Lynn-Edwards Corp.

National Labor Relations Board - Board Decisions

Jul 29, 1988

290 N.L.R.B. 202 (N.L.R.B. 1988)

202 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Lynn-Edwards Corp . and Chauffeurs , Teamsters and
Helpers Local 150, International Brotherhood
of Teamsters , Chauffeurs , Warehousemen and
Helpers of America, AFL-CIO.' Case 20-CA-
18133
July 29, 1988
SUPPLEMENTAL DECISION AND
ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
JOHANSEN AND BABSON
On October 29, 1986, the National Labor Rela-
tions Board issued a Decision, Order, and Direc-
tion of Second Election2 in this proceeding in
which it affirmed the judge' s rulings , findings, and
conclusions and adopted his recommended Order
as set forth in the attached judge's decision. The
Board in the absence of exceptions adopted pro
forma the judge's conclusions that the Respondent
had violated Section 8(a)(1) of the Act by threaten-
ing employees with the loss of a profit-sharing plan
should they become covered by a retirement plan
negotiated by the Union, and by maintaining an eli-
gibility provision in its Employee Stock Ownership
Plan (ESOP), and by related explanatory language
in its employee handbook and summary plan docu-
ment , which unlawfully excluded employees from
participation in the plan.3
The Respondent thereafter filed a petition to
review the Board's Order with the United States
Court of Appeals for the Ninth Circuit and the
Board filed a cross-application for enforcement. On
August 10, 1987, the court vacated the Board's
Order and remanded the case to the Board.' The
court determined that the Respondent, in fact, had
adequately raised an exception to the judge's find-
ing that the Respondent's ESOP eligibility provi-
sion violated Section 8(a)(1) of the Act. According-
ly, the court directed the Board on remand to con-
sider three specified questions raised to the court
by the Respondent regarding its ESOP. These
questions are:
1. Is Lynn-Edward's ESOP a retirement
plan or a profit sharing plan?
I On November 1, 1987, the Teamsters International Union was read-
mitted to the AFL-CIO Accordingly , the caption has been amended to
reflect that change
2 282 NLRB 316
' Chairman Stephens dissented in part , finding that the Respondent's
exceptions did in fact call into question the characterization of the ESOP
Chairman Stephens would have found that the Respondent 's ESOP was a
retirement plan, not a profit -sharing plan, and would have revised the re-
medial order to permit an amendment to the eligibility provision that
"makes the participation of bargaining unit employees in the ESOP a
matter to be negotiated in the context of a collective bargaining agree-
ment " 282 NLRB at 52
4 Lynn-Edwards Corp v NLRB, 825 F 2d 413 (9th Cir 1987)
2. Is the current ESOP eligibility provision
lawful?
3. May Lynn-Edwards amend the eligibility
provision in light of the principles of Rangaire
Corp., 157 NLRB 682 (1966)?
By letter dated November 3, 1987, the Board ad-
vised the parties that it had decided to accept the
remand from the court and invited them to submit
statements of position with respect to the issues
raised by the remand . Thereafter , the Respondent
and the Charging Party filed statements of position.
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
The Board has reconsidered this case in light of
the court 's decision , which we consider the law of
the case, and the parties ' statements of position,
and has decided to affirm the judge 's rulings, find-
ings , and conclusions only to the extent consistent
with this Supplemental Decision and Order.
Initially, we reaffirm our adoption of the judge's
finding, to which it appears the Respondent has not
taken exception , that the Respondent violated Sec-
tion 8(a)(1) of the Act on April 5, 1983, when its
president , Scarzella, told employees that the "union
cannot participate in ESOP" and its vice president,
Riley, stated that "[a]ny employee who is a
member of collective bargaining cannot be eligible
for this [ESOP] plan." The basis for these viola-
tions is fully set forth in the judge 's attached deci-
sion at section III,C,l , paragraphs 1-2.5
We next proceed to an analysis of the questions
remanded to us by the court. To put the issue in
perspective , we first note the following as back-
ground.
The Respondent 's ESOP, in effect since 1977,
was amended in 1983 , retroactive to June 1, 1981.
The amendment includes the following pertinent
provisions:
ARTICLE I
Name and Purpose of Plan
1.1 Name
The Employee Stock Ownership Plan estab-
lished by the LYNN-EDWARDS CORPO-
RATION , a California Corporation (Employer
herein) shall be known as the Stock Bonus
Employee Stock Ownership Plan (Plan herein)
5 Notwithstanding the later language in the judge's Conclusion of Law
3, which appears to base this violation on a finding , which we reverse
infra, that the Respondent 's ESOP is a profit-sharing plan, it is clear from
the judge 's earlier discussion that he based his finding of a violation in
these comments on the fact that, whether the ESOP was a profit-sharing
or a pension plan, the Respondent unlawfully threatened its employees
with the loss of the ESOP immediately on their being represented by a
union
290 NLRB No. 28
LYNN-EDWARDS CORP 203
and the Employee Stock Ownership Trust exe-
cuted by Employer and EDWARD F. SCON-
BERG, JR. and WALTER E. RILEY, (Trust-
ees herein) shall be known as the Employee
Stock Ownership Trust (Trust herein).
1.2. Purpose
It is the purpose of this plan to recognize
the contribution of the Employees to the suc-
cessful operation of the Employer and to
reward such contribution by establishing the
system that would enable the employees to ac-
quire through a Stock Ownership Plan equity
ownership in the Employer without diminish-
ing take-home pay. A major portion of the
Employer contributions to the trust will be in-
vested in stock of Employer, ,
ARTICLE 3
• Eligibility and Participation.
