment and that it intended to
sublease a large portion of the premises in order to
facilitate payment of the rent.
Aside from the documentary evidence, it is clear
from the testimony at the hearing that the Re-
spondent's decision to contract out the service
work contemplated a major shift in the nature and
direction of its business in conjunction with the re-
duction of costs. Union President Terry, testifying
about the meeting in March 1982, stated there was
some discussion about how long the Respondent
anticipated staying in business, with Connor indi-
115
cating "that he really wanted to get out of the
garage business, per se, and more or less, go to-
wards a parts distribution type situation." Terry
continued:
One of the reasons he cited was the high cost
of the rent that they had to pay for the facili-
ties they have there and that he would prob-
ably when the lease came up, and I believe it
was in August, he said they probably wouldn't
be renewing it . . [t]hat he would probably
go into business just with the parts, get a dif-
ferent office and so on.
Connor, in his testimony, confirmed that the Re-
spondent entered into the agreement with Essig
and Childress because the Respondent was unable
to meet its financial obligations and that the result-
ing reduction in costs had kept the Respondent in
business to date. Regarding the Respondent's cur-
rent business operations, Connor testified that the
Respondent had "become basically a manufactur-
er's representative-type of organization" which
sells truck equipment parts and uses various ven-
dors to perform the labor.
Based on the foregoing, we find that the Re-
spondent's decision to contract out the mounting
and service work did not turn on labor costs-al-
though labor costs were one component of the
overhead costs the Respondent intended to reduce
by the subcontracting-but rather turned on a sig-
nificant change in the nature and direction of its
business, i.e., a decision to abandon its service and
mounting operations. We therefore conclude, under
Otis Elevator, that the Respondent had no duty to
bargain with the Union about its subcontracting de-
cision. Accordingly, we shall dismiss this portion
of the complaint.
2. The judge further found, and we agree, that
the Respondent unlawfully failed to bargain with
the Union about the effects of the subcontracting
decision on unit employees. In agreeing with the
judge's finding, we rely on the fact that the Re-
spondent informed the Union of its decision to
enter into the subcontracting agreement only after
that agreement had been executed. Moreover, in its
5 January letter to the Union, the Respondent
made no offer to bargain about the effects of sub-
contracting on unit employees. In this regard, we
also note that the meetings in March and April,
which were held at the request of the Union, oc-
curred more than 2 months after the employees
were permanently laid off. In these circumstances,
we conclude that the Respondent violated Section
8(a)(5) and (1) by its failure to afford the Union
adequate timely notice and a meaningful opportuni-
116 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
ty to bargain about the effects of the subcontract-
ingon.unit employees
Accordingly, we shall in our amended remedy
provide for the payment of limited backpay as is
customary in cases where the Board has found
only an "effects-bargaining" violation. See, e.g.,
Contris Packing Co., 268 NLRB 193 (1983); Inter-
state Tool Co., 177 NLRB 686 (1969); Transmarine
Corp., 170 NLRB 389 (1968).
AMENDED REMEDY
Having found that the Respondent, by failing to
bargain with the Union over the effects of its deci-
sion to subcontract, has engaged in unfair labor
practices within the meaning of Section 8(a)'(5) and
(1) of the Act, we shall order that the Respondent
cease and desist therefrom, and take certain affirm-
ative action designed to effectuate the policies of
the Act.
As a result of the Respondent's unlawful failure
to bargain about the effects, of the subcontracting,
the laid-off employees have been denied an oppor-
tunity to bargain through their collective-bargain-
ing representative at. a time when the Respondent
might still have been in need of their services and a
measure of balanced bargaining power existed.
Meaningful bargaining cannot be assured until
some measure of economic strength is restored to
the Union: A bargaining order alone, therefore,
cannot serve as an adequate remedy for the unfair
labor practices committed.
