Michigan Ladder Co.

National Labor Relations Board - Board Decisions

Sep 30, 1987

286 N.L.R.B. 21 (N.L.R.B. 1987)

MICHIGAN LADDER CO.
Michigan Ladder Company and International Union,
United Automobile, Aerospace and Agricultural
Implement Workers of America, and its Local
Union No . 769. Case 7-CA-24918
30 September 1987
DECISION AND ORDER
BY MEMBERS JOHANSEN , BABSON, AND
STEPHENS
On 18 September 1986 Administrative Law
Judge Marion C . Ladwig issued the attached deci-
sion . The Respondent filed exceptions and a sup-
porting brief, and requested oral argument.' The
General Counsel filed cross-exceptions and a brief
in support of the cross -exceptions and in answer to
the Respondent 's exceptions ; the Charging Party
filed a brief in support of the judge 's decision and
in reply to the Respondent 's exceptions ; and the
Respondent submitted a letter in response to the
General Counsel's cross -exceptions.
The National Labor Relations Board has delegat-
ed its authority in this proceeding to a three-
member panel.
The Board has considered the decision and the
record in light of the exceptions , cross-exceptions,
and briefs and has decided to affirm the judge's rul-
ings, findings ,2 and conclusions only to the extent
consistent with this Decision and Order and to
adopt the recommended Order as modified.
1. The judge found that the Respondent violated
Section 8 (a)(5) and (1) of the Act by contracting
out bargaining unit work without affording the
Union a meaningful opportunity to bargain over
the decision . This conclusion was based on the
judge 's finding that , under the circumstances of the
case, the decision to contract out work normally
performed by bargaining unit employees was a
mandatory subject of bargaining under Otis Eleva-
tor, 269 NLRB 891 (1984). The judge further found
that the Union did not waive its right to bargain.
The judge considered the question of the Union's
waiver of its right to bargain under both the facts
as recounted by the Respondent's witnesses and the
facts as recounted by the General Counsel's wit-
nesses , whom he credited . He found that, under
either version , the Respondent presented the con-
tracting out scheme to the Union as a fait accom-
i 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 The Respondent has excepted to some of the judge's credibility find-
ings The Board's established policy is not to overrule an administrative
law judge's credibility resolutions unless the clear preponderance of all
the relevant evidence convinces us that they are incoi rect Standard Dry
Wall Products, 91 NLRB 544 (1950), enfd 188 F 2d 362 (3d Cir 1951)
We have carefully examined the record and find no basis for reversing
the findings
21
pli, so that the Union was not afforded any mean-
ingful opportunity to bargain over the decision. We
agree with the judge 's findings and conclusions.
First , we agree that under the circumstances of this
case the decision to contract out unit work was a
mandatory subject of bargaining under Otis Eleva-
tor.3 Second , we agree that under either account of
the Respondent 's disclosure to the Union of • the
proposal to contract out the unit work , the Re-
spondent presented nothing more than a fait ac-
compli to the Union , and therefore the Union did
not waive its right to bargain over the decision.4
2. The judge also concluded that the strike by
the Respondent 's bargaining unit employees that
began on 8 May 1985 was an unfair labor practice
strike . He based this conclusion on his finding that
the strike was caused by the Respondent 's "sham
bargaining" over the subcontracting issue in its
meetings with the Union on 26 and 29 March 1985
and its contract negotiations up to the time of the
strike on 8 May . In the judges 's view , the Re-
spondent from 26 March through 8 May continued
to engage in sham bargaining on the issue of con-
tracting out by "treating the unilateral subcontract-
ing as a fait accompli , with no intention of bargain-
ing in good faith on the issue ." We agree that the
strike was an unfair labor practice strike from its
inception , but in so concluding we do not rely on
the judge 's characterization of the Respondent's ne-
gotiating position as sham bargaining . Instead, we
find that the strike arose in reaction to the Re-
spondent 's unilateral decision to subcontract unit
work , presented to the Union as a fait accompli on
26 March . In this regard , it is settled Board law
that "the correct standard in determining whether
a strike is an unfair labor practice strike is whether
it is one which is caused `in whole or in part' by an
unfair labor practice ." Citizens National Bank of
Willmar, 245 NLRB 389, 391 ( 1979) (footnote
8 We agree with the judge's conclusion that the Respondent was obli-
gated to bargain with the Union over its decision to contract out work
performed by bargaining unit employees In doing so , we find that the
judge 's conclusion is consistent with the Supreme Court's opinion in First