3.1 Eligibility.
. - . However, notwithstanding any provi-
sion to the contrary, no employee covered by
a collective bargaining agreement between an
Employee representative and the Employer
shall become a Participant in the Plan, provid-
ed that retirement benefits of said class of Em-
ployees was the subject of good faith bargain-
ing between the Employee representative and
the Employer, and said Employee's retirement
benefits are being funded pursuant to said col-
lective bargaining agreements.
The General Counsel argued to the judge that
the eligibility provision in the amendment violated
Section 8(a)(1) of the Act and the judge agreed. In
so finding, the judge noted that in Rangaire Corp.,
157 NLRB 682 (1966), the Board found that similar
exclusionary language in a pension plan was held
permissible. The judge further noted the Respond-
ent's argument that the exclusionary language of its
amendment fell "within the parameters" of Ran-
gaire and similar cited cases. The judge rejected
this argument, noting that "the gravamen of the
violations in [the General Counsel's cited] cases as
well as the instant case involves the language in the
employers' `profit sharing plans' which automatical-
ly preclude employees from enjoying the benefits
of such plans if they become covered by a 'retire-
ment' plan negotiated by the union [emphasis
added]." (Sec. III,C,1, par. 6.) Thus, in the judge's
estimate , the case turned on whether the Respond-
ent's ESOP was a profit-sharing or a pension plan.
The judge found it to be a profit-sharing plan and
concluded that an employer "may not, through
provisions of a profit sharing plan, automatically
deprive employees of benefits therefrom if they
elect to be covered by a retirement or pension plan
negotiated by the union." (Sec. III,C,1, par. 8.) He
thus found the Respondent's amendment with its
unlawful exclusionary language violated the Act.
This is the finding that the court has directed us to
consider on the merits by an analysis of the three
questions remanded to us. We answer those ques-
tions now in the order set out by the court.
1. Is Lynn-Edwards' ESOP a retirement plan or a
profit-sharing plan?
The Respondent argues that its ESOP is a retire-
ment plan as a matter of Federal statutory law
under the Employee Retirement Income Security
Act of 1974 (ERISA).6 The Charging Party takes
the position that the ESOP is a profit-sharing plan,
and argues that although the Respondent's ESOP
may qualify for certain tax benefits under ERISA,
this does not mean that the Respondent is not of-
fering greater benefits to nonunion employees, such
as profit-sharing and retirement plans, than employ-
ees represented by the Union, and is thus violating
Section 8(a)(1) of the Act. This argument is but an-
other way of claiming that the Respondent's ESOP
is a profit-sharing,plan.
We now find Lynn-Edwards' ESOP to be a re-
tirement plan within the meaning of ERISA. In
this regard, we note that the Respondent's ESOP
was amended in 1983 retroactive to June 1, 1981,
for the express purpose of causing the plan to be a
Stock Bonus ESOP under ERISA and to obtain
tax-qualified status under ERISA and the Internal
Revenue Code.7 Thus, the Respondent's ESOP
was designed to come within the statutory purview
of ERISA. We have further considered that
ESOPs, such as the one in question, are in fact cre-
ated under and defined by ERISA and related reg-
ulations." By statutory definition, an ESOP is an
"individual account plan."9 An individual account
plan, in turn, by statutory definition, is a "pension
plan."10 Thus, individual account plans are, by def-
inition, pension plans. Moreover, an examination of
the ERISA definition of an employee pension bene-
fit plan confirms that ESOPs are merely subspecies
6 Pub L 93-406, 88 Stat 829 (codified as amended 29 U S C §§ 1001-
1462, and in various sections of 26 U S C )
' The preamble to the Stock Bonus Employee Stock Ownership Trust
states
2 The restated plan and this restated trust constitutes the plan in-
tended to comply with and qualify under Section 401(a) of the Inter-
nal Revenue Code of 1954, as an Employee Stock Ownership Plan,
which is defined in Section 4975 (e)(7)(A) of said code, the Employ-
ee Retirement Income Security Act of 1974 particularly Section 407
(d)(3)(a) and 407 (d)( 6) and corresponding provisions of the laws of
the State of California
6 The term "ESOP" is defined by ERISA at 29 US C § 1107 (d)(6)
and by 29 C F R § 2550 407d-6 (1987)
9 29 U S C § 1107 (d)(6)
1029USC § 1002(34)
204 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
of federally regulated employee retirement benefit
plans. I 1
We therefore find, contrary to the judge, that
ESOPs, by statutory definition, are retirement
plans, even if they are funded from the profits of a
company. Accordingly, we conclude that Lynn-
Edwards' ESOP is a retirement plan within the
meaning of ERISA for purposes of the case before
12us.
2. Is the current ESOP eligibility provision lawful?
The-Respondent, relying on Handleman Co., 283
NLRB 451 (1987), argues that its ESOP's eligibility
provision is lawful. It also contends that because
the provision is functionally identical to the excep-
tion to minimum participation standards described
in 26 U.S.C. § 410(b)(3)(A) of the Internal Reve-
nue Code, to find that the provision violates Sec-
tion 8(a)(1) would be tantamount to finding that
the language Congress chose to describe the excep-
tion to minimum participation standards for tax
qualification purposes also violates Section 8(a)(1)
of the Act. The Charging Party, relying on Kroger
Co., supra, argues that once it is determined that
the Respondent's ESOP is a profit-sharing plan it is
clear that the exclusionary language of the Re-
spondent's plan is unlawful. It further asserts that
Handleman is distinguishable from the instant case.
We find, for the following reasons, that the Re-
spondent's ESOP eligibility provision does not vio-
late Section 8(a)(1) of the Act.13
As mentioned above, the Respondent's ESOP
contains an eligibility provision, which states:
3.1 Eligibility
. . . [N]otwithstanding any provision to the
contrary, no employee covered by a collective
bargaining agreement between an Employee
representative and the Employer shall become
a Participant in the Plan, provided that retire-
ment benefits of said class of Employees was
the subject of good faith bargaining between
the Employee representative and the Employ-
er, and said Employee's retirement benefits are
being funded pursuant to said collective bar-
gaining agreements.