Accordingly, we deem it necessary, in order to
effectuate the purposes of the Act, to require the
Respondent to bargain with the Union concerning
-the effects of the subcontracting on its employees,
and shall accompany our order with a limited
backpay requirement designed both to make whole
the, employees for losses suffered as a result of the
violation , and to recreate in some practicable
manner a situation in which the parties' bargaining
position is not entirely devoid of economic conse-
quences for the Respondent. We shall do so in this
case by requiring the Respondent to pay backpay
,to* its employees in a manner similar to that re-
quired in Transmarine, supra. Thus the Respondent
shall pay employees backpay at the rate of their
normal wages when last in the Respondent's
employ from 5'days after the date of this Decision
and Order until the occurrence of the earliest of
the following conditions: (1) the date the Respond-
ent bargains to agreement with the Union on those
subjects pertaining to the effects of the subcon-
tracting on its employees; (2) a bona fide impasse in
bargaining; (3) the failure of the Union to request
bargaining within 5 days of this decision, or to
commence negotiations within 5 days of the Re-
spondent's notice of its desire to bargain with the
Union; or (4) the subsequent failure of the Union to
bargain in good faith; but in no event shall the sum
paid to any of these employees exceed the amount
the employee would have earned as wages from 4
January 1982, the date on which the Respondent
subcontracted the work, to the time the employee
secured equivalent employment elsewhere, or the
date on which the Respondent shall have offered
to bargain, whichever occurs sooner; provided,
however, that in no event shall this sum be less
than these employees would have earned for a 2-
week period at the rate of their normal wages
when last in the Respondent's employ.
ORDER
The National Labor Relations Board orders that
the Respondent, Garwood-Detroit Truck Equip-
ment, Inc., Warren, Michigan, its officers, agents,
successors, and assigns, shall
1. Cease and desist from
(a) Refusing to bargain in good faith with the
Union about the effects on unit employees of the
decision to subcontract the service and mounting
work.
(b) In any like or related manner interfering
with, restraining, or coercing employees in the ex-
ercise of the rights guaranteed them by Section 7
of the Act.
2. Take the following affirmative action neces-
sary to effectuate the policies of the Act.
(a) On request, bargain collectively with the
Union with regard to the effects on employees of
subcontracting the service and mounting work and,
if an understanding is reached, embody such under-
standing in a signed agreement.
(b) Pay the employees laid off on 4 January 1982
their normal wages for the period set forth in the
section of this Decision and Order entitled
"Amended Remedy."
(c) Preserve and, on request, make available to
the Board or its agents for examination and copy-
ing, all payroll records, social security payment
records, timecards, personnel records and reports,
and all other records necessary to analyze the
amount of backpay due under the terms of this
Order.
(d) Post at its facility in Warren, Michigan,
copies of the attached notice marked "Appendix."9
9 If this Order is enforced by a Judgment of a United States Court of
Appeals, the words in the notice reading "Posted By Order of the Na-
tional Labor Relations Board" shall read "Posted Pursuant to A Judg-
ment of the United States Court of Appeals Enforcing an Order of the
National Laobr Relations Board "
GARWOOD-DETROIT TRUCK EQUIPMENT
Copies of the notice, on forms provided by the Re-
gional Director for Region 7, after being signed by
the Respondent's authorized representative, shall be
posted by the Respondent immediately upon re-
ceipt and maintained for 60 consecutive days in
conspicuous places including all places where no-
tices to employees are customarily posted. Reason-
able steps shall be taken by the Respondent to
ensure that the notices are not altered, defaced, or
covered by any other material.
(e) Notify the Regional Director in writing
within 20 days from the date of this Order what
steps the Respondent has taken to comply.
MEMBER DENNIS, dissenting in part.
I agree with the majority that the Respondent
unlawfully failed to bargain with the Union about
the effects of its decision to subcontract unit work.
For the following reasons, however, I disagree
with my colleagues' conclusion that the Respond-
ent was not obligated to bargain with the Union
about the decision itself. In my view, the Respond-
ent's decision was a mandatory subject of bargain-
ing, and the Respondent's refusal to bargain about
the decision violated Section 8(a)(5).
The Union and the Respondent have been parties
to collective-bargaining agreements since the 1950s.
The Respondent, until 1982, operated a truck
equipment service and sales business. In 1982, in
order to "cut their [financial] losses," the Respond-
ent's officers decided to subcontract the servicing
part of the business, thereby reducing labor costs,
rent, heating, and electricity bills, and insurance
premiums.
To maintain good customer relations and provide
customers readily available servicing, the Respond-
ent subcontracted the service business to two
former employees. The subcontractor performs the
same service work on customers' trucks that the
Respondent's employees previously performed, and
uses the same tools and equipment in the same
work area that the Respondent's employees former-
ly used. In a letter to the Union, the Respondent
acknowledged that the subcontracted work contin-
ued to be "required by our customers."
