Griffith-Hope Co.

National Labor Relations Board - Board Decisions

May 23, 1985

275 N.L.R.B. 487 (N.L.R.B. 1985)

GRIFFITH-HOPE CO'
Griffith-Hope Company and Local No. 1677, United
Steelworkers of America. Cases 30-CA-7313
and 30-CA-7529
23 May 1985
DECISION AND ORDER
By CHAIRMAN DOTSON AND MEMBERS
HUNTER AND DENNIS
On 11 August 1983 Administrative Law Judge
Thomas' D. 'Johnston issued the attached decision.'
The Respondent filed exceptions and a supporting'
brief, and the General Counsel filed a 'brief in re=
sponse to the Respondent's exceptions and in sup-
port of the judge's decision.
The Board has considered the decision and the
record in light of the exceptions and briefs' and
has decided to affirm the judge's rulings, findings,
and conclusions as modified herein. '
The facts are set forth' fully in the judge's deci-
sion . The parties' most recent collective-bargaining
agreement is effective 1 August 1982 through 31
July 1985. It does not mention subcontracting, and
the parties did not- discuss subcontracting during
their contract negotiations. In late October 1982,2.
the Union suspected that the Respondent had'sub-
contracted unit work and that, as a result , the Re-'
spondent would lay off unit employees. Union Staff
Representative Thomas Medley asked the --Re-
spondent's executive ' vice president Samuel Hope
III about the situation. Medley conveyed the
Union's concern that subcontracting would cause
layoffs, and asked that, before the Respondent
would lay off employees, it would' meet with the
Union to see what relief the unit could offer so as
to avert the need for layoffs.
In a letter the Respondent presented` to • its bank's
executive vice president at the outset of its 19 Oc-
tober meeting with the bank, the Respondent. in-
formed the bank that it had already implemented a
subcontracting program because "employee wages
and past-negotiated benefits continue to be the
most expensive cost 'item we have. This fact is so
apparent that we have concluded we simply cannot
afford the luxury of all that in-house labor'
The entire 'program of subcontracting . . -. will be
continued to substantially reduce these-employee-
related costs'.".
Around 10 November, the Respondent gave the
Union a list of 11 employees it would lay off on 12
November. The layoff occurred as scheduled. The
Respondent's vice president of manufacturing told
The Respondent has requested oral argument The request is denied
as the record , exceptions, and briefs adequately present the issues and the
positions of the parties.
2 Unless noted otherwise , all dates are in 1982
487
the union president the layoffs were, in part, a
result of the subcontracting. The Respondent in-
creased the amount of its subcontracting and on 17
December it laid off 25 employees and, in the first
week of January 1983, 4 more. The Respondent did
not bargain with the Union about either the deci-
sion to subcontract or its effects.
After the January layoffs, the Union filed unfair
labor practice charges and a grievance. In early
February 1983 at one of the grievance meetings,
the Respondent told the Union it would recall em-
ployees if they would take a 50-percent cut in
wages and benefits.
In Otis Elevator Co., 269 NLRB 891 (1984), we
reevaluated the scope of an employer's obligation
under Section 8(d) of the Act to bargain with a
certified bargaining . representative about various
management decisions and their effects. The plural-
ity opinion in,Otis establishes that, when a particu-
lar management, decision turns upon labor costs, it
falls within the scope of Section 8(d) and concerns
a 'mandatory subject of bargaining. In the present
case, the evidence shows that the Respondent's de-
cision to subcontract was a mandatory subject of
bargaining. In both its 19 October letter to its bank,
and its February 1983 offer to employees to return
from layoff at 50 percent of the wages and benefits
set forth in the parties' contract, the Respondent
indicated that its decision to subcontract unit work
turned upon labor, costs within the meaning of Otis.
Further, it is clear from the record that the Re-
spondent viewed the subcontracting program as a
temporary one that did not effect a fundamental
change in the nature of its operation. Accordingly,
we find that the Respondent violated Section
8(a)(5) and (1).of the Act when it made the deci-
sion to subcontract without fulfilling its obligation
to bargain first with the Union.3 -
Notwithstanding our determination that the Re-
spondent violated the Act when it subcontracted
without bargaining with the Union, we reverse the
judge's additional finding that- the Respondent's
subcontracting also violated Section 8(a)(3) and (1)
of the Act...Although the Respondent subcontract-
ed its work to avoid- paying the contractual wages
8 Although not addressed in any of its exceptions, in its brief to the
Board the Respondent suggests that the fudge-should have deferred the
unfair laboi practice matter to the parties' grievance-arbitration system
We find no merit to this argument as the Respondent never argued
before the judge that he should defer the subcontracting dispute to the
parties' gnevance-arbitration procedure MacDonald Engineering Co, 202
NLRB 748 (1973) -
In addition to the relief the judge recommended, we will also order the
Respondent to remove from its files any reference to the resultant unlaw-
ful layoffs and to notify the affected individuals that this has been done,
and that its unlawful conduct will not be used as a basis for future per-
sonnel actions concerning them See Sterling Sugars, 261 NLRB 472
(1982)
275 NLRB No.. 73
488 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
and benefits, we do not. find its unlawful action was
"inherently destructive" of its employees' Section 7
rights. In particular,.we rely on the judge's finding
there was no evidence of union animus . ,According-
ly, we shall dismiss that part of the complaint that
alleged the Respondent's decision to subcontract
violated Section 8(a)(3) and (1) of the Act; this par-
tial dismissal does not affect the remedy.4
The judge also found that the Respondent violat-
ed Section 8(a)(5) and ( 1).by changing its insurance
carrier on 1 October from a superior one to an in-
ferior one and then taking excessive paycheck de-
ductions from certain employees, all without bar-
gaining with the Union. The Union filed both an
unfair labor practice charge and a grievance over
the insurance change. The Respondent later supple-
mented the insurance with its own coinsurance,
ceased overdeducting money from employee pay-
checks, and reimbursed employees for the excessive,
paycheck deductions it had previously made. The
Respondent urged the judge to defer resolution of
this dispute to the parties' grievance procedure, but
he refused on the ground that the issue did not `in-
volve a matter of contract interpretation. The
judge ordered the Respondent to cease and desist
from making such unilateral changes. However, he
recommended no further remedy because the col-
lective-bargaining agreement authorized the Re-'
spondent to change insurance carriers provided the
benefits were equal or better, and the Respondent
subsequently met that condition as well as refunded
any excessive deductions.
We find merit in the Respondent's exception to
the judge's failure to defer- this issue to the griev-
ance and arbitration' procedures of the parties' col-
lective-bargaining agreement. In United Technol-
ogies Corp., 268 NLRB 557 (1984), the' Board held
that, where an employer and a union have volun-
tarily elected to create dispute resolution machin-
ery culminating in final and binding arbitration, it is
contrary to the basic principles of the Act for the
Board to jump into-the fray prior to an honest at-
tempt by the parties to resolve their disputes
through that machinery. Here, the parties met on a
matter covered by the collective-bargaining agree=
ment and resolved their dispute through the griev-
ance mechanism. The Union's president Obreno-
vich, who was responsible for handling grievances,
testified that, by, meeting with the Respondent after
the Union filed its grievance' over the ,insurance,
Obrenovich accomplished everything the Union
was seeking. The matter was appropriate for, defer-
ral and we find that deferral to the resolution
See Pennsylvania Energy Corp, 274 NLRB 1153 ( 1985), Stone &
Thomas, 221 NLRB 573 (1975), American N eedle & Novelty Co, 206
NLRB 534 (1973)
reached through the grievance procedures is also
appropriate. Accordingly, we shall dismiss that
part of the complaint.
AMENDED CONCLUSIONS OF LAW
1. Substitute the following for Conclusion of
Law 5.
"5. By unilaterally subcontracting its bargaining
unit work beginning about October 1982, without
notifying or bargaining with the Union-over its de-
cision to do so or about the effects of the decision
on the unit employees , the Respondent has engaged
in unfair labor practices in violation of Section
8(a)(5) and (1) of the Act."' .
2. Delete Conclusion of Law 6 and renumber the
subsequent paragraph accordingly.
ORDER -
The National Labor Relations Board orders that
the Respondent, , Griffith-Hope Company, West
Allis, Wisconsin, its officers, agents, successors, and
assigns , shall, -' _
1. Cease and desist from -
(a) Subcontracting bargaining , unit work without
prior notice. to and bargaining with the Union.
. (b) Laying off unit employees by unilaterally
subcontracting bargaining unit work.
(c) 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) Terminate its subcontracts for bargaining unit
work which -have resulted in the 40 unit employees
being laid off work as a result on 12 November and
17 December 1982 and in January 1983. - -
(b) Reinstate at its plant the bargaining unit work
previously performed by its employees represented
by the Union, and offer to those 40 employees laid
off work as a result of the unilateral subcontracting
of bargaining unit work found herein immediate
and,full reinstatement to their former jobs or, if
those jobs no longer exist, then to -substantially
equivalent jobs, without prejudice to their seniority
and , other rights and privileges, and. make them
whole for any loss of earnings and other, compensa-
tion they may have suffered by laying them off
work in the manner set forth in the remedy section
of the-judge's decision, as modified herein.
;(c) Bargain collectively with the Union about
any decision to subcontract when the decision is
based on labor costs.
(d) Expunge from its files any reference to the
unlawful layoff and notify the affected employees
in writing that this has been done and the evidence
GRIFFITH-HOPE CO.
of their unlawful layoffs will not be used against
them in any way.
(e) 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.
(f) Post at its West Allis, Wisconsin plant copies
of the attached notice marked "Appendix."5
Copies of the notice , on forms provided by the Re-
gional Director for Region 30, after being signed
by the Respondent 's authorized representative,
shall be posted by, the Respondent immediately
upon receipt and maintained for 60 consecutive
days in conspicuous places including all - places
where notices to employees are customarily posted.
Reasonable steps shall be taken by the Respondent
to ensure that the notices are not altered , defaced,
or covered by' any other material.
(g) Notify the. Regional Director in writing
within 20 days from the date of, this Order what
steps-the Respondent has taken to comply.
IT IS FURTHER ORDERED that the complaints be
dismissed insofar as they allege unfair labor prac-
tices not specifically found herein.
MEMBER DENNIS , concurring in the result.
I agree that the Respondent violated Section
8(a)(5) by subcontracting unit work without bar-
gaining with the Union over. the decision or its ef-
fects . Applying the two-step test set forth in my
concurring opinion in Otis Elevator Co., 269 NLRB
891, 895 (1984), I find first that the Respondent's
decision was "amenable to resolution through the
bargaining process." The Respondent's statement
to its bank , quoted in the majority opinion , reveals
that labor costs were a significant consideration in
the decision to subcontract . Turning to the second
part of my Otis test , the Respondent's decision did
not represent a significant change in business oper-
ations . Further, the evidence does not establish the
presence of any other burden elements- such as a
need ' for speed or confidentiality . Accordingly, I
conclude that the benefit for the collective-bargain-
ing process outweighs any burdens placed on man-
agement that are apparent from the record.'