29USC § 1002 (2XA)
'a Further, for the reasons set forth by Chairman Stephens at fn 8 of
his prior concurring and dissenting opinion in this case and contrary to
the Union's contention in its statement of position, we find that the
Board 's decisions in Kroger Co, 164 NLRB 362 (1967), enfd 401 F 2d
682 (6th Cir 1968), cert denied 395 U S 904 (1969), and Winn-Dixie
Stores, 224 NLRB 1418 (1976), enfd in part 567 F 2d 1343 (5th Cir
1978), are not inconsistent with this holding
"The Union's argument is rejected because, as more fully discussed
above, the plan is a retirement plan, not a profit -sharing plan , for the pur-
poses of the case before us We again note that the finding that the dis-
puted provision is lawful is not inconsistent with the holding in Kroger,
supra
In finding that the Respondent's eligibility provi-
sion does not violate Section 8(a)(1), we note that
the provision does not automatically terminate the
employees' benefits upon selection of the Union as
its exclusive representative. Rather, it provides that
the benefits may only be terminated if two condi-
tions are met. First, retirement benefits for the cov-
ered employees must be the subject of good-faith
bargaining. Second, the employees' retirement ben-
efits must be funded pursuant to the collective-bar-
gaining agreement. Thus, the employee's participa-
tion in the Respondent's ESOP continues through-
out the negotiation process and is discontinued only
in the event that a new retirement plan is funded
through the agreement. Finally, we note that the
Respondent and the Union under this scheme main-
tain the option, through good-faith negotiations, to
either continue coverage for employees under the
Respondent's ESOP, or to negotiate for the substi-
tution of a different plan, which may include stock
ownership features. Under these circumstances, it is
clear that the Respondent's eligibility provision
does not run afoul of Section 8(a)(1).14
3. May Lynn-Edwards amend the eligibility provi-
sion in light of the principles of Rangaire Corp., 157
NLRB 682 (1966)?
The Respondent argues that this issue has been
rendered moot by the Board's decision in, inter
alga, Handleman Co., supra, since both the language
and application of the disputed provision here are
less restrictive concerning the eligibility of repre-
sented employees than the eligibility provisions in-
volved in that case. By contrast, the Charging
Party premises its argument on the assumption that
the Respondent's ESOP is a profit-sharing plan, a
contention that we have rejected above.
We agree with the Respondent. Thus, although
the Respondent may, if it so desires, amend the eli-
gibility provision in its ESOP in light of the princi-
ples of Rangaire Corp., there is no need to do so
because the eligibility provision as written does not
run afoul of Section 8 (a)(1).
In conclusion, we find, contrary to the judge,
that the Respondent's ESOP is a retirement plan
and that its eligibility provision does not violate
Section 8(a)(1). Nonetheless, we reaffirm that part
of the judge's Conclusion of Law 4 in which he
found that "Respondent has violated Section
8(a)(1) of the Act . . . by maintaining those por-
14 See , eg, Rangaire Corp, 157 NLRB 682, 683-684 (1966), Tappan
Co, 228 NLRB 1389, 1390 (1977), enfd 607 F 2d 764 (6th Cir 1979), Ni-
agara Wires, 240 NLRB 1326, 1328 (1979), Sarah Neuman Nursing Home,
270 NLRB 663, 680-681 (1984), Handleman Co, 283 NLRB 451 (1987)
In finding that the disputed provision does not violate Sec 8(a)(1), we
also note the similarity between this provision and 26 U S C
§ 410(b)(3)(A)
LYNN-EDWARDS CORP
tions of existing booklets and documents which
contain related explanatory material." It is clear
that by "existing booklets and documents" the
judge was referring to the Respondent's employee
handbook and summary plan document, and by
"related explanatory material," it is clear the judge
was referring to the description in both documents
that indicated that eligible for the ESOP were
"[a]ll full-time employees, except those covered by
collective bargaining agreements."15 It is well set-
tled that an employer violates Section 8(a)(1)
through a-provision in, or a statement about, a plan
that suggests that coverage of employees will auto-
matically be withdrawn as soon as they become
represented by a union or that continued coverage
under the plan will not be subject to bargaining.
See, e.g., Niagara Wires, 240 NLRB 1326 (1979),
and cases cited therein. Accordingly, we find the
description of the ESOP in the handbook and sum-
mary plan document here violated the Act.16
In so concluding, we find Handleman Co., supra,
and Dallas Morning News,, 285 NLRB 807 (1987),
to be distinguishable on this point from the instant
case. In Handleman, unlike the present case, the ex-
clusionary language contained in the respondent's
eligibility provision, indicated that coverage for
represented employees was subject to negotiations
and, thus, did not automatically withdraw or com-
pletely foreclose, coverage for such employees. In
Dallas Morning News, employees represented by a
union had historically been excluded from cover-
age from various sick-pay plans instituted by the
employer for the benefit of nonunion employees.