Applying the two-step test set forth in my con-
curring opinion in Otis Elevator Co., 269 NLRB 891
at 897 (1984), I find first that the Respondent's sub-
contracting decision was "amenable to resolution
through the bargaining process." The Union could
have made offers that reasonably could have affect-
ed management ' s decision , for as even my col-
leagues in the majority concede, "labor costs were
one component of the overhead costs the Respond-
ent intended to reduce by the subcontracting."
Turning to the second part of my Otis test, I
cannot agree with the majority that the Respond-
117
ent's decision constituted "a significant change in
the nature and direction of its business." Where, as
here, the same work is still being provided at the
same location to the same customers, I find that the
benefit achieved by subjecting the Respondent's de-
cision to the bargaining process outweighs any bur-
dens placed on management that are apparent from
the record. Cf. First National Maintenance Corp. v.
NLRB, 452 U.S. 666, 679-680 (1981), explaining Fi-
breboard Corp. v. NLRB, 379 U.S. 203 (1964) (con-
duct of the business not significantly burdened by
requiring bargaining about subcontracting decision
where decision did not alter company's basic oper-
ation and involved only replacement of company's
employees with subcontractor's employees to do
same work under similar employment conditions).
APPENDIX
NOTICE To EMPLOYEES
POSTED BY ORDER OF THE
NATIONAL LABOR RELATIONS BOARD
An Agency of the United States Government
The National Labor Relations Board has found
that we violated the National Labor Relations Act
and has ordered us to post and abide by this notice.
WE WILL NOT refuse to bargain in good faith
with International Union, United Automobile,
Aerospace and Agricultural Implement Workers of
America, and Local Union No. 189, UAW, about
the effects on unit employees of the decision to
subcontract our service and mounting work.
WE WILL NOT in any like or related manner
interfere with, restrain, or coerce our employees in
the exercise of the rights guaranteed them by Sec-
tion 7 of the Act.
WE WILL, on request, bargain collectively with
the Union with respect to the effects of subcon-
tracting our service and mounting work on unit
employees and reduce to writing any agreement
reached as a result of such bargaining.
WE WILL pay the employees laid off on 4 Janu-
ary 1982 their normal wages for a period required
by the National Labor Relations Board.
GARWOOD-DETROIT TRUCK EQUIP-
MENT, INC.
DECISION
STATEMENT OF THE CASE
THOMAS E. BRACKEN, Administrative Law Judqe.
This case was tried in Detroit, Michigan, on February 14
and 15, 1983. The charge was filed by the Union on
118 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
April 12, 1982,1 and the complaint was issued on May
26. The primary issue is whether the Respondent, in sub-
contractinq out service and mountinq work, and laying
off unit employees who had previously been performing
the work, without notifying or bargaining with the
Union, violated Section 8(a)(1) and (5) of the National
Labor Relations Act.
On the entire record including my observations of the
demeanor of the witnesses and after due consideration of
the brief filed by the Respondent and oral argument of
the General Counsel, I make the following
FINDINGS OF FACT
1. JURISDICTION
The Company, a Michigan corporation, installs and
sells truck equipment, parts, and related products.
During the fiscal year ending July 31, 1981, Respondent
purchased and received at its Warren place of business,
truck equipment and parts and other goods valued in
excess of $100,000, of which goods and materials in
excess of $50,000 were transported to its Warren, Michi-
gan place of business, directly from points located out-
side the State of Michigan. The Company admits, and I
find, that it is an employer engaged in commerce and in
operations affecting commerce within the meaning of
Section 2(2), (6), and (7) of the Act.
II. THE LABOR ORGANIZATION INVOLVED
The Union is a labor organization within the meaning
of Section 2(5) of the Act.
III. ALLEGED UNFAIR LABOR PRACTICES
A. Background2
For some years the Respondent had been in the truck
equipment service and sales business. A small company,
its business consisted of installing major pieces of special-
ized equipment and accessories onto trucks owned by
various customers, such as municipalities and contrac-
tors. The customer would bring to the Respondent's
shop its stripped down truck, consisting chiefly of a
frame and a chassis. Here the Garwood employees
would install such major components as dump bodies,
snowplows, salt spreaders, scrapers, lights, and horns. At
times Respondent also performed repairs on such auxilia-
ry equipment. It also sold truck equipment parts at
wholesale and retail as a minor part of its business.