National Maintenance Corp. v NLRB, 452 U S 666 (1981), and with any
of the views expressed in Otis Elevator, supra Further , we find it unnec-
essary to pass on the Board 's decision in Garwood-Detroit Trucking Equip-
ment, 274 NLRB 113 ( 1985), because we agree with the judge that that
case is factually distinguishable from the present case
4 Members Stephens and Johansen note that, in agreeing that the Re-
spondent did not afford the Union a reasonable opportunity for bargain-
ing, they are not faulting the Respondent simply for having worked out a
detailed plan for the subcontracting in advance See Owens-Corning Fiber-
glas Corp, 282 NLRB 609 (1987) However, where, as here, an employer
conceals and misrepresents details of an arrangement already worked out
with the subcontractor when it presents the plan to the bargaining repre-
sentative and when the employer agrees with the subcontractor to put
the arrangement into effect at a time when the bargaining representative
is still in the dark about what is happening , they cannot find that the em-
ployer has afforded the bargaining representative the opportunity for ne-
gotiations that is its due under the Act
286 NLRB No. 4
22 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
omitted); see also Tufts Bros., Inc., 235 NLRB 808
(1978). The record reflects that the Union contin-
ued to object vigorously to the decision to subcon-
tract throughout the negotiation meetings that took
place between 26 March and the strike, and we
find that these continued objections to the Re-
spondent's unfair labor practices warrant the con-
clusion that a cause of the strike was the Respond-
ent's unlawful unilateral action in contracting out
the work without affording the Union a meaningful
opportunity to bargain over the decision.
3. The judge did not pass on the allegation in the
complaint that the Respondent violated Section
8(a)(5) and (1) by failing to afford the Union a
meaningful opportunity to bargain over the effects
on the unit employees of the decision to contract
out unit work. The General Counsel has excepted.
We find no merit in the General Counsel's excep-
tion. Unlike the issue of bargaining over the deci-
sion itself, the record contains no evidence that the
Union was presented with a fait accompli concern-
ing the effects of the decision. The record contains
no evidence that the Respondent had made unilat-
eral decisions regarding the fate of the unit em-
ployees by 26 March. Indeed, at the time of the
hearing the Respondent had not laid off the em-
ployees whose duties were contracted out. Al-
though the record reflects that the subject of the
decision to contract out unit work was raised re-
peatedly at meetings between the Union and the
Respondent, it reflects no occasion on which the
Union requested that the Respondent bargain with
it over the effects of the decision on the unit em-
ployees. Therefore, in the absence of any evidence
that the Union sought bargaining over the effects
of the decision, we find that the Union waived its
right to bargain over this subject. See, e.g., Haw-
thorn Mellody, Inc., 275 NLRB 339, 342 (1985).
4. The General Counsel has also excepted to the
judge's failure to grant a make-whole remedy. Be-
cause such a make-whole remedy is appropriate in
this case, we will modify the recommended Order
accordingly. See, e.g., University Health Care
Center, 274 NLRB 764 (1985), enfd. sub nom. Nur-
minco, Inc. v. NLRB, 786 F.2d 1170 (8th Cir. 1986).
Thus, we shall order that the Respondent fully re-
store the status quo at the time of its unlawful re-
fusal to bargain. The Respondent will be ordered
to offer employees laid off, terminated, or other-
wise denied work opportunities as a result of its
unilateral contracting out of unit work immediate
and full reinstatement to their former positions or,
if those positions no longer exist, to substantially
equivalent positions, without prejudice to their se-
niority or other rights and privileges. We shall also
order the Respondent to make whole those em-
ployees who were laid off, terminated, or other-
wise denied work opportunities for any losses of
earnings as a result of the Respondent's unilateral
contracting out of unit work. Backpay shall be
computed as in F. W. Woolworth Co., 90 NLRB 289
(1950), or as in Ogle Protection Service, 183 NLRB
682 (1970), as appropriate, with interest to be com-
puted in the manner prescribed in New Horizons for
the Retarded.5
ORDER
The National Labor Relations Board adopts the
recommended Order of the administrative law
judge as modified and set forth in full below and
orders that the Respondent, Michigan Ladder
Company, Ypsilanti, Michigan, its officers, agents,
successors, and assigns, shall
1. Cease and desist from
(a) Contracting out bargaining unit work without
good-faith bargaining with International Union,
United Automobile, Aerospace and Agricultural
Implement Workers of America, and its Local
Union No. 769.