I 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 Judgment
of the United States Court of Appeals Enforcing an Order of the Nation-
al Labor Relations Board "
i It is unnecessary to decide whether the subcontracting also violated
Sec 8(a)(3), as the finding, of such an additional violation would not
affect the remedy
I also concur in the majority's decision to defer the alleged 8(a)(5) uni-
lateral change in insurance coverage to the settlement the parties reached
489
pursuant , to their grievance procedure See Alpha Beta Co, 273 NLRB
1546 (1985).
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 collectively with
Local Union No. 1677, United Steelworkers of
America as the exclusive bargaining representative
of our employees in the appropriate unit described
below with respect to wages, hours, and other
terms and conditions of employment. The appropri-
ate unit is:
All production and maintainence employees of
the Employer; excluding office clerical em-
ployees, professional employees, guards and
supervisors.
WE WILL NOT unilaterally subcontract bargain-
ing unit work, or otherwise' change the wages,
hours, and other terms and conditions of employ-
ment of our unit employees, without prior notice to
and bargaining with the above-named Union or any
other labor organization they may 'select as their
exclusive bargaining representative.
WE WILL NOT lay off unit employees by unilater-
ally subcontracting bargaining unit 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 except to the extent that such
rights may be affected by an agreement requiring
membership in a labor organization as a condition
of employment as authorized in Section 8(a)(3) of
the Act.
WE WILL terminate our subcontracts for bargain-
ing unit work which have resulted in the 40 unit
employees being laid off work on 12 November
and 17 December 1982 and in January 1983.
WE WILL reinstate at our plant the bargaining
unit work previously performed by our employees
represented by the above-named Union and WE
WILL offer to those 40 employees who were laid
off work, as a' result of the unilateral subcontract-
ing of bargaining unit work herein found, immedi-
ate and full reinstatement to their former jobs or, if
those jobs no longer exist, then to substantially
equivalent jobs, without prejudice to their seniority
490 DECISIONS OF NATIONAL' LABOR RELATIONS BOARD
and other rights and privileges, and WE WILL make
each of them whole for any loss of earnings and
other compensation they may have suffered by our
laying them off work, with interest. -
WE WILL expunge from our files any references
to the unlawful layoffs and WE WILL notify the af-
fected employees that this has been done and that
evidence of- the' unlawful layoffs "will not be used
against them in any way. - -
WE WILL bargain collectively- with Local Union
No. 1677, United Steelworkers of America as the
exclusive bargaining representative of our employ-
ees in the' aforesaid appropriate unit with respect to
wages,' hours, and other -terms and conditions of
employment. - -1 -1
WE 'WILL bargain, collectively with the Union
about any decision to-subcontract when the ; deci-
sion is based on labor costs.
. -GRIFFITH-HOPE COMPANY
DECISION
STATEMENT OF-THE CASE
THOMAS D. JOHNSTON, Administrative Law Judge.
These consolidated cases were heard at Milwaukee, Wis-
consin, on April.28 and 29, 1983,. pursuant to a charge
filed by Local No. 1677, United Steelworkers of Amer-
ica (the Union) in, Case, 30-CA-7313 on September 2,
1982,1 and a charge filed :byc,the United Steelworkers of
America (the International) in Case 30-CA-7529 'on Jan-
uary 5, 1983, and complaints issued in those cases on De-
cember •17:and February 14, 1983, respectively.
The complaints allege that Griffith-Hope Company
(the Respondent) -,violated . Sections 8(a)(1) and (5) and
8(d) of the ,National:Labor,-Relations Act (the Act) -by
failing and,, refusing to . bargain -in good faith with the
Union. by unilaterally, without prior notice to or afford-
ing the Union an opportunity, to negotiate and bargain,
changing during the existing, collective-bargaining agree-
ment-the -.-insurance carrier providing medical insurance
coverage, to-the unit employees, and deducting from the
paychecks of certain of the unit employees the difference
in ,the;.premium cost between the premium paid to the
new medical insurance carrier and the premium cost paid
to the, Health ,Maintenance Organization (HMO). The
Respondent also violated Section 8(a)(1), (3), and (5) and
Section . 86) of-the, Act by failing and refusing to bargain
in good faith with the,Union by subcontracting, without
prior ,notice _to or bargaining with the Union concerning
the decision and/or, the, effects of the decision' occurring
during; te!term of,the collective-bargaining agreement,
the vast majority of its bargaining unit work to outside
companies and discrimmatonly laid off. approximately 11,
25 and ; 4r of its 0- unit employees as- a. consequence of
said subcontracting'which'was"a midterm repudiation of
its collective-bargaining agreement with the Union, and
All dates referred to are in 1982 unless otherwise stated
the layoffs were inherently destructive of employees'
rights under Section 7 of the Act.
The Respondent in its answers dated January 11 and
February 24, 1983, denies having violated the Act as al-
leged and asserts various affirmative defenses. With re-
spect to the allegations pertaining to changing insurance
carriers and making certain deductions, the Respondent's
affirmative defenses are those matters should be referred
to the grievance and arbitration process under Collyer In-
sulated Wire, 192 NLRB 837 (1971), pursuant to a,griev-
ance the Union filed on _ September 9; the Respondent
had a contractual right to change insurance carriers
which it had followed; the deduction of the difference
between the premiums paid to the new insurance carrier
and contributions paid to HMO were in accordance with
the collective-bargaining agreement ; the Respondent in
making HMO contribution deductions acted pursuant to
HMO regulations; and.the deductions were made in ac-
cordance with past practice and the Union, waived its
right, to challenge current deductions, which like earlier
deductions were made pursuant to'a right expressly re-
served in the past and present collective- bargaining
agreements. Those affirmative defenses raised are: sub-
contracting has been done since at least 1952 and no col-
lective-bargaining agreement has limited such right; the
management-rights provision encompasses the right to
subcontract; the absence.of a prohibition against subcon-
tracting coupled-with the retention of rights clause in the
management-rights provision gives it-the right to subcon-
tract; and even assuming the Respondent was required
by the collective-bargaining agreement or the Act to bar-
gain with the Union regarding subcontracting, the pre-
cipitous and wholly unexpected change for the worse in
October 1982 in the Respondent's financial situation2
gave it no time (and thus no duty) to bargain over any
decision td subcontract.
The issues involved are whether the Respondent vio-
lated Section 8(a)(1), (3), and (5) and Section 8(d) of the
Act as alleged by 'refusing to bargain with the Union in
good faith by unilaterally changing its insurance carrier;
deducting the difference in premium cost paid to the
new insurance carrier and those paid to HMO; subcon-
tracting bargaining unit work; discriminatorily laying off
40 employees as. a result of such subcontracting; and
whether the affirmative defenses raised by the Respond-
ent are valid.
On the entire record in this case and from my observa-
tions of the witnesses and after due consideration of the
z This financial situation was described as follows In October, a new
cost-accounting system showed Griffith-Hope to be unable to survive,
much less remain competitive , given its outmoded plant and machinery
and its overhead and employment costs At the same time, the Compa-
ny's bank changed the status of Griffith-Hope's $850,000 debt from a
demand note to a cash-collateral account This meant that the bank
could close the Company 'at any time Griffith-Hope's lender made it
clear' that the Company would be forced to close if immediate and drastic
steps were not taken to begin showing a profit A lack of money prevent-
ed the Company from making much -needed changes in its plant and ma-
chinery, so the bank demanded a deduction in employment costs How-
ever, any layoff due to subcontracting will be temporary, not permanent,
although the duration of such layoff is presently impossible to estimate
Griffith-Hope needs a total re-tooling before it can expect to remain com-
petitive'in the future
GRIFFITH-HOPE CO.
briefs filed by the General Counsel3 and the Respondent,
I make the following4
FINDINGS OF FACT
1. THE BUSINESS OF THE RESPONDENT
The Respondent, a' Wisconsin corporation with its
office and place of business located at West Allis, Wis-
consin, is engaged in the business of the manufacture and
nonretail sale and distribution of metal stampings and re-
lated products During the calendar years 1981 and 1982
each, the Respondent in the course of its operations sold
and shipped from its West Allis,' Wisconsin facility prod-
ucts, goods, and materials, valued in excess of $50,000,
directly to points located outside the State of Wisconsin.
The Respondent is an employer engaged in, commerce
within the meaning of Section 2(6) and (7) of the Act.
II. THE LABOR ORGANIZATION INVOLVED
Local No. 1677, United Steelworkers of America is a
labor organization within the meaning of Section 2(5) of
the Act.
III. THE UNFAIR LABOR PRACTICES
A. Background and the Bargaining Unit
The Respondent operates a plant located at West Allis,
Wisconsin, where it is engaged in the manufacture and
nonretail sale and distribution of metal stampings and re-
lated products. Included among its officers and supervi-
sory personnel are President Samuel Hope Jr., Executive
Vice President and Treasurer Samuel Hope III, Vice
President of Manufacturing Raymond Brzenk, Comptrol-
ler Gary Perschbacher, and Plant Superintendent Joseph
Selz. Members of the board of 'directors include Presi-
dent Hope Jr., who is the chairman, Executive Vice
President Hope. III, Mrs. Hope Jr., Roland Sprenger,
Herman Linke, and Davis.
Since about 1934, the Union has had successive collec-
tive-bargaining agreements with' and has been the exclu-
sive representative of the Respondent's employees in the
following described unit which is an appropriate unit for
the purpose of collective bargaining within the meaning
of Section 9(b) of the Act:
All production and maintenance employees of the
Employer; excluding office clerical employees, pro-
fessional employees, guards and supervisors.
The Union at all .times material herein has been, and is
now, the exclusive representative of the employees in the
aforesaid unit for the purposes of collective bargaining
within the meaning of Section 9(a) of the Act.
The current collective agreement between the Union
and' the Respondent,- which was signed on August 23, is
effective by the terms from August 1, to midnight July
3 The brief filed by the General Counsel was submitted by Sharon A
Gallagher, Esq, for the General Counsel .
' Unless otherwise indicated the findings are based on the pleadings,
admissions , stipulations , and undisputed evidence contained in the record
which I credit
' 49i
31, 1985. It replaces the pnor.agreement which expired
on July 31.
B. Unilateral- Changes in Insurance Carriers and
Deductions for Premium Cost Differences
Article XX of, the current collective-bargaining agree-
ment entitled "Life and Accident ' and Sickness Insur-
ance" provides, in pertinent part, as follows:
Section` 2. Hospitalization and Surgical. The Com-
pany will continue the Health and Surgical Insur-
ance programs described as follows:
Aetna Hospital-180 day Hospital stay R. & C.
charges -
Aetna Surgical-Reasonable & Customary charges
Aetna Major-No Maximum
Medical-$25 deductible
The Company reserves the right to determine the
insurance carriers for all insurance programs de-
scribed under Article XX and agrees that- benefits
will be equal or better than had previously been ne-
gotiated . The Company agrees to provide a com-
parison of benefits prior to changing carriers.
The Company will bear the cost for both em-
ployees and dependents electing to be covered
under these programs. •
Effective 9/1/79 employees may enroll in Family'
Health Plan, a,qualified H.M.O. for one year peri-
ods. All provisions shall be as provided by Federal
Laws-covering H.M.O.'s. Benefits are - to be those
normally provided all users without adding addi-
tional cost to the Company.