The Company's shop was essentially a one-story rec-
tangular building about 40 feet wide by 100 to 120 feet
long. On the north end of the building was the office, a
room about 20 feet by 20 feet. To the rear of the office
was a parts room of about the same size. There was a
partial second floor over the office space, used as a
locker room and for the storage of records. The remain-
ing ground floor area was divided into three service bays
and one paint shop bay. The shop contained various
All dates are in 1982 unless otherwise indicated
The factfindmgs contained herein are based on a composite of the
testimonial and documentary evidence received at the hearing The perti-
nent facts are not in dispute
items of equipment, the major ones being eight 2-ton
electric overhead cranes, two 5-ton manual overhead
cranes, one 2-ton air operated overhead crane, one gas
and oxygen manifold system, one oil storage manifold
system, one paint blower, and one compressor.
Donald E Connor was the president of the Company
and had been for a number of years The rest of the off-
fice force consisted of his son, Bruce R. Connor, the vice
president and general manager, and one outside salesman.
B Bargaining History
Since some time in the 1950s, the Respondent and the
Union have been parties to collective-bargaining agree-
ments. On August 14, 1978, the parties had executed a
formal 27-page sophisticated and comprehensive agree-
ment that was to terminate on August 4, 1981.3 The
agreement also contained an automatic renewal clause,
unless either party gave a 60-day notice of termination to
the other party.
No such notice was given in 1981, and on August 17,
1981, the parties executed a one-page memorandum
agreement as an addendum to the prior formal agree-
ment. This memorandum agreement established the ter-
mination date as August 4, 1982. This agreement did
contain a 10-cent-per-hour-wage increase, and an in-
crease of 10 cents per hour for the pension fund, and in-
creased the life insurance policy per employee to $13,000
Bruce Connor testified that during the negotiations the
Company had requested monetary concesions from the
Union, but these were refused by the Union. Kenneth
Terry, the president of Local 189, and its full-time em-
ployee, admitted that during these negotiations the Com-
pany had asked for concessions but he did not remember
what they were. Donald Schroeder, a full-time employee
of Garwood and its union committeeman in the shop,
participated in the 1981 negotiations. He admitted that he
knew that the Company was having "a terrible financial
problem at the time," and that the Company asked for
additional concessions from the Union during negotia-
tions.
C. The Subcontracting of Work
In the fall months following the signing of the 1-year
agreement with the Union, the Respondent's business
was suffering a "general downturn" and was losing
money.4 The officers had previously tried to sell the
business without success, so they decided to "cut their
losses," and get out of the installation and service part of
their business. To cut its losses the Company sought to
reduce its labor costs, its rent, its heating and electricity
bills, and its insurance premiums.
At this time the bargaining unit employees consisted of
apparently four employees, Donald Schroeder, Howard
3 This agreement contained a seniority list that set forth the names of
eight employees as of September 1, 1978
4 The Respondent's accountant, an independent certified public ac-
countant, testified credibly that for the fiscal year, which ended on July
31, 1981, the Company had a net operating loss of approximately $33,000,
and that for the first 3 months of the new fiscal year, as of October 31,
1981, the loss was approximately $16,000
GARWOOD-DETROIT TRUCK EQUIPMENT
Sherfey, Timothy Beltowski , and Larry Bettencourt.5
Bettencourt, a utility man, had been laid off in October
or November 1981. Beltowski, a mechanic-welder, in
November 1981, and Sherfey, another mechanic-welder,
in December 1981 Schroeder, who was the top seniortiy
employee, was on voluntary layoff in December and had
notified the Company that he was going to bump Sher-
fey after the Christmas holidays
In early December 1981, Arnold Essig and Adron
Childress, who had previously done some work for the
Respondent, approached the Connors about the possibili-
ty of taking over the Company's service function. There
were several conferences between the Respondent and
Essig and Childress, and in the last week of December
the Respondent decided to subcontract its service work
to Essig and Childress. An attorney was called in who
proceeded to draft an agreement based on prearranged
terms. On January 4, 1982, on the first working day after
New Year's Day the two Connors signed the agreement
on behalf of the Respondent and Essig and Childress
signed as the president and vice president of Essig and
Childress, Inc (R. Exh 3)
The prefatory clauses of the agreement plainly set
forth the purposes of the agreement. (1) Garwood was
desirous of eliminating its service and mounting depart-
ment in order to reduce costs, (2) to maintain good rela-
tions with its customers and to provide its customers
with readily available service and mounting it was
"hiring an independent contractor to perform such serv-
ices," and (3) Essig and Childress would rent space and
equipment from Garwood and provide "services as an
independent contractor as requested bay GARWOOD
for customers of GARWOOD."