Some of these plans were written and some were
not. The respondent subsequently drafted a written
plan to provide a consistent policy in all depart-
ments in which the employees had sick leave bene-
fits of one kind or another and indicated that the
plan excluded "those covered by a collective bar-
gaining arrangement." The Board reversed the
judge's finding there that the institution of this
plan, with its exclusion of "those covered by a col-
lective bargaining arrangement," was a per se vio-
lation of Section 8(a)(1). In doing so, the Board
noted that in the past sick pay had been a subject
of negotiations between the respondent and the
union but that the parties had never entered into
'5 The Respondent clearly was aware that the judge had found viola-
tions based on the language in the handbook and summary plan docu-
ment Thus, we note that in its brief to the Board in support of its excep-
tions to the judge's decision it specifically stated, at p 2, that the judge
"found that Lynn-Edwards maintained an unlawful exclusionary provi-
sion in its profit-sharing plan, in its employee handbook, and in its sum-
mary plan document "
16 As the judge noted, these documents were in existence during the
election campaign We therefore rind no basis to reconsider our prior de-
termination in the representation case to set aside the election and direct
a second election
205
contracts that provided a sick-pay plan. The Board
held that "[w]ere the per se violation found by the
judge to stand, an employer would effectively be
required to grant its unionized employees any bene-
fit that the nonunit employees possessed, or at least
would not be able to provide accurate descriptions
of the details and scope of all its existing employee
benefits when non-unit employees were the benefi-
ciaries of any plan in which the unit employees
were not included." Noting that there was no alle-
gation of bad-faith bargaining in. the .u (Qy-
ees' not securing a sick-pay plan " or aegation
that the announcement of the plan was used as a
device to defeat the union, the Board dismissed the
complaint allegation. In so holding, however, the
Board distinguished its decision in Melville Confec-
tions, 142 NLRB 1334 (1963), enfd. 327 F.2d 689
(7th Cir. 1964), cert. denied 377 U.S. 933 (1964), on
which the judge had relied. The Board indicated
that, in Melville, employer statements that suggest-
ed that employees would automatically forfeit an
existing benefit plan if they voted for a union in the
pending representation election constituted a viola-
tion of Section 8(a)(1). The statements in the em-
ployee handbook and summary plan document here
likewise indicate that employees covered by a col-
lective-bargaining agreement will automatically
forfeit their entitlement to the ESOP and are there-
fore unlawful.
AMENDED CONCLUSIONS OF LAW
Substitute the following for paragraphs 3 and 4
of the judge's Conclusions of Law:
"3. The Respondent has violated Section 8(a)(1)
of the Act by threatening employees with loss of
the Employee Stock Ownership Plan in the event
they become represented by a union.
"4. The Respondent has violated Section 8(a)(1)
of the Act by maintaining those portions of its em-
ployee handbook and summary plan document,
which contain language specifying that the Re-
spondent's Employee Stock Ownership Plan ex-
cludes full-time employees who are covered by
collective-bargaining agreements."
AMENDED REMEDY
Having found that the Respondent has engaged
in unfair labor practices within the meaning of Sec-
tion 8(a)(1) of the Act, we shall order that it cease
and desist therefrom, and that it take certain affirm-
ative action to effectuate the policies of the Act.
Accordingly, we shall order the Respondent to
amend any existing employee handbooks or sum-
mary plan documents so as to eliminate therefrom
any language which indicates that employees who
are covered by collective-bargaining agreements
206 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
automatically will be excluded from the Respond-
ent's Employee Stock Ownership Plan.
ORDER
The National Labor Relations Board orders that
the Respondent, Lynn-Edwards Corp., North
Highlands , California , its officers , agents , succes-
sors, and assigns, shall
1. Cease and desist from
(a) Threatening employees with loss of Employ-
ee Stock Ownership Plan in the event they become
represented by a union.
(b) Maintaining those portions of the employee
handbook and summary plan document which con-
tain language specifying that the Respondent's Em-
ployee Stock Ownership Plan excludes full-time
employees who are covered by collective -bargain-
ing agreements.
(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) Amend its existing employee handbook and
summary plan document so as to eliminate there-
from any language that indicates that employees
who are covered by collective-bargaining agree-
ments automatically will be excluded from the Re-
spondent 's Employee Stock Ownership Plan.
(b) Post at its North Highlands, California facili-
ty copies of the attached notice marked "Appen-
dix."' 7 Copies of the notice, on forms provided by
the Regional Director for Region 20, after being
signed by the Respondent 's authorized representa-
tive , shall be posted by the Respondent immediate-
ly 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.
(c) Notify the Regional Director in writing
within 20 days from the date of this Order what
steps the Respondent has taken to comply.
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 Nation-
al Labor Relations Board" shall read "Posted Pursuant to a Judgment of
the United States Court of Appeals Enforcing an Order of the National
Labor Relations Board -
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 threaten you with loss of the Em-
ployee Stock Ownership Plan in the event you
become represented by a union.
WE WILL NOT maintain those portions of the em-
ployee handbook and summary plan document
which contain language specifying that our Em-
ployee Stock Ownership Plan excludes full-time
employees who are covered by collective-bargain-
ing agreements.
WE WILL NOT in any like or related manner
interfere with , restrain, or coerce you in the exer-
cise of the rights guaranteed you by Section 7 of
the Act.
WE WILL amend those provisions of our employ-
ee handbook and summary plan document which
indicate that employees covered by a collective-
bargaining agreement automatically will be dis-
qualified from participating in our Employee Stock
Ownership Plan.
LYNN-EDWARDS CORP.
Carmen Plaza De Jennings and Boren Chertkov, Esqs., for
the General Counsel.
Dennis R. Murphy, Esq. (Diepenbrock, Wulff Plant &
Hannegan), of Sacramento, California , for the Re-
spondent.
Carol Livingston , Esq., of Sacramento , California , for the
Union.
DECISION
STATEMENT OF THE CASE
GERALD A. WACKNOV , Administrative Law Judge.
Pursuant to notice , a hearing regarding this matter was
held before me in Sacramento , California, on November
29, 1983.' The initial charge was filed on June 16, by
Chauffeurs, Teamsters and Helpers , Local 150, affiliated
with International Brotherhood of Teamsters , Chauf-
feurs, Warehousemen and Helpers of America (the
Union), and an amended charge was filed by the Union
on July 27
Thereafter, on July 29, the Regional Director for
Region 20 of the National Labor Relations Board (the
Board ) issued a complaint and notice of hearing alleging
a violation by Lynn-Edwards Corp. (Respondent) of
I All dates or time periods are within 1983 unless otherwise specified
LYNN-EDWARDS CORP
Section 8(a)(1) of the National Labor Relations Act (the
Act).