The Company shall further continue this insur-
ance for retired employees and dependents. for a
five year period, subject to the following. qualifica-
tion. •
These provisions except for the future increases in ben-
efits indicated are substantially identical to sections XII
and -XIII of the prior collective-bargaining agreement,
which covered those same benefits.
During negotiations for the current collective- bargain-
ing agreement changes in the insurance benefits sought
by the Respondent were discussed. According to, the In-
ternational's staff representative Thomas Medley, who
represents the Union, as a result of such negotiations.the
Union relinquished pay for certain personal holidays and
holidays around the, Christmas shutdown period, as pro-
vided for in the prior collective-bargaining agreement,
based on the Respondent 's promise this would be a basis
of dealing with the insurance plan and keeping it as they
had it. Union President Nicholas Obrenovich • testified
that Medley offered the personal holidays to offset medi-
cal costs after the Respondent had asked for copayment
insurance with higher deductibles on the grounds the spi-
raling cost of 'medical coverage was putting a serious
cramp in their style. .
E
492' DECISIONS OF NATIONAL LABOR RELATIONS BOARD
,Medley, Obrenovich, and= the Respondent's executive
vice president Hope III all denied there was any mention
made in negotiations about changing insurance carriers.
About September -1 Obrenovich stated the Respond-
ent's vice president Brzenk informed him the Respondent
would be changing ; the insurance carrier.- Pursuant to
Obrenovich's inquiries Brzenk said the cost's would be
less and there' would be a difference of about $30 be-
tween HMO participants and the new insurance.
According to Obrenovich,. if the. base plan cost is less
than HMO--then the,employees under HMO5 have to
pay the difference. Under the Aetna,Life and Casualty
Company (Aetna) plan with its present $25 deductible,
there was no cost to those participants • under HMO,
however before the deductible was reduced to the $25
level in 1981 they did have to pay a difference in cost.
Brzenk explained if the Respondent purchased insurance
with a $100 deductible since such insurance which would
cost less than the insurance with the $25 deductible, this
would result in employees under HMO -having to pay
$32.80. - -
The following day David Kloss, who is the Union's
,vice president and insurance representative, and Obreno-
vich met .with. Brzenk at which time .,they discussed a
sheet . of paper furnished by, the Respondent listing a
comparison of the -insurance benefits.5- Kloss' version of
the meeting was Brzenk informed them the Respondent
was changing,its insurance carrier from' Aetna to Mid-
western National Insurance Company (Midwestern) and
the insurance would have a $100 deductible of which the
Respondent would pay $75 and the employee would pay
$25.-Upon their reminding Brzenk the-deductible provid-
ed for under the collective-bargaining agreement was $25
rather than $100 Brzenk agreed. Kldss and 'Obrenovich
then questioned Brzenk about how the employees under
HMO. would be affected whereupon Brzenk said they
would have to make up the difference to which- Kloss
objected as being unfair. Brzenk insisted that was the
way it had to be. - . . .
-Obrenovich, who corroborated Kloss, said he also in-
formed Brzenk if he went ahead with his plan about the
deductible he would be violating the collective-bargain-
ing agreement.'
- Brzenk, who 'acknowledged -having conversations with
Kloss - and Obrenovich in which • they questioned him
about the proposed insurance not - being the same as
Aetna,, did not dispute-their. testimony which I credit.
About - September 8. Obrenovich credibly testified
without denial that he mentioned to Executive Vice
,President Hope III that in his opinion if the Respondent
-went ahead with the $100 deductible it would violate the
collective-bargaining agreement and urged him not to do
so in order to keep himself in ,A good' light in case he
needed future-,concessions: -
Staff Representative Medley testified that in Septem-
:.-ber after learning 'from Obrenovich about the Respond-
ent s plan to change its insurance carrier he contacted
-Executive' Vice'President Hope III and informed him he
-5 Obrenovich stated Executive Vice-President Hope, III once estimated
approximately 40'percent of,the Respondent's employees were covered
by HMO - ` -
6 This particular document was not proffered as evidence
thought they had agreed that was going to be the insur-
ance that was going to govern. When Hope denied he
had violated anything Medley accused Hope of violating
the collective-bargaining agreement as it related to addi-
tional money on the deductible and said they had not
agreed that the Respondent could alter the insurance
plan. Medley mentioned that while it may not have af-
fected one group of employees by the Respondent insur-
ing itself it had a definite effect on another group of em-
ployees and that Hope knew about the employees under
HMO as they had discussed HMO during bargaining
,Medley said he would have Obrenovich follow through
on the basis of the insurance and that the collective-bar-
gaining agreement stipulated if they changed carriers the
level of benefits would remain the same. Medley also
mentioned that if the Respondent changed carriers.not
only would they provide them with the same level of
benefits but they also wanted the same level of service.
Medley indicated that while the Respondent and the
Union's committee and president could meet concerning
this, any plan finalized would be through his direction.
Hope III did not dispute Medley's testimony, which I
credit concerning this conversation. .
The Respondent, effective October 1, switched its in-
surance career from Aetna to Midwestern.
On February 12, 1983, the insurance agent who han-
dled both the Aetna and Midwestern insurance plans for
the Respondent furnished the Respondent with a summa-
ry of both plans along with a comparison of their bene-
fits.
The Aetna plan summary was as follows.
The Basic Plan provides reasonable and customary
payment, for inpatient treatment of an accident or
sickness. Additionally, the Basic` Plan will pay the
costs of surgical, lab and x-ray charges while not
confined as an inpatient
The Major-medical plan provides other benefits
such as drugs, office calls, medical equipment, artifi-
cial limbs, etc: The Major-medical will pay 80% of
all covered expenses after the $25.00 deductible has
been satisfied. The 20% "out-of-pocket" cost will
be paid by the member without a maximum dollar
limit.
The ambulance benefit is a flat $30 00 per trip to a
maximum of $90.00 per year.
The Midwestern plan summary was as follows:
This plan does not have a basic or major-medical
section. It, is, instead, a Comprehensive major-medi-
cal plan with a "calendar year deductible" for "all
causes," accident or sickness. Medical expenses are
paid as,they are incurred in a calendar year without
regard to the type of claim J inpatient, outpatient,
drugs, office calls, etc.).
Under,the . current Griffith Hope Company plan, in
a calendar year, the first.-$100.00 of medical ex-
penses is paid by the member. The next $2,000.00 of
medical expenses are paid on a shared basis with the
insurance company paying 80% ($1,600.00) and the
GRIFFITH-HOPE CO. . 493
member paying 20% ($400.00). The remaining med-
ical expenses for the balance of the calendar year
will be paid in full (100%) by the insurance compa-
ny.
There are two additional features that will limit the
amount of "out-of-pocket" costs to the member.
First is a Supplemental Accident Benefit that pays
the first $500 00 of all medical expenses relating to
an accident. The dedutible [sic] and co-insurance
will be waived in this instance.
The second, previously. explained, protects the
member with a maximum "out-of-pocket" expense
of $400.00 plus, the .$ 100.00 deductible. If-applicable,
the member is further protected by - a maximum
"out-of-pocket" expense of $1,000.00 per calendar
year, including-the: deductible, if under the family
plan. ' - . ' -
A comparison of the benefits between the two plans
was as follows:
BENEFIT AETNA MNI CURRENT PLAN .
HOSPITALIZATION 120 days per disability , R&C 365 days per disabilty , •UR&C subject to
SURGICAL CARE OR SURGERY R&C
MATERNITY R&C
PHYSICIAN VISITS IN HOSPITAL R&C
X-RAY & LAB TESTS R&C
RADIATION THERAPY R&C
FIRST AID/EMERGENCY CARE R&C
ded. & co-in.
_UR&C subject to ded. & co-in.
UR&C subject to ded & co-in.
UR&C subject to ded. & co-in
UR&C subject to ded & co-in.
UR&C subject to ded. & co-in.
if care rendered within 72 hours of UR&C within 90 days of accident, first
an accident
INPATIENT PSYCHIATRIC CARE
AMBULANCE
R&C
$30 per trip covered; $90 yearly maximum
DEDUCTIBLES
PERCENT OF CHARGES COVERED
PHYSICIAN OFFICE VISITS
PHYSICAL THERAPY
IMMUNIZATION & INJECTIONS -
MEDICAL SUPPLIES
PRESCRIPTION DRUGS
ALLERGY CARE -
PEDIATRIC CARE
OUT-PATIENT MENTAL HEALTH
SERVICES
ALCOHOLISM/DRUG ABUSE
ORAL SURGERY
$500 in full any additional subject to
ded. & co-in
UR&C subject to ded . & co-in.
UR&C subject to ded. & co-in
$25 per person per year; 2 ded. per family $100 per person per year, 3 ded . per family
per year
80% after payment of $25 ded.
80% after payment of $25 ded.
80% after payment of $25 ded
per year
.80% after payment of $100 ded.
80% after payment of $100-ded.
80% after payment of $100 ded.
Injections covered @80% after payment of Interjections convered @80% after
$25 ded.; immunization not covered nient"of $100 ded ., immunizations
80%-after payment of $25 ded.
80% after payment of $25 ded.
80% after payment of $25 ded.
80% after payment of $25 ded
Up to $500 covered yearly
45 inpatient days; $500 yearly maximum
for outpatient care
Covers gingivectomy, alveolectomy & api-
coectomy
No limit on out of pocket expenses..
The document also defined the abbreviations used, and
the term "co-in."was defined as that part of the medical
expenses that is paid by the -insurance and member to-
gether. Member means the insured or employee covered
under the plan.
Brzenk testified Obrenovich and Kloss were furnished
with a copy of this document containing the summary of
both plans and a comparison of their 'benefits to look
over; and about a week'later he met with them to discuss
anything they felt was a problem at which time•questions
were asked about the third party deductibles, X-rays; and
diagnostic comparisons.
Brzenk also credibly stated without denial that after
receiving this document the Respondent determined
there was an error in the understanding or interpretation
-ered to age 6
80% after payment of $100 ded.
80% after payment of $100 ded.
80% after payment of $100 ded.
80% after payment-of $100.ded.
pay-
cov-
$500 yearly plus the plan's regular benefits
or sickness ;
70 inpatient days $ 500 maximum plus the
plan's regular benefits for sickness
Covers gingivectomy, alveolectomy & api-
coectomy subject to ded & co-in.
$100-ded. per person per year, $300 per
family per year, maximum out of pocket
expenses per family per year including
deductibles is $1000.
of the insurance contract, whereupon they informed the
Union they would' definitely follow everything the Aetna
plan offered and they were co I insuring that portion that
was not specifically-covered by the Midwestern plan.
Under this procedure', as explained by Brzenk, the em-
ployees present claims to 1the office manager-who proc-
esses them and, along-with,an- agent representing Mid-
western, reviews the claims. The Respondent then makes
out a check for. its part and Midwestern pays for its part.