The agreement set forth that the Respondent leased to
Essig and Childress the shop, paint shop, and all of the
equipment set forth in III, A, above. It also provided
that Respondent was retaining Essig and Childress to
provide products and services for Garwood and its cus-
tomers, and that Garwood had no right to exercise any
control over the employees of the subcontractor. Com-
pensation for the subcontractor "for any work performed
by them on behalf of GARWOOD shall be in amount as
can be agreed upon by the parties for each job per-
formed "
D. Union Knowledge of the Subcontracting
On January 11, Schroeder received from the Respond-
ent at his home a letter dated January 5 , 1982. (G.C.
Exh. 3. ) This letter informed Schroeder that the Compa-
ny had entered into an agreement with an independent
contractor to perform the service and mounting work re-
quired by its customers and was, therefore , eliminating
its service and mounting department . The final paragraph
requested that he pick up his tools by January 15. This
was the first notice that any employee in the bargaining
unit, or the Union itself, had received from the Company
that it was going to subcontract work , or that it was
going to eliminate that department.
5 Union President Terry testified that he believed there had been five
employees , but he did not cite names
119
Schroeder thereupon telephoned the union president
and informed him of the letter he had just received.
Upon Terry advising him to file a grievance, Schroeder
went to the plant of the Respondent. When he entered
the shop he saw two men working on an International
truck that unit employees had previously worked on.6
Schroeder then talked to Bruce Connor as to why he
had been laid off, and was informed that it was because
of financial difficulties.
Following this conversation Schroeder went to the
union office arriving about 2 or 3 p.m. By this time,
Terry had received a letter from the Respondent also
dated January 5, which was virtually identical to the
letter sent to Schroeder. Schroeder and Sherfey then
filled out a formal grievance which stated that the griev-
ance was being filed "because outside employees are per-
forming work normally done by members of the bargain-
ing unit." Schroeder delivered the grievance to Bruce
Connor, who proceeded to write on the reverse side
thereof under foreman 's Disposition , "This grievance has
no basis in fact Please refer to grievance form #2855
dated July 24, 1978. This issue was settled at that time.
Past procedure has been to contract out work as neces-
sary."'
E. Postsubcontracting Events
Subsequent to January 11, Terry advised Bruce
Connor that the Company was violating their collective-
bargaining agreement by its use of subcontractors to do
bargaining unit work . The company vice president con-
tended that their attorney had advised them that they
had a legal right to do so. Terry then contracted the
Union's legal counsel who suggested that the Union ex-
amine the books of the Company so as to determine its
economic situation.
In the middle of February, the Union 's representatives
audited the books of the Respondent As a result of the
audit, it was concluded by the Union that the Company
was in very bad financial condition and that it had lost
thousands of dollars.
About January 23, Schroeder returned to work for the
Respondent as a utility man. In this classification he did
not perform mechanic-welder work as he had formerly
done, but chased parts and performed maintenance work
in the building . While this was an easier job than his
former one, it also carried a lower rate of pay At some
subsequent undisclosed time, Sherfey apparently became
an employee of Essig and Childress, as Schroeder ob-
served him working in the shop on service work
In March , Terry requested a meeting with the Compa-
ny as the next step of the grievance procedure . A meet-
ing was held in late March, at which Terry, Schroeder,
and Sherfey were present for the Union Donald and
Bruce Connor represented the Company . Terry informed
the company representatives that he wanted to settle the
issue of subcontracting as they were in violation of their
labor agreement . He stated that the Union would consid-
6 Schroeder subsequently learned that the two workers were Essig and
Childress
' Grievance form 2855 was not produced , nor otherwise further identi-
fied
120 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
er concessions so as to work out a compromise that
would get the laid-off employees back to work. Bruce
Connor stated that the Company's problem was a short-
age of money and that concessions would not help He
did suggest the possibility of the employees buying the
corporation or buying into the corporation. The vice
President also suggested that the employees do piece
work These suggestions were turned down by the
Union.
At the Union's request, the parties met again in mid-
April with same people present who attended the March
meeting. As President Connor testified, the parties went
over the same ground as in the March meeting. The
Union wanted their members put back to work and re-
quested that the matter be arbitrated. The Company re-
fused to submit the issue to arbitration, and under the
terms of the collective-bargaining agreement, no griev-
ance could be arbitrated unless mutually agreed to.