Pursuant to a representation petition filed by the
Union on April 7 in Case 20-RC-15616,, an election by
secret ballot was conducted on June 2. The tally of bal-
lots reflects that of the approximately 79 eligible employ-
ees, 16 cast ballots for. the Union and 53 cast ballots
against the Union. There were three challenged ballots
which were insufficient in number to affect the results of
the election. Subsequently, the Union filed timely objec-
tions to the election. Pursuant to a Report on Objections,
notice of hearing, and order consolidating cases issued by
the Regional Director on August 31, certain objections
were consolidated with the instant unfair labor practice
proceeding for the purpose of hearing, ruling, and deci-
sion by an administrative law judge.
The parties were afforded a full opportunity to be
heard, to call; examine, and cross-examine witnesses, and
to introduce relevant evidence. Since the close of the
hearing, briefs have been received from the General
Counsel2 and counsel for Respondent. '
On the entire record, and based on my observation of
the witnesses and consideration of the briefs submitted, I
make the following
FINDINGS OF FACT
1. JURISDICTION
The Respondent is a California corporation , with an
office and place of business in North Highlands , Califor-
nia, and is engaged in the wholesale sale and distribution
of office products and supplies . Respondent, in the
course and conduct of its business operations, annually
purchases and receives products , goods, and materials
valued in excess of $50,000 directly from points outside
the State of California.
It is admitted , and I find , that Respondent is now, and
has been at all times material , an employer engaged in
commerce within the meaning of Section 2(2), (6), and
(7) of the Act.
11. THE LABOR ORGANIZATION INVOLVED
It is admitted that the Union is, and has been at all
times material, a labor organization within the meaning
of Section 2(5) of the Act.
III. THE ALLEGED UNFAIR LABOR PRACTICES
A. The Issues
The principal issues raised by the pleadings are wheth-
er the Respondent, pursuant to the provisions of its Em-
ployee Stock Ownership Plan, unlawfully excluded em-
ployees represented by a union from participation in the
plan, and threatened its employees with loss of plan ben-
efits if the employees were to unionize; and whether
such conduct warrants the direction of a second election.
2 The General Counsel's request to correct the transcript is granted
207
B.' The Facts
On April 4 the Union requested recognition from Re-
spondent in an appropriate unit.3
On April 5, the day following the Union's request for
recognition, but before the filing of the representation
petition, the Respondent held separate meetings for unit
employees on each of three shifts. The Respondent was
represented by Jack Scarzella, president and chief execu-
tive officer; Walter Riley, vice president in charge of
marketing, and a trustee of Respondent's Employee
Stock Ownership Plan (ESOP);4 and Ken Saunders, Re-
spondent's chief financial officer.
President Scarzella's outline of the meetings reflect
that he began by telling the employees that the Company
had received a claim for recognition by the Union and
that it-doubted whether the Union represented a majori-
ty of its employees. He then went on to enumerate six
points under the general topic "UNIONS TELL YOU
WHAT THEY CAN DO FOR YOU-NO GUARAN-
TEE OF WAGE INCREASE OR SECURITY." He
apparently spoke negatively about the "LARGE UN-
FUNDED VESTED LIABILITY" of the Teamsters
pension plan , and then mentioned the Respondent's
ESOP plan, telling the employees that "UNION
CANNOT PARTICIPATE IN ESOP." Scarzella testi-
fied that although he did not read from the outline, he
"essentially" followed it in conveying its meaning. After
further statements regarding the costs of belonging to a
union and other matters, Scarzella introduced Riley and
Saunders for the express purpose of discussing the Re-
spondent's ESOP plan. Riley commenced this portion of
the meeting by reading the following description of the
plan:
Lynn-Edwards Corporation Employee Stock
Ownership Plan (ESOP) was adopted on June 1,
1977. ESOP is a voluntary program on the part of
corporation's management and its continuance and
growth is dependent on contributions from profits
which are not needed for growth, debt reduction,
etc. ESOP is a form of retirement program designed
to benefit the long term employee.
The purpose of this plan is to recognize the con-
tribution of the employees to the successful oper-
ation of Lynn-Edwards and to reward their contri-
bution by enabling the employees to acquire equity
ownership in the Corporation without diminishing
take home pay. A major portion of the Corporate
contribution to the Employee Stock Ownership
Trust will be invested in Lynn-Edwards Corpora-
tion Stock. The value of the stock fluctuates with
the performance of the business. Any employee who
The unit as described here is as follows , .
All shipping and receiving employees including stock pullers, stock-
ers, returns, packers, shipping/strappers, maintenance employee driv-
ers, and forklift operators employed by Lynn-Edwards Corporation
at its North Highlands, California facility, excluding office clerical
employees, salespersons, managerial employees , guards, and supervi-
sors as defined in the Act
' The record clearly shows, and I find, that Riley is a supervisor and
agent of Respondent , as alleged
208 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
is a member of collective bargaining cannot be eligible
for this plan . [Emphasis added.]
After providing the details of the plan' s operation, in-
cluding the vesting provisions , Riley told the employees
that:
All participating employees as of May 31, 1982
will be receiving their individual statements in the
mail this week. This is being done to respect indi-
vidual employee privacy.
Scarzella testified that during additional group meet-
ings subsequent to the April 5 meetings and following
the filing of the representation petition, he did recall that
he compared the ESOP plan to the "contributory nature
and the solidity" of the Teamsters' pension plan. Howev-
er, according to Scarzella, the matter was not considered
to be a major point during the preelection campaign.