Obrenovich,7"-.Medley, and Kloss described the Mid-
western plan as being different, from the, Aetna plan,
which they felt provided better coverage. The differ-
7 Obrenovich denied ever seeing a copy of the insurance contract
itself , -
494 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
ences `as described by Obrenovich were : the Aetna plan
was a normal type medical plan with" a- major medical
which included a $25 deductible ; the Midwestern plan
had a deductible for everything ; the Aetna plan had un-
limited coverage ; the Midwestern plan had a million
dollar lifetime maximum ; and the Aetna plan had a de-,
ductible for two dependents while the Midwestern plan
had a deductible for three dependents . Under cross-ex-
amination Obrenovich acknowledged the Respondent did
not change the $25 deductible under the basic plan and
that the collective -bargaining agreement did not state the
Respondent could not self-insure itself although it had
never done so previously. •
The differences explained by Medley were under the
Midwestern plan many employees were requested to first
pay money themselves which the Respondent would
then reimburse them for by mailing checks out to those
employees . Medley stated he complained to the Re-
spondent the Union did not want checks made out to the
-employees or money channeled through them which was
a change in policy they would not accept.
Kloss described the differences were: under the Aetna
plan employees would go down and have work such as
laboratory or diagnostic work performed - with the bills.
being taken care of: under the Midwestern plan employ-
ees- had to bring bills in to the office. The Respondent is-
now self-insuring itself to make up the difference be-
tween the coverages of the Midwestern plan and Aetna
plan whereas under the Aetna plan as in the past the Re-
spondent had never self-insured itself.
Both Brzenk and Comptroller. Perschbacher acknowl-
edged the Midwestern plan by itself does not provide
coverage as good as that under the Aetna plan. Howev-
er, they contend the coverage under the Midwestern
plan plus the coinsurance by the Respondent is equal to
or better in certain areas than coverage under the Aetna
plan. Examples of these better benefits as pointed out by
Brzenk were the Midwestern plan provided for 365 days
hospitalization per disability to 120 days under the Aetna
plan; the time limits on first aid or emergency care were
90 days after an accident under the Midwestern plan, but
only 72 hours under the Aetna plan ; on ambulance fees,
there is a $30-limit per trip with a $90 yearly maximum
under the Aetna plan and no limits under the Midwest-
ern plan ; on out-patient mental health services the Aetna
plan unlike the Midwestern plan did not include the
plans's regular benefits for sickness ; the Aetna plan only
- provides ' impatient days for alcoholism and drug abuse,
whereas the Midwestern plan provides for '70 inpatient
'days; and under the Midwestern plan an employee only
pays a maximum of $1000 per family per -year while
under the Aetna plan the employees always- pay 20 per-
cent . ' Brzenk-stated the only' difference between the Mid-
western plan plus the - coinsurance ' and the Aetna plan' is
the 'Midwestern plan' had a $1 million lifetime limitation
per person. •
Under cross-examination, Obrenovich, who as union
president also handled grievances; stated that after the
charge ° in the instant case involving the insurance change
was filed he later filed a grievance8 concerning the insur-
ance coverage. Meetings were then held between the Re-
spondent and the Union regarding the insurance cover-
age issue at which Obrenovich stated he got everything
he wanted and the questions he had raised with the
charge and the grievance regarding this issue has been
settled to his satisfaction except it has not been deter-
mined whether the law had been violated. According to
Obrenovich, the Respondent provided the Union with a
letter stating it, was not guilty of any unfair labor prac-
tice and denied it did anything wrong Further, Obreno-
vich testified the Respondent is now paying the premi-
ums, the employees only have a $25 deductible, and the
employees who were affected under the HMO have re-
ceived their backpay.
Medley, however, denied the insurance problem had
been resolved to his satisfaction. His reason was he has
seen nothing to indicate the employees have unlimited
diagnostic, laboratory, and X-rays which he says the Re-
spondent admits is not specified in the agreement but
states is covered.
While Medley and Kloss contended some employees
had not had their claims paid, those individuals were not
identified. Both Brzenk, while acknowledging there
could be two employees having problems receiving pay-
ment from Midwestern, and Comptroller Perschbacher
denied the Respondent has not paid those claims it owes.
According to Brzenk and Perschbacher, after recog-
nizing there had been an error, those employees under
HMO, for whom deductions were taken out of their pay
for at least 6 months beginning October 1, were reim-
bursed for such deductions and on March 17, 1983, reim-
bursement checks were also sent to the laid-off and re-
tired employees under HMO who had contributed.
C.' Subcontracting and the Layoffs of Employees
-During negotiations for the current collective-bargain-
ing agreement , which lasted from about June until
August, the Union agreed to certain wage concessions.
Based on the testimony of Staff Representative Medley
and President Obrenovich, this occurred after the Re-
spondent had represented it was having financial difficul-
ties which it attempted to demonstrate through the use
of charts and other information. The Union's auditor had
examined the Respondent's records. Medley stated the
Respondent told and more or less promised them that
would be an approach to keep their people working and
possibly to bring back some of the employees who were
on layoff. Obrenovich stated Executive Vice President
Hope III said he_ had customers waiting for cost cuts and
he would not be surprised that after the concessions
were given and the contract was settled to see some of
the employees on layoff return.
Obrenovich testified the Union's auditors had reported
-that the Respondent. was r in need of approximately
$115,000, to a $120,000 in relief. Obrenovich estimated
the Union gave the Respondent approximately $195,000
in wage concessions during the negotiations.
Medley, whose testimony was corroborated by Obren-
ovich, stated that throughout negotiations he stressed the
8 This grievance was not proffered as evidence . ' 9 The auditor did not testify.
GRIFFITH-HOPE CO
Union was concerned about layoffs and that if the Re-
spondent wanted consideration as it related to the terms
of the agreement to come to him before they put a pad-
lock on the door.
Both Medley and Executive Vice President Hope III
denied that there was any discussion about subcontract-
ing during negotiations.
Shortly after the employees returned to work follow-
ing thestrike,10 the Respondent recalled 11 laid-off em-
ployees to work. Obrenovich stated Vice President
Brzenk informed him at the time of the recall that they
had a lot of orders to fill. Medley also stated after the
new collective-bargaining agreement was reached Plant
Superintendent Selz mentioned to him that the Respond-
ent's production was up, which he attributed to the
Union's concessions during bargaining, and that laid-off
employees were returning to -work and he had no reason
to disbelieve that all of them would be back before the
end of the month.
Brzenk contended the laid-off employees were recalled
right after. the strike because of a special need for pro-
duction as a result of the strike. -
Obrenovich testified that about October 10 Brzenk, in
the presence of Plant Superintendent Selz, informed him
that productivity was not what they had hoped for at the
time of negotiations and cited absenteeism as part of the
reason. Obrenovich promised to'work on it and remind-
ed Brzenk that if they were in any kind of trouble and
might have to make some serious changes, including
modifying the contract, to let him know and that his po-
sition had always been that the contract was a guideline.
According to Obrenovich, at that time they were quite
busy for one shift and except for a- few employees still on
layoff they had practically the full work force.
The current collective-bargaining agreement contains
under article V the following "Management Rights" pro-
vision. i i '
Section 1. The management of the Company and
the direction of the work force including the right
to plan, direct and control plant operations, - to
schedule and assign work to employees, to deter-
mine the means, methods, processes, materials' and
schedules of production, to determine the products
to be manufactured, to choose the location of its
plants and a continuance of its operating depart-
ments, to encourage the efficiency of employees, to
establish and require employees to observe reasona-
ble company rules and regulations, to hire, lay off
and relieve employees from duties, to maintain
order and to suspend, demote, disciplihe and dis-
. charge employees for just cause, are the recognized
reserved rights of the Company. -
The foregoing enumeration of management's
rights shall not be deemed to exclude other -nghts of
management not specifically set forth. The Compa-
ny therefore retains all rights not otherwise•specifi-
cally restricted by this Agreement. The exercise by
the Company of any of the foregoing • rights shall
10 The strike lasted from about August 1 until about August 8 or 9
1 i This provision is the same as that, contained in sec II of the pnor
collective-bargaining agreement
495
not alter any of the specific provisions of this
Agreement nor shall they be used to discriminate
against any member of the Union or bargaining
unit. -
There is no specific provision set forth in the collec-
tive-bargaining agreement pertaining to subcontracting.
Section 1 of article IV entitled "Non-Bargaining Unit"
provides in pertinent part: "It is unequivocally recog-
nized, that bargaining unit employees will perform the
work that is customarily performed by the bargaining
unit.
The Respondent in the past has subcontracted work.
However, Union President Obrenovich credibly testified,
without denial; that the Union on two prior occasions in
the late 1960s and late 1975 or 1976 filed grievances
against the Respondent for subcontracting work, where-
upon meetings were held on one occasion with President
Hope Jr. and on the other occasion with James Toby,
who was then vice president of manufacturing. The Re-
spondent on those occasions showed the Union it had an
insufficient amount of equipment and space to get out
orders when they needed them,'. Which the Union knew
to be a problem in the past, and indicated. the Union
should not concern itself as long as the' did, not have
any layoffs. The Union agreed with the Respondent that
if it could not do the work it could not do' it and as long
as they did not have layoffs. Since then' other odds and
ends type work has been subcontracted. However, no
layoffs have resulted from subcontracting until the -in-
stant case. '
Union President Obrenovich stated that in November
he noticed that work was being shipped into the plant
which he knew they, did not do. Upon checking, •Obren-
ovich learned - that there were -dyes' which had been
shipped out which the Respondent ;did not have and a
conclusion was made that someone else was. doing some
of the employees' work.! Union -Vice President - David
Kloss, who corroborated. Obrenovich's -- testimony,' ?
stated upon asking his 'foreman Stan Breeze where the
work was going Breeze told him to another company...
Staff Representative Medley testified upon learning at
a union meeting, which he, placed as occurring -in Octo-
ber, that there was, a, belief work was being contracted
out and later being made aware that- l l employees might
'be affected by a layoff which had. not yet occurred, he
contacted Executive: Vice President Hope III 'and ques-
tioned him about what was going on Hope indicated the
Respondent. was, having " str_oiig_ financial difficulties and
he had to do certain things. Medley, asked Hope whether
he was aware, he,was in violation of, their, contract and
Hope ,replied , that he did- not. believe he was in violation
of the. contract at, -the .time: Medley then,,asked Hope
about mployees being .laid off, andthe .ieasons where-
upon Hope mentioned one reason was dealing with the
bank and the other, reason-was he, had discussed. employ-
ee absenteeism and production, with .- the committee.
When Hope also said their wage structure was too high,
12 Kloss believed it was late October or early November when they
noticed the dyes being shipped out -
496 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Medley informed Hope that was a way of circumventing
their contract, that it was totally unacceptable and would
never go, and that was the worse thing they could have
told him about the wages they had just sat down and
bargained for. Medley then asked Hope why he had not
contacted him and said he had heard nothing about the
Respondent's financial difficulties to that degree. Hope
only, remarked that he heard Medley and that maybe he
did not get ahold of him. Medley then said before any,
layoffs or anything-came to pass he wanted to. sit down
and see if they could.resolve those things and also sug-•
gested that Hope meet with Obrenovich and the commit-
tee about the production and the absenteeism problem.
Although Medley stated Hope was supposed to let him
know about his meetings with Obrenovich and the com-
mittee, he denied-hearing anything'from Hope:
Hope III did not deny having such a conversation
with Medley,' whom I credit.