As the months went on, Essig and Childress continued
to handle the service work assigned to them by the Re-
spondent as a subcontractor Also, that firm could solicit
work from sources other than Garwood, and perform
such work on the leased premises The Respondent sold
no more truck equipment parts at wholesale as it had
done prior to January 4, but only sold such parts at
retail. Schroeder was the only employee in the bargain-
ing unit working for the Respondent after January 24.
One more meeting was held by the parties, and this
occurred in December, when the Company requested it.
This time each side was represented by counsel, but no
more progress was made toward settlement than had
been achieved in the March and April meetings. Again,
the Company's financial situation was discussed. The
only new matter revealed by the record was that the
Company raised the possibility of the employees becom-
ing subcontractors like Essig and Childress in which case
they would be self-employed. This was rejected by the
Union
The General Counsel contends that, even though the
Respondent was in a serious financial position, its deci-
sion to subcontract out the service work to a subcontrac-
tor, and lay off unit employees as a consequence, during
the terms of a collective-bargaining agreement, consti-
tutes a midterm repudiation of the agreement in violation
of Section 8(a)(1) and (5) and Section 8(d) of the Act In
addition, the General Counsel contends that the Re-
spondent had a duty to bargain about the effects of the
subcontracting prior to the effective date and that the
Company failed to do so. He further argues that there
was no past practice that would constitute a waiver of
the Union's statutory right to challenge the subcontract-
ing of work by the Respondent.
The Respondent asserts that it had the legal right to
subcontract the work and layoff the employees as this
decision was not based on union animus but was, in fact,
a partial closing motivated solely by the precarious finan-
cial condition of the Company. The Respondent also
denies that it had a duty to bargain with the Union con-
cerning the effects of its decision to subcontract but, in
any event, it did so bargain with the Union.
G. Analysis and Conclusions
The Respondent's contention that there was no union
animus involved in its decision to subcontract the service
work is well supported by the record Union President
Terry described their relationship as extremely good and
committeeman Schroeder described it as excellent. How-
ever, this of itself is immaterial as to the General Coun-
sel's case against the Respondent ACF Industries, 231
NLRB 83 (1977), enfd. 592 F.2d 422 (8th Cir 1979).
The record also establishes that Garwood was faced
with severe financial problems in August 1981, when it
negotiated the 1-year agreement, and that this condition
was known to the union negotiators. The union repre-
sentatives also knew that the work force had disminished
from seven employees to four in the 3 years since the
execution of the 1978 bargaining agreement.
However, the Company did negotiate a collective-bar-
gaining agreement in the summer of 1981 with the
Union, and it was bound by the terms of this agreement,
and the applicable provisions of the National Labor Re-
lations Act. Section 8(d) provides that an employer and a
union are required to bargain, among other things, over
"terms and conditions of employment."
The General Counsel argues that the facts in this case
fall squarely within the holding of the Supreme Court in
Fibreboard Corp. v. NLRB, 379 U.S. 203 (1964). The Re-
spondent contends that Fibreboard is not applicable to
the facts of this case, and argues that its case falls within
the Court's holdings in First National Corp. v. NLRB,
452 U.S. 666 (1981). I find merit in the General Counsel's
position.
It is true that in Fibreboard the Court did not decide
that all subcontracting was a matter of mandatory collec-
tive bargaining . However, the Court did decide that on
the facts of that case the employer was obligated to bar-
gain with its union before it subcontracted the work to
an outside contractor I find that the subcontracting facts
in Fibreboard are on all fours with the facts in the instant
case. The Court in Fibreboard succinctly described the
type of subcontracting involved therein as "the replace-
ment of employees in the existing bargaining unit with
those of an independent contractor to do the same work
under similar conditions of employment "
This is exactly what Garwood did in the instant case.