The parties stipulated that all employees are furnished
with Respondent's employee handbook, which contains a
detailed summary of the ESOP plan. Significant portions
of the handbook summary are as follows:
EMPLOYEE STOCK OWNERSHIP PLAN
(ESOP)
The purpose of this plan is to enable full time
permanent employees of the Company to share in
the growth and prosperity of the Company and to
provide participants with an opportunity to accu-
mulate capital for their future economic security.
The Plan is designed to do this without any deduc-
tions from participant's paychecks and without call-
ing upon them to invest their personal savings A
primary purpose of the Plan is to enable participants
to acquire a proprietary interest in the Company-
consequently a major portion of the Employer Con-
tributions made to the Trust will be invested in
Company stock.
This Plan is administered by a Committee con-
sisting of not less than three (3) nor more than five
(5) members.
All full-time employees, except those covered by
collective bargaining agreements, who have attained
the age of 20 and have completed two (2) months
of continuous service prior to the Plan Entry Date
of May 31st, are eligible to participate. [Emphasis
added.]
Vesting Schedule:
Vesting measures a Participant's right to receive
the value of the Employer's contributions which
have been allocated to his account in the event he
terminates employment for reasons other than
death, disability or retirement.
ESOP contributions are made from corporation
funds and are divided to all participants in same
proportions as their salary is to total salaries. It is
important to note that no money is withheld from
the employee's salary. The Plan is totally funded by
the Corporation and should be thought of as extra
salary being invested for each participant. [Emphasis
added.]
In 1978 a "Summary Plan Document" was distributed
to employees. This summary, inter alia, contains the fol-
lowing:
The purpose of this Plan is to enable participating
employees of the Company to share in the growth
and prosperity of the Company and to provide Par-
ticipants with an opportunity to accumulate capital
for their future economic security. The Plan is de-
signed to do this without any deductions from Par-
ticipants' paychecks and without calling upon them
to invest their personal savings. A primary purpose of
the Plan is to enable Participants to acquire a proprie-
tary interest in the Company-consequently, a major
portion of the Employer Contnbutions made to the
Trust will be invested in Company stock. This Plan
is adopted as an amendment of the Company's
Profit Sharing Plan, and the assets of the Profit
Sharing Plan will be transferred to the Trustee
under this Plan. The Plan is administered by a Com-
mittee consisting of not less than three, no more
than five members. [Emphasis added.]
2. When do I become eligible to participate?
All full-time employees, except those covered by
collective bargaining agreements, who have attained
age 20 and have completed at least 2 months of
continuous service are eligible to participate as of
the effective date of the Plan. [Emphasis added.]
The documentary evidence indicates that the
ESOP plan, which has been in effect since 1977,
was amended in 1983 retroactive to June 1, 1981.5
The amendment, a document of some 37 pages,
contains the following:
ARTICLE I
Name and Purpose of Plan
1.1 Name
The Employee Stock Ownership Plan established
by the LYNN-EDWARDS CORPORATION, a
California corporation (Employer herein) shall be
known as the Stock Bonus Employee Stock Owner-
ship Plan (Plan herein) and the Employee Stock
Ownership Trust executed by Employer and
EDWARD F. SCONBERG, JR. and WALTER E.
RILEY (Trustees herein) shall be known as the
Employee Stock Ownership Trust (Trust herein).
1.2 Purpose
It is the purpose of this plan to recognize the
contribution of the Employees to the successful op-
eration of the Employer and to reward such contri-
bution by establishing the system that would enable
the employees to acquire through a Stock Owner-
ship Plan equity ownership in the Employer with-
out diminishing take-home pay. A major portion of
3 The amendment does not denote the month and day in 1983 when
the plan was amended This case was litigated on the premise that the
amendment has been in effect at all times material
LYNN-EDWARDS CORP
the Employer contributions to the trust will be in-
vested in stock of Employer.
ARTICLE 3
Eligibility and Participation
3.1 Eligibility
. . However , notwithstanding any provision to
the contrary , no employee covered by a collective
bargaining agreement between an Employee repre-
sentative and the Employer shall become a Partici-
pant in the Plan, provided that retirement benefits
of said class of Employees was the subject of good
faith bargaining between the Employee representa-
tive and the Employer , and said Employee 's retire-
ment benefits are being funded pursuant to said col-
lective bargaining agreements.
C. Analysis and Conclusions
1. The unfair labor practice case
Both the Respondent 's employee handbook and its
summary plan document , copies of which have been fur-
nished to the employees since 1977 or 1978, specify that
all employees are able to participate in the plan "except
those covered by collective bargaining agreements."
Similarly , on April 5, the Respondent 's president, Scar-
zella, told the employees at a series of meetings that the
"union cannot participate in ESOP," and Vice President
Riley stated that "Any employee who is a member of
collective bargaining cannot be eligible for this plan."
Such statements by Scarzella and Riley are clearly viola-
tive of the Act, as alleged.