About November 10 Obrenovich stated Vice President
Brzenk gave him a list of 11 employees to be laid off on -
November 12 and told him there was going to be a
layoff. Upon asking Brzenk whether the layoff was the
result of subcontracting,, Brzenk replied some of it was
and mentioned that Obrenovich knew what kind of times
they were having then and said that had something to do
with it. Brzenk suggested that Executive Vice President
Hope III would be the appropriate person for Obreno-
vich to talk to about subcontracting. Brzenk did not dis-
pute Obrenovich's testimony which I credit.
Either that afternoon or the 'next day Obrenovich
stated he had a-conversation with Executive Vice Presi-
dent Hope III at which he believed Brzenk was also
present. During the- conversation he asked Hope why
work was being shipped out and whether he needed any
more money from them. Hope denied needing any
money, stating that he had. all the money he needed but
mentioned the problem then was they had a lot of orders
which customers were waiting fof and that they had lost
customers and could not afford to lose another customer
Hope then said they had trouble with their bank which
had put them on a cash collateral basis and the bank was
very influential in what the Company had to do and indi-
cated that because it. was in a precarious situation at the
bank he had little control over. his destiny. Upon asking
whether any more employees were going to be laid off,
Hope's response was that they met on a day-to-day basis
and he could not give him an honest answer
Obrenovich stated he also informed Hope 11113 that in
his opinion they could cut labor cost at the plant and he
did not think it was necessary to subcontract all the
work. Hope indicated he had a deadline to meet to show
a profit before the end of the quarter. Upon asking Hope
whether it was necessary to ship that quantity of work
out and why he could not keep enough to have a stable
work force Hope 'informed him the bank was calling the
shots.
Obrenovich_stated at the time of this conversation the
Respondent was increasing the volume of work to be
shipped to subcontractors. -
'a The record is not clear whether these remarks were made at that
same meeting -
Neither Brzenk nor Hope III denied having such con-
versations with Obrenovich whose testimony I credit.
- Obrenovich testified that about November 23 he,
Union Treasurer Darlene Rouk, and Vice President
Kloss, met with Executive Vice President Hope III, Vice
President Brzenk, and Plant Superintendent Selz. During
this meeting Hope was ask why such a volume of sub- -
contracting was necessary. He reiterated the earlier con-
versations between Obrenovich and himself, regarding
layoffs in which Hope said they were making decisions-
on a day-to-day basis and that he was in trouble with the
bank When Kloss asked Hope if he could keep enough
work in there to provide work for their employees,
Hope said that- it was out of his hands and the bank was
controlling his money. They then asked Hope if he was
going to subcontract out more work whereupon Hope
said he did not know because those decisions were made
on a day-to-day basis. Obrenovich said he thought their
employees were capable of performing the • work at a
lower cost and they had a lot of fat to trim and suggest-
ed a committee for dealing with cutting cost which
Hope agreed sounded like a good idea and mentioned
Obrenovich should get together with Brzenk on it.
Kloss, who corroborated Obrenovic'h's testimony-con-
cerning the meeting, stated Obrenovich also said he felt
that sending their work out violated the contract and
that Kloss told Hope that if Hope explained to the em-
ployees the situation with the bank and the financial
problems he thought the employees would be willing to
help. However, Hope III replied there was not any tithe.
I credit Obrenovich's and Kloss' undisputed testimony
concerning this meeting.
Following this meeting Obrenovich testified he and
Brzenk got together, and Obrenovich appointed a com-
mittee for the Union. About December 2 or 3 Obreno-
vich and his committee, comprised of approximately six
employees, met with Brzenk, Supervisor Stan Breeze and
he believed Plant Superintendent Selz was' also present.
Hope III also came into the room at one point.
. They discussed the need for the committee and getting
things done to cut-cost The main items discussed were
absenteeism and productivity Brzenk upon being asked
why there was a layoff said the bank was influencing the
Respondent's decision When Arlene Tripple questioned
whether the Respondent would take any of the commit-
tee's suggestions, Brzenk remarked he hoped something
could come out of the committee. They pointed out to
the Respondent they did not think it was necessary to
subcontract. if they trimmed the fat, and Obrenovich sug-
gested to Brzenk at one meeting he thought they had at
least 25-percent fat they could trim thereby reducing-
cost
Following this meeting the union committee members
met and discussed ways of cutting ' cost. Afterwards
Obrenovich' stated he had Joe Jeshmski ask Hope III if
they could keep enough work there to let them _ prove
some of the stuff out whereupon Hope said he would
consider it.
Shortly after this the union committee held its last
meeting with the Respondent.' Obrenovich said during
this meeting Brzenk again mentioned the bank situation
GRIFFITH-HOPE CO
and the present financial situation and also how he
would like to buy certain machinery I
Obrenovich testified that about mid-December after
being advised by a_ truckdriver that his job had been
eliminated he went to Brzenk's office where he believed
Plant Superintendent Selz was also present He accused
Brzenk of violating the contract and the.law and ques-
tioned him about what eliminating a truckdriver's job
had to do with showing a profit in the last quarter.
Brzenk informed him the truck was leased for-$600 a
month, which lease the Respondent's' comptroller was
trying to break in order to account for every penny he
could and he showed Obrenovich some papers to indi-
cate he was on the level.
Obrenovich testified that on December 17 Brzenk in-
formed him the Respondent was laying off 25 employees
and provided him with a list of their names In January
1983 Brzenk also gave Obrenovich a list-of names of four
more employees who were being laid 'Off. 14
According to Obrenovich, as a result of these layoffs
the Union filed charges with the Board ' and a grievance.
Obrenovich stated a meeting was held on this and other
grievances on January 28, 1983, attended by Hope III,
Brzenk, Selz, and an attorney for the Respondent
Obrenovich, Medley, and Barry Chait represented the
Union. During this meeting, the, subject of subcontract-
ing was raised. and Medley asked Hope III why he did
not come back and talk to him before he laid the em-
ployees off, Hope's response was they did not have
enough time.
Obrenovich said that about a week later another griev-
ance meeting was held at which subcontracting was
again discussed and the Respondent said it would be
willing to-bring the people back if they took a 50-percent
cut in wages and benefits. . , -
Obrenovich testimony about-these grievance meetings
which I credit was undisputed. . -
Obrenovich testified at the hearing that the 40 employ-
ees laid off15 had not been recalled, the'Respondent was
continuing to subcontract the work, and the present
work force consisted of 17 unit employees whereas he
estimated the normal size of the work force prior to
these layoffs was approximately 60 to 65 employees
Executive Vice President Hope III acknowledged in
October that the Respondent without notifying the
Union began subcontracting on a large scale and laid off
11 employees in November, 25 employees in December,
and 4 employees in January 1983 for a total of 40 em-
ployees and that it was continuing to subcontract Ac-
cording to Hope III, there are currently 17 unit employ-
ees on the payroll whereas prior to_ the subcontracting
there were 57
Hope III testified regarding subcontracting that since
October the Respondent has undertaken a substantial
effort to place work in other facilities to transfer the cost
14 The complaint alleges the four employees were laid-off on January
7, 1983, while the Respondent in its brief gives the date as January 6,
1983, and the General Counsel in its brief lists the dates as January 5 and
6, 1983
is Obrenovich acknowledged the Respondent in laying off the employ-
ees followed the layoff procedures contained in the collective-bargaining
agreement.
497
of production to such vendors, which it has done by uti-
lizing a number of different vendors while at the same
time reducing the Respondent's work force accordingly.
Hope stated it was after the October 19 meeting between
the Respondent and its bank, discussed infra, that it
began contacting other places to place their work.
Hope III acknowledged the Respondent did not con-
tact or bargain with the Union over the subcontracting
of this work or its impact upon the employees. His rea-
sons were he felt no obligation to do so and he could not
see where it would help because the Respondent had a
cash crisis and what it needed was capital or some way
to manage cash on a short-term basis.
Vice President Brzenk also testified following the Oc-
tober 19 meeting between the Respondent and its bank,
discussed infra, Hope III informed him the only solution
was to subcontract which Brzenk said he then, did by
finding subcontractors.
-The testimony of Hope III and the Respondent's
records establish the Respondent continues to purchase
some raw materials which it then ships to subcontractors
and also on many occasions it furnished as the subcon-
tractors with steel or other materials from its inventory
for use on the work subcontracted to them and that it
has also sent riveting machines to the subcontractors to
use to perform the work.
Hope III testified the decision to subcontract, which
they felt was the only option available, was made to help
the Respondent return to profitability by finding places
where they could get their work done at less cost than in
their aged and unproductive -plant and to transfer the
cash burden of materials and payrolls from the Respond-
ent to a group of subcontractors and using the dollars of
the Respondent's customers to pay for the work, thereby
solving an immediate cash crisis.16 They decided if the
Respondent took precise action the bank would probably
go along with it for at least a little while to see if it
would work. . • `
Both board of director members Sprenger and Linke
corroborated Hope III's testimony concerning the deci-
sion to subcontract. While Comptroller Perschbacher did
not participate in the-decision to subcontract he also cor-
roborated Hope III's testimony about this being the only
option available
Hope III described the chief problem was the Re-
spondent had run out of cash and had no funds available
to run the Company. -
Other alternatives, to' subcontracting as described by
Hope III were considered and rejected. New capital
could not be received because the Respondent's net
worth had deteriorated so much that investors would not
invest and the Respondent did feel it was prudent to ask
the bank to increase the ' amount- of loans to them and
that it would be a waste of time' to shop around for other
banks. If the plant was closed all of the proceeds would
go' towards paying off creditors. To file for bankruptcy
would result in having a creditors' committee run -the
plant and would also be fatal to their customer base.
16 Hope III estimated that the Respondent has 30 to 90 days to pay its
subcontractors while Respondent's customers paid for the product in 30
days - • -
498 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Selling the business, .was rejected because they wanted a
chance to continue the business- if they had a chance
with long-range hopes of retooling, investing-in the plant
and equipment and becoming competitive. Additionally,
to sell the plant would require massive infusions of cap-
ital because of the liability side of the balance sheet to
satisfy the debts. -
D. Respondent's Financial Condition
The condition of the Respondent 's plant as -described
by Vice President Brzenk was it had old machinery, anti-
quated methods, lacked certain equipment, was improp-
erly laid out, and needed tooling changes and factory im-
provement. Brzenk estimated it would cost approximate-
ly $950,000 to -$1 million to make the Respondent com-
petitive not including replacing 10 of the 35 • presses
which needed replacing for an additional cost of about
$1,700,000. Both board of director members Sprenger
and Edward Van- Housen, who is the executive vice
president of administration of the Marhall & Ilsley Bank
(M & I Bank) also described the plant or machinery as
being, antiquated or improperly laid out. However,
Sprenger claimed it 'would take an engineering study to
determine what capital` requirements were needed to
make the Respondent competitive.