It replaced its own employees with those of Essig and
Childress, to do the same service and mounting work on
customers' trucks, using the same tools, equipment,
cranes, bays, and plant working area formerly used by its
own employees. The Court held that under such facts,
the Act requires the employer to bargain collectively
with the representatives of its employees about the plan
to subcontract such work
The Respondent contends that its agreement with
Essig and Childress constituted "a partial closing" and,
therefore, under the holdings of First National Corp., it
was not required to bargain with Local 189 over its
agreement with Essig and Childress. While the Board
has concisely stated that "the distinction between sub-
contracting and partial closing is not always readily ap-
GARWOOD-DETROIT TRUCK EQUIPMENT
parent," I find such statement inapplicable to the instant
case. There was no closing of Garwood's service depart-
ment, partial, limited, or otherwise. On January 4, when
Essig and Childress started working in the Respondent's
shop, they merely picked up right from where Gar-
wood's employees left off in December, with one of their
earliest jobs being the transfer of a body on an Interna-
tional truck, a truck which unit employees had previous-
ly worked on. Both before and after the subcontract,
Garwood engaged in the identical business of servicing
and mounting equipment on trucks at its shop in Warren,
Michigan, and billing these customers for the parts in-
stalled and the works done. The only difference is that
the service work is now performed by Essig and Chil-
dress employees pursuant to the subcontracting agree-
ment, rather than by the Respondent's employees. Thus,
it is clear that the Respondent did not engage in a major
shift in the direction of the Company, and the nature of
its business was not substantially altered by the subcon-
tract.
Other factors are to be considered in determining the
suitability of the matter of subcontracting to the collec-
tive-bargaining process. They are the extent of capital
expenditures, and the ability of the Union to engage in
meaningful bargaining in view of the employer's situation
and objectives. Fibreboard Corp., supra. Garwood was
not required to engage in any capital restructuring or in-
vestment. The shop area subleased to Essig and Childress
still is subject to Garwood's dominion and control, as it
is the primary lessee of these premises and Essig and
Childress, its tenant, can be removed by a 60-day written
notice. In short, there was no immediate or subsequent
restructuring of capital required by Garwood's decision
to subcontract service work and, therefore, such element
could not remove the decision to subcontract from the
scope of the Respondent's mandatory bargaining obliga-
tion.
As to the last factor to be considered, the ability of the
Union to engage in meaningful bargaining, it is readily
apparent that in December 1981, the Union could have
engaged in significant bargaining to alleviate the financial
situation of the Company. If the Company had broached
its desire to subcontract the work and lay off its employ-
ees, the Union would have been faced with a hard
choice, a position in which many unions have found
themselves during the last few years. But it would have
been a choice that the Union could do something about
if it wanted to, such as, an offer to cut its members'
wages substantially, and thus reduce the Respondent's
cost. The Union could have agreed to cut or waive over-
time rates, cut or waive fringe benefits, cut the vacation
period, or cut the number of paid holidays. It was also
possible for the Union to offer that its members work at
piece rates. Certainly, in today's industrial market, con-
cessions are being made every day by employees when
they are faced with hard economic facts on the possible
survival of their employer, and the survival of their jobs.
Thus, it is clear that the bases and objectives in the
Respondent's decision to subcontract were precisely suit-
able for resolution through the collective-bargaining
e Bob's Big Boy Family Restaurants, 264 NLRB 1369 (1982)
121
process This the Respondent did not allow the Union to
do I, therefore, find and conclude that the Respondent
violated Section 8(a)(1) and (5) and Section 8(d) of the
Act by subcontracting its service work and laying off its
unit employees without notice to the Union and without
giving the Union an opportunity to bargain concerning
the subcontracting. Milwaukee Spring Division, 265
NLRB 206 (1982) [reversed and dismissed 268 NLRB
601]; Los Angeles Marine Hardware Co., 235 NLRB 720
(1978), enfd. 602 F.2d 1302 (9th Cir. 1979).
While the Respondent contends it did bargain over the
effects of its decision to subcontract, I do not find that it
did. Obviously Respondent did not bargain before the
layoff of its employees as it gave the Union no advance
notice whatsoever prior to Essig and Childress' com-
mencing work on January 4 Thus, the Union, during the
most critical period of December, at the very time that
bargaining would have been most productive, was kept
completely unaware of Respondent's intention to subcon-
tract the work and lay off the shop employees. This it
may not do. Ozarks Trailers, 161 NLRB 561, 564, (1966).
Since the Respondent does not state in its brief how it
bargained about the effects of its decision, it apparently
relies on the meetings held between the Respondent and
Local 189 in March and April. Both of these meetings
were requested by the Union and held many weeks after
the subcontracting commenced. They were actually an
exercise in futility as the genie was long out of the
bottle. In the context of the facts in this case, the Re-
spondent had the duty to afford the Union opportunity
to bargain over the effects of its decision to subcontract
and lay off its employees, once the decision was made.
This it did not do. Accordingly, I find that the Respond-
ent's failure to afford the Union an opportunity to bar-
gain over the effects of its subcontracting was a violation
of Section 8(a)(1) and (5) of the Act. Stagg Zipper Corp.,
222 NLRB 1249 (1976); Summit Tooling Co, 195 NLRB
479 (1972).