In Niagara Wires, 240 NLRB 1326, 1327-1328 (1979),
the Board found that virtually identical language appear-
ing in a pension plan and summaries of the plan , consti-
tuted a violation of Section 8(a)(1) of the Act. The
Board stated-
While , as Respondent notes, the Board has
indeed found violations under the Act based on an
employer's unlawful conduct in implementing a re-
strictive eligibility provision to deprive otherwise
eligible employees of benefits , or by explicitly using
the eligibility restriction as a coercive device during
an election campaign ,3 it is clear that such conduct
is not a sine qua non for finding a violation in this
area . Rather , we have consistently stated that the
mere maintenance and continuance of a provision in
a pension plan, making lack of union representation
one of the qualifications for eligibility to participate
therein , itself tends to interfere with , restrain, and
coerce employees who are otherwise eligible in the
exercise of their self-organizational rights .4 Here,
Respondent's plan , in limiting eligibility to employ-
ees who are not covered by a collective-bargaining
agreement, in effect, conditions eligibility on the un-
represented status of the employees. It is clear that
Respondent publicized this restriction by distribut-
ing summaries of the plan to its employees a few
weeks before they were scheduled to vote in the
209
union election . While there is no reason to assume
that the distribution of the plan was unlawfully mo-
tivated , the communication and the continued exist-
ence of such an exclusionary eligibility requirement
necessarily exert a coercive impact on the employ-
ees. It is for this reason that an employee benefit
plan which restricts coverage to unrepresented em-
ployees is per se violative of Section 8(a)(1) of the
Act, regardless of whether the employer adds to the
misconduct by implementing the restriction or ex-
ploiting it during an organizing campaign.5
' See, e g , Firestone Synthetic Fibers Company , 157 NLRB
1014, 1018, 1019 ( 1966), enforcement denied 374 F2d 211 ( 1967),
Sunshine Food Markets, Inc, 174 NLRB 497, 504 (1969)
* See, eg, Jim O'Donnell, Inc, 123 NLRB 1639, 1643 ( 1959),
Melville Confections , Inc, 142 NLRB 1334 , 1338 (1963 ), enfd 327
F 2d 689 (7th Cir 1964), cert denied 377 U S 933 See also A M
Steigerwald Co, 236 NLRB 1512 (1978)
5 See, e g, White Sulphur Springs Company , d/b/a Greenbrier
Hotel, 216 NLRB 721, 727 (1975), Sunshire Food Markets, Inc, 174
NLRB 497, 504 ( 1969), Goodyear Tire & Rubber Company, 170
NLRB 539, 550 ( 1968), modified in part 413 F 2d 158 (6th Cir
1969), Dura Corporation , 156 NLRB 285, 288, 289 (1965), enfd 380
F 2d 970 (6th Cir 1967)
Further, even assuming the exclusionary language of the
amendment to the plan , supra, is not unlawful , and that
Scarzella and Riley simply misrepresented the provision
to the assembled employees , as the Respondent main-
tains, their statements are nevertheless unlawful . Thus, in
Rangaire Corp., 157 NLRB 682, 684 ( 1966), the Board
found under similar circumstances that although the ex-
clusionary language of the plan was not unlawful , never-
theless a "plainly misleading statement of fact which pur-
ports to exclude the possibility of bargaining over con-
tinuation of an existing condition of employment inter-
feres with the protected right of employees to engage in
collective bargaining " See also Tappan Co., 228 NLRB
1389 (1977). It is therefore clear , and I find , that the
similar misleading statements by Scarzella and Riley
during the course of the April 5 group meetings were
per se unlawful and violative of Section 8(a)(1) of the
Act.
In Rangaire , supra at 683 , the Board found that lan-
guage in a pension plan excluding "any person covered
by a collective bargaining agreement entered into with
the employer , which agreement does not provide for
coverage of such person by this plan " was permissible.
Similarly , in Tappan , supra at 1390, the language in the
"retirement savings benefit plan" which was further de-
scribed as "Tappan Company Retirement Savings Plan
for Non -Bargaining Unit Employees " was not found' to
be unlawful , in that it did not automatically exclude
union employees , but rather provided that they would be
excluded only if they become members "of a bargaining
unit recognized for the purpose of collective bargaining,
and for whom the Company maintains or contributes to
an employee benefit plan pursuant to agreement with the
collective bargaining representative for the unit."
The Respondent contends that the exclusionary lan-
guage in its amendment to the plan falls within the pa-
rameters of the cited cases , and is therefore lawful be-
210 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
cause , as stated by the Board in Solo Cup Co., 176 NLRB
823 at fn. 3 (1969):
This does not mean of course, that an employer
may not advise his employees, in a noncoercive
fashion, that pensions for those in the unit are sub-
ject to bargaining and that if a separate pension plan
for those in the unit is agreed upon, coverage in the
existing plan will not be maintained, i.e., the em-
ployer is not obligated to provide "double cover-
age."
The General Counsel, however, citing Solo Cup, supra
Kroger Co., 164 NLRB 362 (1967), enfd 401 F.2d 682
(6th Cir. 1968), cert. denied 395 U.S. 904 (1969), and
Winn-Dixie Stores, 224 NLRB 1418 (1976), enfd. in perti-
nent part 567 F.2d 1343 (2d Cir. 1978), maintains that the
language is unlawful because of the nature of Respond-
ent's plan. As argued by the General Counsel, the grava-
men of the violations in the foregoing cases as well as
the instant case involves the language in the employers'
"profit sharing plans" which automatically preclude em-
ployees from enjoying the benefits of such plans if they
become covered by a "retirement" plan negotiated by
the union. Thus, profit-sharing plans and retirement
plans, as characterized by the Board, are different enti-
ties.
Profit-sharing plans are essentially dependent on an
employer's current and future profits and, as in the in-
stant case, constitute a bonus for employees whose ef-
forts have enabled the company to make a profit As
stated in the Respondent's employee handbook, the con-
tributions are to be viewed as "extra salary." Indeed, the
amendment to the plan renames it to reflect that it is a
"Stock Bonus" plan designed to reward the employees
for their contributions to the Respondent's success. Al-
though certainly more elaborate, the plan, in essence,
may be viewed as similar to an annual Christmas bonus
rewarding employees for a job well done; and indeed,
the value of the bonus to the employees may diminish
with time, as the benefits are dependent on the value of
the Respondent's stock upon the employees' retirement.
In contrast, retirement plans or pension plans, as contem-
plated or discussed by the Board in the foregoing cases,
are not subject to the vicissitudes of an employer's busi-
ness operations, but rather are customarily funded on a
different basis, ensuring regular contributions and stabili-
ty. The fact that Respondent's plan is sometimes denomi-
nated as a retirement plan by the Respondent in the van-
ous documents or speeches referred to above does not
alter the plan's essential purpose. As the Board has stated
in Winn-Dixie, supra at 1419, the fact that "enjoyment of
the benefits derived from Respondent's contributions is
deferred until a point of time normally associated with
retirement," is not a determinative factor.