Brzenk acknowledged the problems he described re-
garding the plant and equipment had existed for many
years and Executive Vice President Hope III also ac-
knowledged the machines were still operating without
investing in them 'and'stated the only'machines which re-
quired investment were, for the most part, the stamping
machines. •
According to President Hope Jr. and-Executive Vice
President Hope III, the Respondent has lost various cus-
tomers since 1979. This included its biggest. customer
Fort Howard Paper,: Company, which accounted for
about one-third,, of its sales and provided it with, a cash
flow of approximately $250,000 a- month. That account
WAS, phased out ,over a, `period of several years ending
about ,1981. However, ;during,.this- same period the Re-
spondent.also- acquired new,customers.,
The Respondent's financial statements reflect in 1978 it
had a net worth of approximately $1,508,543. This de-
clined to $965,241 in 1979; to $811,161 in 1980, ; and to
$576,534 in 1981. These statements show the Respond-
ent's, pre-tax earnings for,, 1979 were-. approximately
$120,428., However, for 1980 there was aJoss of $258;854
and---for 1981 'a. lost •of,,$418,634. The net. earnings Jor
1979 were approximately $74,452.=with losses, of $125,774
in 1980 and of $257,744 in 1981. , -, ,
--During 1980 as,result of bookkeepingiand,accounting
problems; the Respondent hired.a new,.cbmptrollerLGary
Perschbacher and in 1981 it hired.a new accounting, firm.
Thereafter,,the Respondents books and records were-up-
dated and in, 1982 a. job; costing :system, completed mid-
September, and any inventory control system, completed
about January 1, were put into effect.. - ;
.Perschbacher testified that the results -.of,a , complete
physical' inventory taken at the Respondent's in the mid-
October disclosed a discrepancy' of approximately
$413,000. less An. inventory than appeared on the ; Re-
spondent's records. Most of this amount was attributed
by Perschbacher to an increase of about 20 percent in
the cost of labor and materials from the previous year,
which was not taken into account in the price - of the
goods already sold by the Respondent. According - to
Perschbacher, inventory adjustments resulting from the
absence of materials due to inventory control problems
of $235,000 in 1981 and of $150,000 in 1980 had also
been made previously. This latest adjustment was report-
ed to the M & I Bank.
The financial condition of the Respondent as of Octo-
ber, as described by Perschbacher, was it owed the M &
I Bank approximately $845,000, its assets had been ap-
praised at about $250,000, and its net worth was between
$200,000 and $300,000. It owed suppliers and vendors ap-
proximately $325;000 and one or two of them would no
longer ship to the Respondent without payment of cash
in advance. With the latest inventory adjustment of
$413,000, Perschbacher estimated- the Respondent was
losing approximately $60,000 a month? for the first 8
months of 1982 out of gross sales of about $2,700,000 to
$2,900,000. He also stated that salaries of officers and
office workers had been reduced in 1982.
Executive Vice President Hope III estimated in Octo-
ber that the Respondent had about a $1 million backlog
of orders and placed the value of their inventory in No-
vember as being about $ 1 million .18 While Hope III
stated in November the Respondent was about 3 months
behind in their interest- payments to the M & I Bank, he
thought they had paid some-of it. '
Although Hope III and Perschbacher contended that
in October the Respondent was running out of or was
out of cash, no records were produced .to establish how
much, if any, cash the Respondent actually had. Persch-
bacher. also stated in mid-October, based on his knowl-
edge of the Respondent and its records and weekly fore-
casts, he thought that by the end of 1982 the Respondent
would be out of existence. • -
Executive Vice President Van Housen of the M & I
Bank stated in 1979 and 1980 that the Respondent ob-
tained many loans from the bank and at the peak the ag-
gregate totaled about $1,300,000 or $1;400,000.19 During
1982 through the efforts of both the Respondent and the
bank, the • outstanding balance was reduced to about
$800,000 and interest payments were brought up from 90
days to about 30-35 days. Van Housen testified that
since 1979 there has been a serious deterioration in the
Respondent 's` earnings and net worth to which he attrib-
uted in part to the loss of the Fort Howard Paper Com-
pany account and to an inventory imbalance. In 1982 he
stated he escalated pressure on the Respondent because
the bank was increasingly concerned about the Respond-
ent and its liability. Meetings were held with the Re-
spondent's owners so they would know the bank had
sorrel firm ideas r of their .deteriorating financial condition.
17• Perichbacher estimated without including the adjustment the losses
were about $15,000 a month - -
18 Hope acknowledged that as he could remember the M & I Bank
had urged a reduction in the inventory which it felt was out of line
IS The Respondent's board of director member Linke, who formerly
worked for the M & I Bank , testified that a $400,000 loan was made to
the Respondent in 1980 for the Hope family to purchase the interests of
outside stockholders
GRIFFITH-HOPE CO. 499
Executive Vice President -Hope III confirmed that
weekly meetings were held with the bank and stated the
bank had been auditing the Respondent's records on, a
regular basis for at least 2 years. He also said the bank
was made aware of its negotiations with the Union and
of the collective-bargaining agreement reached.
The M & I Bank, by letters dated October 13, notified
President Hope Jr. that it was placing the Respondent on
a cash collateral account. Under this account, controlled
by the bank, the Respondent would deposit all payments
received on accounts receivable for the Respondent
whereby the proceeds at the bank's discretion may then
be applied to the Respondent's outstanding loans or to
the Respondent's general account. Van Housen testified
that such an account was set up so that. incoming re-
ceipts would be the bank's bather than,available to credi-
tors if an involuntary bankruptcy were to be pushed on
the Respondent. ,
On October 19 a meeting was held between represent-
atives of the M & I Bank, including Executive Vice
President Van Housen and Assistant Vice President I. S.
Purtell, and the Respondent's board of directors. Van
Housen stated he had demanded such meeting as a part
of the bank's pressure on the Respondent because of its
deteriorating financial condition. According to Executive
Vice President Hope III the meeting was in response to
a request by the bank so the Respondent could inform
the bank about the Respondent's intentions concerning
continuing its business.
Van Housen's version of the meeting was it opened
with the Respondent presenting him with a letter. This
letter was not discussed at the meeting and he denied
learning of its contents until later. He informed them of'
his concern for the desperate condition' of the Respond-
ent and the welfare of the Hope family who had put
over $1 million down the drain in 3 years and of the
great need for some remedial action and quickly if the
senior Hopes were to have-any nest egg for their retire-
ment Van Housen said he made a representation about'
the possibility of calling in the loan by mentioning with-
out setting a date that the last month or 2 were absolute-
ly critical and in that period the rest of the Hopes'
money would be gone and he would have no choice but
to recommend that the bank take whatever action was
necessary to save its loan. He also mentioned the possi-
bility of a creditor action rising day by day and that the
steel companies were a tough bunch who would take
whatever action they needed to and the first would be to
shut off any more supplies. The options the Respondent
had as defined by Van Housen were to raise more capital
to replace' what was lost; sell the business; restructure the
business with somebody else doing the manufacturing
and with the Hopes doing the designing and manufactur-
ing, and to liquidate the business. - -
Executive Vice President Hope III stated that at -this
meeting they informed Van Housen and Purtell they had
a good history, product, and customers and felt they
could make the business survive by taking drastic meas-
ures to stop their cash drain and insure their return, to
profitability. They mentioned they intended to subcon-
tract, work down their inventory, convert it into cash,
and apply the cash to pay down their bank loan over a
period of a few months and that was their intention;, of
continuing the business and getting the debt down to a
manageable level in order to take a little bit of the heat
off. Hope III, who could not recall Van Housen 's exact
words , indicated his response was it was their decision
and he wished them good luck, adding they were not
going to take any action that day and ,. they wanted imme-
diate results.
President Hope Jr., who corroborated Hope. III, said
Van Housen also told them to write down the debt and
it had to be fast because the bank was out of patience
and the Respondent was in the worse situation they
faced , .however , he was doing his best to have -faith in
them to handle the problem.
Both board of director members Sprenger and Linke
also testified Van Housen expressed concern about the
Respondent 's financial condition and the loans.,
The letter presented to Van Housen at the meeting
which was addressed to him and dated October 19 states
in pertinent part as follows:
Although our union contract was a successful three
year pact, even after our short strike, employee
wages and past-negotiated benefits continue to be
the most expense cost item we have . This fact is so
apparent that we have concluded we simply cannot
afford the luxury of all that in-house labor. There-
fore, we have already commenced to find subcon-
tractors to undertake some of the major manufac-
turing phases of making our products : steel ware-
housing and storage , punch. press work , welding,
painting, assembly , and perhaps even warehousing
and shipping.
The entire program of subcontracting has already
started, and will be continued to substantially
reduce these employee-related costs . Frankly, it is
going to be a big job; we'll face inevitable union-
problems with our present people, will need to find
the proper suppliers at the best price, we'll have to
exercise strong quality control over those suppliers,
and to get their cooperation we will have to be pre-
pared to promptly pay them. Although it's a tough
job, we can, and will, get it done.
The letter further mentioned prices had already been
increased to a, few major customers and prices would
-continue to increase to others, and unprofitable products
would be dropped or phased out if they could not obtain
price increases. '
' Van •Houseii denied subcontracting" was the bank's-idea
and stated the'-first he learned of it was from the letter
after the October 19 meeting.
While- Hope III testified - the -bank was `not `going' to
supply the Respondent any' more 'cash , no evidence -was
proffered to-establish any officials of -the M. &' I Bank
ever specifically told Hope III or any other official of
the Respondent tliat no more money would be loaned by,
the bank to the Respondent. Although' Comptroller
Perschbacher contends in conversations he had -with the
bank auditor and Assistant Vice President Purtell he was
500 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
informed indirectly -by them that the bank, would not
make any more loans to the Respondent, his version of
such conversations in which he stated they would ask
questions about the financial statements and the business
and, discuss problems and' solutions' fails to show he was
indirectly told this.
Van Housen informed President Hope Jr. by letter
dated February 8 that the last 3 months had seen a con-
tinuing erosion of the Respondent's capital base and that
the subcontracting program which was the Respondent's
idea and not the bank's appeared to be moving somewhat
slower than the proverbial snail 's pace. The letter men-
tioned the bank was-deeply concerned about the, viability
of the Respondent and concerned it did not fully appre-
ciate the, precariousness of-its financial position.
After not making a.profit for any month in 1982 and
losing approximately $30,000 in January. 1983 the Re-
spondent had a profit of approximately $2,500 in Febru-
ary 1983 and over $18,000 in March 1983.