The Respondent also relies on the case of NLRB Y.
Adams Dairy, 350 F.2d 108 (8th Cir. 1965). However, I
find this case to be inapposite. In Adams, the Eighth Cir-
cuit held that the decision of the dairy to terminate a
phase of its business by ceasing to distribute milk by its
own employees in company trucks and to distribute its
products through independent contractors was not a re-
quired subject of collective bargaining The court found
that there was more than just the substitution of one set
of employees for another, that, in addition, there was "a
change in the capital structure of Adams which resulted
in a partial liquidation and a recoup of capital invest-
ment " But Garwood liquidated no equipment and re-
couped no capital investment. Essig and Childress used
the identical equipment that the Respondent's employees
had used, and the depreciation of such equipment would
be the same whether used by the subcontractor's em-
ployees or Garwood's employees. While Adams re-
couped its trucks, Garwood recouped nothing, as its
shop and equipment kept being used as if there had been
no change.
Finally, we have the Respondent's claim made during
the course of the hearing that there had been a past prac-
122 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
tice in which the Company had subcontracted out work
and that the Union had accepted such practices, thus
barring its current contesting of contracting out. Little
specific testimony was offered by either side on this sub-
ject . Schroeder admitted that there had been some work
contracted out to other companies when the Respond-
ent's employees were backed up with a whole lot of
work . Bruce Connor testified that the Company had con-
tracted out work in the past to meet production sched-
ules. He also admitted that , in 5 years he had worked for
the Company, there had never been a time when Gar-
wood employees had to be laid off because of the sub-
contracting of work.
Since the record shows that there had been no subcon-
tracting out of work that caused any employee to be laid
off, it is clear that there was no past practice that could
in anyway constitute a waiver of the Union's right to
challenge the subcontracting of work, which caused em-
ployees to be laid off. A CF Industries , supra.
CONCLUSIONS OF LAW
1. The Respondent is an employer engaged in com-
merce within the meaning of Section 2(2), (6), and (7) of
the Act.
2. The Respondent, by unilaterally subcontracting its
service and mounting work without prior notice to the
Union, and without affording the Union an opportunity
to bargain over the subcontracting decision during the
term of the collective-bargaining agreement between the
Respondent and the Union, has unlawfully modified the
terms and conditions of that agreement in violation of
Section 8(a)(1) and (5) and Section 8(d) of the Act.
3. The Respondent, by failing and refusing to bargain
with the Union concerning the effects upon the employ-
ees of subcontracting the work, has engaged in unfair
labor practices within the meaning of Section 8(a)(1) and
(5) of the Act.
4. The aforesaid unfair labor practices affect commerce
within the meaning of the Act
THE REMEDY
Having found that the Respondent has engaged in cer-
tain unfair labor practices, I shall order it to cease and
desist therefrom and to take certain affirmative action de-
signed to effectuate the policies of the Act.
Having found that the Respondent violated Section
8(a)(1) and (5), I shall order it to rescind its decision to
subcontract its service and mounting work, and to re-
store the status quo ante by having its service and
mounting work performed by the employees in the bar-
gaining unit. In order to further restore the status quo
ante the Respondent will be required to recall any em-
ployees so laid off and offer to reinstate them to the posi-
tions they held before their unlawful layoff or, if those
positions no longer exist , to substantially equivalent posi-
tions without prejudice to their seniority and other rights
and privileges. I shall further order the Respondent to
make these employees whole for any loss of earnings
they may have suffered by reason of the illegal actions
against them Backpay shall be based on earnings which
each such employee would have earned from the Janu-
ary 4, 1982 layoff until one of the following conditions is
met:
(a) Mutual agreement is reached with the Union
relating to subjects about which Respondent is re-
quired to bargain
(b) Good faith bargaining results in a bona fide
impasse
(c) The failure of the Union to commence negoti-
ations within five days of the receipt of Respond-
ent's notice of desire to bargain
(d) The failure of the Union to bargain in good
faith
The backpay will be less net earnings during such
period and shall be computed on a quarterly basis, with
interest, in the manner prescribed in F. W. Woolworth
Co., 90 NLRB 289 (1950), and Florida Steel Corp, 231
NLRB 651 (1977). See generally Isis Plumbing Co., 138
NLRB 716 (1962).
[Recommended Order omitted from publication.]