On the basis of the foregoing, I find that Respondent's
ESOP plan is a profit-sharing plan within the purview of
the aforementioned cases. It is clear that an employer
may not, through provisions of a profit-sharing plan,
automatically deprive emplo) ees of benefits therefrom if
they elect to be covered by a retirement or pension plan
negotiated by the union. Because this is precisely the ex-
press intent of the language in Respondent 's profit-shar-
ing plan , such provisions are unlawful . I therefore con-
clude that by maintaining such an unlawful exclusionary
clause in its profit-sharing plan Respondent has violated
Section 8(a)(1) of the Act, as alleged Winn-Dixie Stores,
supra ; Solo Cup Co., supra ; Kroger, supra.
-2. The representation case
Insofar as the record shows, and as found above, the
Respondent has maintained an unlawful exclusionary
provision in its profit -sharing plan during all times mate-
rial The amended plan was in existence during the elec-
tion campaign , as were the employee handbook and the
summary plan document . Immediately before the filing
of the petition , and as a direct consequence of the
Union 's request for recognition, the Respondent empha-
sized language contained in the employee handbook and
summary plan document, by telling the employees that
the benefits of the ESOP plan were not available to
union-represented employees .6 Further , during the
course of the postpetition campaign , Respondent admit-
tedly mentioned its ESOP plan to the employees, for
purposes of comparison with the Union 's retirement plan.
It is clear that conduct violative of Section 8(a)(1) as
found here is, a fortiori , conduct which interferes with a
free and untrammeled choice in the election. Federated
Department Stores, 241 NLRB 240, 253 fn . 38 (1979);
Dal-Tex Optical Co., 137 NLRB 1782, 1786 ( 1962). Re-
spondent contends that the ESOP plan was not consid-
ered by Respondent to be a significant issue during the
preelection campaign and therefore should not constitute
grounds for setting the election aside The Board stated
in Enola Super Thrift, 233 NLRB 409 (1977), the "only
recognized exception to this policy [of finding that con-
duct violative of Section 8(a)(1) constitutes a fortiori in-
terference with a free election] is where the violations
are such that it is virtually impossible to conclude that
they could have affected the results of the election." Ap-
plying this test to the instant factual situation, it is clear
that Respondent 's contention is without merit.
Moreover , I find no merit to Respondent's similar ar-
gument that because the vote was overwhelmingly
against union representation , it would serve no useful
purpose to conduct a second election . It is clear that
"whether certain conduct warrants setting aside an elec-
tion does not turn on the election results, but rather on
its likelihood to coerce prospective voters to cast their
ballots in a particular manner ." United Broadcasting Co.,
248 NLRB 403, 404 (1980).
The Respondent 's profit-sharing plan is a financial ben-
efit which, it may reasonably be presumed , significantly
affects each unit employee. Indeed , the Respondent,
when confronted with the Union's request for recogni-
tion, deemed it expedient to present the employees with
the details and benefits of the plan in an effort to per-
6 It is well-established that prepetition conduct may be considered for
purposes of evaluating objections insofar as it lends meaning and dimen-
sion to postpetition conduct or assists in its evaluation Arthur Briggs, Inc ,
265 NLRB 299 (1982), Maywood, Inc, 251 NLRB 979 fn 4 (1980),
Dressler Industries, 231 NLRB 591 (1978), Parke Coal Co, 219 NLRB 546
(1975)
LYNN-EDWARDS CORP.
suade them that not only was a union unnecessary, but
that selecting a union would result in their exclusion
from the plan. I therefore conclude that, under the cir-
cumstances, it is necessary to recommend that a second
election be conducted.7
CONCLUSIONS OF LAW
1. Respondent is an employer engaged in commerce
within the meaning of Section 2(2), (6), and (7) of the
Act.
2. The Union is a labor organization within the mean-
ing of Section 2(5) of the Act.
3. The Respondent has violated Section 8(a)(1) of the
Act by threatening employees with loss of a profit-shar-
ing plan in the event they become covered by a retire-
ment plan negotiated by the Union.
4. The Respondent has violated Section 8(a)(1) of the
Act by maintaining article 3.1, Eligibility, of its amended
profit-sharing plan which unlawfully excludes employees
from participation in the plan, and by maintaining those
portions of existing booklets and documents which con-
tain related explanatory material
5. The aforesaid unfair labor practices are unfair labor
practices affecting commerce within the meaning of Sec-
tion 2(6) and (7) of the Act.
7 A separate, unrelated election objection was withdrawn by the Union
at the hearing
211
6. By the unfair labor practice found above, the Re-
spondent has interfered with the freedom of choice of its
employees in the representation proceeding, and it is rec-
ommended that the election in Case 20-RC-15616 held
on June 2, 1983, be set aside and that a second election
be conducted.
THE REMEDY
Having found that Respondent violated and is violat-
ing Section 8(a)(1) of the Act, I recommend that it be
required to cease and desist therefrom and from in any
like or related manner interfering with, restraining, or
coercing its employees in the exercise of their rights
under Section 7 of the Act, and take certain affirmative
action described here, including the posting of an appro-
priate notice attached hereto as "Appendix [omitted from
publication]."
Having found that Respondent violated Section 8(a)(1)
of the Act by maintaining article 3.1 "Eligibility" of its
amended profit-sharing plan, it is recommended that Re-
spondent cease and desist from further maintaining the
paragraph. Further, Respondent shall be ordered to
amend the plan and any existing employee booklets
and/or publications so as to eliminate therefrom any lan-
guage which suggests that employees covered by a re-
tirement plan resulting from collective bargaining
through a union will be disqualified from participating in
Respondent's profit-sharing plan
[Recommended Order omitted from publication.]