E. Analysis and Conclusions
The General Counsel 'contends the Respondent violat-
ed Sections 8(d) and 8(a)(1), (3), and (5) of the Act as
alleged by refusing to bargain with the Union in good
faith by unilaterally changing, its insurance carrier; de-
ducting the difference in premium cost paid to the new
insurance carrier and those paid to HMO; and subcon-
tracting bargaining unit work and discnmmatonly laying
off 40 employees as a result of such subcontracting. The
Respondent denies having violated the Act and asserts
various affirmative defenses. _
Section 8(a)(1) of the Act prohibits an employer from
interfering with, restraining, or coercing its employees in
the exercise of their rights guaranteed in Section 7 of the
Act. Section 8(a)(3)-of the Act provides in pertinent. part:
"It shall be an unfair labor practice for an employer. . .
by discrimination in-regard to hire or tenure of-employ-
ment or any:term or condition-of employment to encour-
age •or discourage membership ,in any labor organization
" Section 8 (a)(5) of the Act prohibits -an -employer
from refusing to bargain collectively with the representa-
tive of its employees. , I
The initial issues discussed are whether the Respond-
ent unlawfully changed its insurance carrier and deduct-
ed the difference in premium cost paid to the new insur-
ance carrier and those' paid to HMO. '
The law is well- settled that unilateral changes of
"wages , hours and terms and'conditions-of employment"
by`an employer obligated to -bargain with the representa-
tive of its employees -in -an appropriate unit violates Sec-
tion '8(a)(5) of the. Act. Master Trousers Corp., 230 NLRB
1054 (1977),.enfd'. 618-F.2d 6-(6th Cir. 1980); Amsterdam
Printing & Litho +Corp.,i223 NLRB 370 (1960), enfd. 559
F.-2d -188 (D.C: Cir: 1977);- and NLRB ' Katz, 369. U.S.
736 (1962). Under Section 8(d) of.the Act an employer is
precluded from altering the'terms and' conditions of em-
ployment embodied in a collective-bargaining agreement
during the term of that agreement without the consent of
the Union. Oak Cliff-'Golman Baking Co., - 207 NLRB
1063, 1064 ?(1973), enfd: 505 F.2d 1302 '(5th Cir. 1974),
cert. denied 423 U.S: 826 (1975). • •
The findings supra establish effective October 1 the
Respondent changed its insurance carrier providing med-
ical insurance' coverage to its employees from Aetna to
Midwestern. Although the Respondent gave prior notice
to the Union -about September 1 that it would be chang-
ing its insurance carrier it did not bargain with the Union
about making such change and the Union not only
voiced its objections to the proposed and actual changes
made but also accused the Respondent of having violated
their collective-bargaining agreement by doing so. •
The current collective-bargaining agreement, like its
predecessor, provides for hospitalization and surgical
coverage of the unit employees by Aetna. However, pro-
visions contained in both of these collective-bargaining
agreements, which are clear and unambiguous on their
face, expressly reserve the fight of the Respondent to de-
termine the insurance carriers for all of the insurance
programs described, except it further agrees that the ben-
efits will be equal or better than those previously negoti-
ated. Thus, the Respondent possessed a contractual right
to change its insurance carrier provided the benefits
would be equal or better than those previously negotiat-
ed and the collective-bargaining agreement placed no re-
strictions on either the selection of the insurance carrier
or against the Respondent from acting 'as a co-insurer
with such insurance carrier selected.
A comparison of the benefits, however, between those
provided by the Aetna plan and the Midwestern plan
standing by itself shows, and both Vice President Brzenk
and Comptroller Perschbacher admit, that, the Midwest-
ern plan does.not provide as good a coverage as the
Aetna plan. Therefore, the Respondent although author-
ized under the collective-bargaining agreement to change
insurance carriers failed to•comply with the further con-
dition to enable it to do so, namely,_ that benefits would
be equal or better than those previously provided.
Under these circumstances and having failed to
comply with 'the conditions required by the collective-
bargaining agreement to provide equal or better cover-
age, I find that the Respondent about October 1, 1982,
violated Section 8(d) and Section 8(a)(5) and (1) of the
Act by unilaterally, without bargaining with the Union,
changing the insurance coverage of the unit employees
from the Aetna plan to the Midwestern plan.
The evidence further shows after receiving a compari-
son of the coverage and benefits of both the Aetna plan
and the Midwestern plan from its insurance agent about
mid-February 1983 and discovering there was an error in
their understandmng.and interpretation of the, insurance
contract the Respondent then became a coinsurer with
Midwestern, for part of the coverage,provided for those
employees. Taken together the Midwestern plan and the
Respondent acting as a coinsurer, which Vice President
Brzenk explained to the Union to mean that the Re-
spondent would definitely follow everything the Aetna
plan had offered and they were comsurmg that portion
not .specifically. - covered by the Midwestern plan; the
new- plan now provides equal or better coverage than the
Aetna plan and thereby meets the condition as required
by the collective-bargaining agreement to change insur-
ance carriers.
GRIFFITH-HOPE CO. - 501
With respect to the deductions•from the paychecks of
certain unit employees for the difference in the premium
cost between the premium paid to Midwestern and that
paid'to HMO the evidence herein found shows such de-
ductions were admittedly made over a period of approxi-
mately 6 months beginning October 1 from the pay-
checks of those employees covered by HMO. These de-
ductions arose as a result of the Respondent paying a
lower premium cost for the Midwestern plan which was
less than the HMO. Under the provisions of the collec-
tive-bargaining agreement the benefits provided under
HMO were not to add additional cost to the Respondent
and before 1981 employees under HMO also had to pay
a difference. in cost.
Since the change from the Aetna plan to the Midwest-
ern plan effective October 1 was unlawful and these de-
ductions from the paychecks of unit employees for the
difference in the premium cost between the premium
paid to Midwestern and that paid to HMO were the
result of that unlawful change in plans and. were made
by the Respondent unilaterally without bargaining with
the Union, I find the Respondent by unilaterally without
bargaining with the Union making such deductions be-
ginning October 1 thereby violated Section 8(d) and Sec-
tion 8(a)(5) and (1) of the Act. -
The evidence further shows these deductions, which-
were made over a period of approximately 6 months, are
no longer being made and those, deductions made have
since been refunded to the employees. This occurred
after Vice President Brzenk -and' Comptroller Persch-
bacher testified it was learned the Respondent had made
an error in making such deductions. -
The Respondent's additional defenses raised in its-
answer or brief that the issues of changing its insurance
carrier and making those deductions should be deferred
under the Collyer doctrine to,the grievance and arbitra-
tion procedures under the collective-bargaining agree-
ment and that the case -had since been settled between
the Respondent and the Union and should be dismissed
as being moot are hereby rejected as being' without
merit Deferral under Collyer is inappropriate whereas
here contract interpretation is not involved. See Struthers
Wells Corp., 245 NLRB 1170, 1171 fn. 4 (1979), enfd. 636
F.2d 1210 (3d Cir 1980). Insofar as a private settlement
agreement between the Respondent and the Union is
concerned the rights guaranteed under the Act are in the
public interest rather than private rights. See Schuylkill
Metals Corp., 218 NLRB 317 (1975) -
The remaining issues to be resolved are whether that
the Respondent unlawfully subcontracted unit work and
discriminatorily laid off 40 employees as a result of such
subcontracting.
The General Counsel argues in^ its'brief that the iinilat-
erally subcontracting of unit work and laying off 40 em=
ployees as a result by the Respondent without notifying
or bargaining with the Union over the decision to, sub-
contract or its effects upon the unit employees was un-
lawful. The Respondent's position asserted in its brief is
the decision to subcontract was purely 'a managerial deci-
sion relating to its survival over which it would have
been futile and counterproductive to bargain and denies
such decision, was a mandatory subject of bargaining.
Those' affirmative defenses raised by the Respondent- in
its answer are the - Respondent has previously subcon-
tracted work ; the collective-bargaining agreement: does
not limit its right to subcontract ; the management rights
provision emcompasses the right to subcontract , the ab-
sence of a prohibition against subcontracting coupled
with the retention of .rights clause -in the management
rights provision gives it the right to subcontract; and
even assuming it was obligated ' to bargain with the
Union -regarding subcontracting the Respondent 's finan-
cial situation in October gave the Respondent no time
(thus no duty) to bargain over any decision to subcon-
tract. • . . '
Both parties cite numerous cases in their briefs dealing
with subcontracting as : well as other forms of transfer-
ring or relocating unit'work to support their position. -
Contracting out of work being previously performed
by members of an existing bargaining unit to independent -
contractors is a mandatory subject ' of bargaining under-
Section 8(d) of ' the Act and an employer 's refusal to bar-'
gain , albeit for economic reasons, with their bargaining
representative over such decision violates Section 8(a)(5)
of the Act. Fibreboard Paper Products 'Corp.' v. NLRB,
379 U.S. 203 ( 1964); and Town & Country Mfg. Co., 136
NLRB 1022, 1027, enfd. 316 F.2d 846 (5th Cir. 1963).
While Fibreboard is not to be applied mechanically, the'
Board has found violations of Section 8(a)(5) and (1) of
the Act where the subcontracting involved a departure
from previously operating practices , effected a change in
conditions of employment , or resulted in a significant im-
pairment of job tenure, employment security , or reason-
ably anticipated work opportunities for those in the bar-
gaining unit . Westinghouse Electric Corp. (Mansfield
Plant), 150 NLRB 1574, 1576 (-1965)..
The findings , supra, establish that the Respondent in'
October, but prior to October 19 , began subcontracting
work being performed by its own employees in the bar-
gaining unit to other contractors notwithstanding' such.
work was covered by the terms of the collective -bargain-
ing agreement in - effect between the Respondent and the
Union . Thereafter 11 unit employees were laid off , work'
on -November 12; 25 unit employees - were laid off -work:
on December 17, and 4 more - unit employees were, laid
off-work in January 1983 . The layoffs of these 40.em-_
ployees were the direct result of the subcontracting of
unit work undertaken by the Respondent20 as-evidenced-
by Executive Vice President Hope III 's admission that as
the work was - subcontracted the Respondent's, -work'
force was reduced accordingly , Vice .President Brzenk's!
admission to President Obrenovich that a reason for-the'
November 12 layoff was subcontracting the work, as
well as;statements made by Hope III and 'Brzenk to•Staff'
Representative' Medley, • President Obrenovich, ' Vice
President Kloss, and Treasurer Rouk during their discus
sions-about the layoffs and subcontracting 21,_
20 The Respondent in its brief'acknowledged the layoffs of-the 40 em-'
ployees were caused by the subcontracting of unit work
21 Various other reasons were also given by Executive Vice President
Hope III and Vice President Brzenk to Union Representatives Medley,
Obrenovich , Kloss, and Rouk for the layoffs including financial difficul-
, 1 , ' • Continued
502 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Hope III admitted the Respondent did not consult
with or bargain with the Union over the decision to sub-
contract . the unit work or its effects upon the unit em-
ployees . ; His reasons expressed at the hearing were he
felt no obligation- to do so and and he could not see
where it would help because the Respondent had a cash
crisis and what it needed was capital or some way to
manage cash on a short-term basis.
The Respondent 's October 19 letter to the M & I Bank
reflects the subcontracting , which had already began,
was undertaken because of the expense of the employees',
wages and past negotiated benefits and its conclusion
that it could not afford the luxury of "all that in-house
labor." .
The Union upon learning of the Respondent's actions
regarding subcontracting and laying off employees as a
result protested such conduct and accused the Respond-
ent of violating their collective-bargaining agreement but
to no avail except for an indication by Hope III at a
grievance meeting over the layoffs held about February
1983 that he would be willing to bring employees back if
they took a 50-percent cut in wages and benefits.
This subcontracting and the resulting layoffs of em-
ployees occurred notwithstanding the Union had just
made substantial wage concessions during recently con-
cluded negotiations . Not only had the' Union stressed to
the Respondent at that time that if further concessions
became necessary to let it know which the Respondent
failed to do but a suggestion made by Vice President
Kloss to Executive Vice President Hope III about No-
vember 23 that the employees -would probably help if
Hope explained the bank situation and financial problems
to them was rejected on the grounds there was no time.
Upon examining those defenses raised by the Respond-
ent in its answer I find them to .be without merit. While
work had previously been subcontracted the Union had
not only objected but had filed grievances which were
resolved on the basis , which is not the situation in the
instant case, that work subcontracted out would be work
the Respondent could not perform and as long as it did
not result in layoffs. The collective-bargaining agreement
itself contains no express provision - regarding subcon-
tracting . However, it did specifically recognize that bar-
gaining unit employees will perform the work that is cus-
tomarily performed by the bargaining unit . Although the
management-rights provision gives management the right
to "schedule and assign work to employees," to "choose
the location of its plants and a continuance of its operat-
ing,departments ," and to "hire, -lay off, and relieve em-
ployees from duties" this does not give the Respondent
the right to subcontract as- is urged by the Respondent
nor does the absence of any provision in the collective-
bargaining agreement prohibiting subcontracting coupled
with the clause in the management-rights provision in
which the Respondent retains all rights "not otherwise
.ties; dealing with and trouble with the bank, the hard times they were
having, discussions about absenteeism and production, the bank was very
influential in what the Respondent had to do, because of the Respond-
ent's precarious situation at the bank it had little control over its destiny,
the bank was calling the shots, and it was out of Hope III's hands and the
bank was controlling the Respondent 's money
specifically restricted" give the Respondent the right to
subcontract as is also urged by the Respondent.
Apart from the cited provision about recognizing that
bargaining unit employees will perform work customari-
ly performed by the bargaining unit, which alone negates
any finding that the management-rights provision author-
izes subcontracting, the evidence fails to show the Union
by entering into the management-rights provision waived
its right to object to subcontracting. A waiver of a statu-
tory right to bargain, as absent here, must be "clear and
unmistakable" which is determined by examining both
the collective-bargaining agreement and the circum-
stances surrounding the making of such agreement. A-1
Fire Protection, 250 NLRB 217, 219 (1980). -The absence
of language in a collective-bargaining agreement itself
does not constitute a waiver by the Union of its statutory
rights. Park-Ohio Industries, 257 NLRB 413, 414 (1981),
enfd. 702 F.2d 624 (6th Cir. 1983).
Insofar as the Respondent's financial situation in Octo-
ber at the time its decision to subcontract was made is
concerned, while the evidence shows that it was heavily
indebted; was losing money and its net worth had de-
clined ; was under pressure by the bank which had put it
on a cash collateral basis; and its plant and machinery
were antiquated, other evidence indicates the state of the
Respondent' s business was not of such a - nature at that
time to relieve it of its' obligation to bargain with the
Union over its decision to subcontract unit work or
about the effects of the decision on its unit employees as
a result. For examples, this decision to subcontract was
made prior to any showing that M & I Bank at the Octo-
ber 19 meeting had threatened in the future it might call
in its loans; at the time there were approximately $1 mil-
lion each in inventory and in a backlog of orders; the
discovery of and the adjustment of inventory which re-
sulted in an increase in the loss of earnings from approxi-
mately $15,000 to $60,000 per month,was attributed to
undercharging its customers , for products already sold
which the Respondent indicated in its October 19 letter
to M & I Bank was being corrected by raising_prices and
eliminating unprofitable products; only approximately 2
months before in negotiations for the new collective-bar-
gaining agreement the Union had agreed to substantial,
wage concessions; and both Comptroller Perschbacher
and M & I Bank Executive Vice President Van Housen
indicated the Respondent could have continued to oper-
ate as it was for at least awhile.22 While the Respondent
also claimed it was running out of or was out of cash
and the bank would not lend it any more money no
records were produced to establish how much if any
cash the Respondent actually had in October23 or to
show that any loans were requested from the bank and
denied or that the bank had actually informed .the Re-
spondent it would not lend the Respondent any more,
money. Thus, at_ the time the decision to subcontract -unit
22 Perschbacher, based on his knowledge of the Respondent's records,
estimated it would be the end of the year before the Respondent -would
be out of existence and Van Housen estimated the next month or 2 was a
critical penod and the rest of the Hopes' money would be gone
2s The Respondent continued to employ 17 unit employees in addition
to its other personnel which presumably would have also required-cash
GRIFFITH-HOPE CO
work was made the Respondent was continuing to oper-
ate its -business without any showing'it was faced with an
immediate shutdown or inability to operate. or lack of
time to permit bargaining with the Union or that such
bargaining would be futile.
Based on the foregoing evidence and for those reasons
discussed, and having rejected the Respondent's defenses,
and applying Fibreboard which I find applicable here, I
find the Respondent violated Section 8(d) and Section
8(a)(5) and (1) of the Act by unilateral subcontracting its
unit work beginning about October 1982 without notify-
ing or bargaining with the Union over its decision to do
so or about the effects of its decision on the unit employ-,
ees as a result of which 11 unit employees on November
12; 25 unit employees on December 17 and 4 unit em-
ployees in Janaury 1983 were laid off work.
Although there is no independent evidence of union
animus inasmuch as the layoffs of these 40 employees re-
sulted directly from the subcontracting of unit work
which was undertaken by the Respondent for a reason as
indicated in its October 19 letter to the M & I Bank to
evade paying the employees wages and past negotiated
benefits contained in its collective-bargaining agreement
covering the unit employees. I find its actions are inher-
ently destructive of its employees' rights under the Act
and by so doing it also violated Section 8(a)(3) and (1) of
the Act. See Los Angeles Marine Hardware Co., 235
NLRB 720 (1978), enfd. 602 F.2d 1302 (9th Cir. 1979).
VI. THE EFFECT OF THE UNFAIR LABOR PRACTICES
UPON COMMERCE
The activities of the Respondent set forth in section
III, above, found to constitute unfair labor practices oc-
curring in connection with the operations of the Re-
spondent described in section I, above, have a close , inti-
mate , and substantial relationship to trade, traffic, and
commerce among the several States and tend to lead to
labor disputes burdening and obstructing commerce and'
the free flow thereof.
CONCLUSIONS OF LAW
1. Griffith-Hope Company is an employer engaged in
commerce within the meaning of Section 2(6) and (7) of-
the Act.
2. Local No. 1677, United Steelworkers of America is
a labor organization within the meaning of Section 2(5)
of the Act. - ' _
3. All production and maintenance employees of the'
Employer; excluding office clerical employees, profes-
sional employees , guards and supervisors constitute a
unit appropriate for the purposes of collective bargaining
within the meaning of'Section 9(b) of the Act
4. The Union is now and at all times material herein
has been the exclusive representative of all the employ-
ees in the aforesaid appropriate unit for' the purposes of
collective bargaining within the meaning of Section 9(a)
of the Act. . ' '
5. By unilaterally, without bargaining with the Union,
changing the insurance coverage of the unit employees
about October 1, 1982, from the Aetna plan to the Mid-
western plan and deducting from the paychecks of unit
503
employees the difference in the premium cost between
the premium paid to Midwestern and that paid the health
maintenance organization; _ and by unilaterally, subcon-
tracting its bargaining unit work beginning about Octo-
ber 1982, without notifying or bargaining with the Union
over its decision to do so or about the effects of the' deci-
sion on the unit employees, as a result of which 11 unit
employees on November 12,.1982, 25 unit employees 'on
December 17, 1982, and 4 unit employees in January
1983 were laid off work,. Respondent has engaged in
unfair labor practices in violation of Section 8(d) and
Section 8(a)(5) and (1) of the Act.
6. By laying off the 11 unit employees on November
12, 1982, 25 unit employees on December 17, 1982; and 4
unit employees in January 1983 as a result of the subcon-
tracting of unit work undertaken to evade paying the
employees wages and past negotiated benefits contained
in the collective-bargaining agreement, the Respondent
has engaged in unfair labor practices in violation of Sec-
tion 8(a)(3) and (1) of the Act.
7. The aforesaid unfair labor practices affect commerce
within the meaning of Section 2(6) and (7) of the Act.
THE REMEDY
Having found that the Respondent 'has engaged in cer-
tain unfair labor practices within the meaning of Section
8(d) and Section 8(a)(1), (3), and (5) of the Act, I -shall
recommend that it 'cease and desist therefrom and take
certain affirmative action to effectuate the'policies of the
Act.
Accordingly, having found , the Respondent unilateral-
ly changed its insurance carrier and made deductions for
the difference in the premium costs between the premi-
um paid to Midwestern_and that'paid to the health main-
tenance organization, I shall order it to' cease and desist
from making such unilateral changes except where au-
thorized by their collective-bargaining agreement. Inas-
much as the collective-bargaining agreement- authorized
the Respondent to change its insurance carrier provided
the benefits were equal or `better and' whereas the Mid-'
western plan coupled with the Respondent acting as •a
coinsurer has now' met that condition I shall not 'order '
the Respondent to restore the Aetna plan previously in
effect and since the deductions made for the difference in
cost are no longer being made and these deductions'
made'-have already been refunded, I'shall not order such
a refund. '
.
I . '• -
Having found' that the Respondent beginniig about
October '1982 unilaterally subcontracted its` bargaining'
unit work without notifying' or'bargaining' with the
Union over 'its decision'to do so :or! about, the effects of'
such decision on the unit employee`s as aresult of which
11 'unit employees on November '12; `1982; '25 unit em
plooyees on December` 17, '1982, and 4 unit employees in
January 1983 were laid off work, I' shall order' that the
Respondent cease and desist from unilaterally subcon-
tracting unit ° work or - otherwise Imaking 'unilateral'
changes in' its employees' terms' 'arid` conditions" of `6m"
ployment without notifying or bargaining with the Union
as their exclusive; bargaining representative; restore, the.
status quo ante as it existed' prior to- the unlawful subcon='
504 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
tracting of unit work beginning in October '1982 herein
found, by terminating those subcontracts for the unit
work subcontracted and bargain with the Union over
any future' decision to subcontract those operations or
other unit work,24 reinstate at its plant the unit work
subcontracted; offer immediate and full reinstatement to
its 40 employees discriminatorily laid off work as a result
of its subcontracting to their former jobs or if those jobs
no longer exist to substantially equivalent jobs without
prejudice to their seniority and other 'rights and' privi-
leges and make them whole for any loss of earnings or
other compensation they may have suffered as a result of
the Respondent's unlawful action in bypassing their bar-
gaining representative and unilaterally subcontracting
their jobs out and laying them off work on November
12, 1982; December 17, 1982, and in January 1983. Back-
pay shall be computed in accordance with the manner
prescribed in F. W. Woolworth Co., 90 NLRB 289 (1950),
and Florida Steel Corporation, 231 NLRB 651 (1977).25.
[Recommended Order omitted from publication.]
24 Where that bargaining obligation has been satisified after the re- 25 This reinstatement and make-whole remedy for the 40 employees
sumption of bargaining the Respondent may,- of course, lawfully subcon - laid off applies to both the 8 (a)(3) and 8(a)(5) violations although it is an
tract unit work appropriate remedy for each violation itself