(b) In any like or related manner interfering
with, restraining, or coercing employees in the ex-
ercise of the rights guaranteed them by Section 7
of the Act.
2. Take the following affirmative action neces-
sary to effectuate the policies of the Act.
(a) Immediately cancel its 1 April 1985 "subcon-
tracting" agreement with Custom Woodcrafters,
Inc. and resume the production and maintenance
work in the plant with bargaining unit employees.
(b) On their unconditional application for rein-
statement, offer the striking employees immediate
and full reinstatement to their former positions or,
if those positions no longer exist, to substantially
equivalent positions, without prejudice to their se-
niority or any other rights or privileges, dismissing,
if necessary, any replacements, and make them
whole for any loss of earnings they may have suf-
fered as a result of the Respondent's failure to rein-
state them on application, by payment to them of a
sum of money equal to that which each would
have earned as wages from 5 days after the date of
their unconditional application to return to work,
S In accordance with our decision in New Horizons for the Retarded,
283 NLRB 1173 (1987), interest on and after 1 January 1987 shall be
computed at the "short-term Federal rate" for the underpayment of taxes
as set out in the 1986 amendment to 26 US C § 6621 Interest on
amounts accrued prior to 1 January 1987 (the effective date of the 1986
amendment to 26 U S C § 6621) shall be computed in accordance with
Florida Steel Corp, 231 NLRB 651 (1977)
The judge included a visitatorial clause in his recommended Order au-
thorizing the Board , for compliance purposes, to obtain discovery from
the Respondent under the supervision of the United States Court of Ap-
peals enforcing the Board 's Order Under the circumstances of this case
we find it unnecessary to include such a clause
MICHIGAN LADDER CO.
to the date of the Respondent's offer of reinstate-
ment, less their net earnings during such period,
with backpay and interest thereon to be computed
in the manner prescribed by the Board in F. W.
Woolworth Co., 90 NLRB 289 (1950), and New Ho-
rizons for the Retarded, 283 NLRB 1173 (1987)."
(c) On request, bargain with the Union as the ex-
clusive bargaining representative of the employees
in the following appropriate unit concerning terms
and conditions of employment and, if an under-
standing is reached, embody the understanding in a
signed agreement:
All full-time and regular part-time employees
of Michigan Ladder Company, but excluding
all confidential salaried employees and all
guards and supervisors as defined by the Act.
(d) Offer all employees laid off, terminated, or
otherwise denied work opportunities as a result of
the unlawful contracting out of bargaining unit
work immediate and full reinstatement to their
former positions or, if such positions no longer
exist, to substantially equivalent positions without
prejudice to their seniority or other rights and
privileges.
(e) Make whole all employees who were laid off,
terminated, or otherwise denied work opportunities
for any loss of earnings as a result of the unlawful
contracting out of unit work., in the manner set
forth in this decision.
(f) 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.
(g) Post at its facility in Ypsilanti, Michigan,
copies of the attached notice marked "Appendix."6
Copies of the notice, on forms provided by the Re-
gional Director for Region 7, after being signed by
the Respondent's authorized representative, shall be
posted by the Respondent immediately upon re-
ceipt and maintained for 60 consecutive days in
conspicuous places including all places where no-
tices to employees are customarily posted. Reason-
able steps shall be taken by the Respondent to
ensure that the notices are not altered, defaced, or
covered by any other material.
(h) Notify the Regional Director in writing
within 20 days from the date of this Order what
steps the Respondent has taken to comply.
APPENDIX
NOTICE To EMPLOYEES
POSTED BY ORDER OF THE
NATIONAL LABOR RELATIONS BOARD
An Agency of the United States Government
23
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 contract out bargaining unit work
without good-faith bargaining with International
Union, United Automobile, Aerospace and Agri-
cultural Implement Workers of America, and its
Local Union No. 769.
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 immediately cancel our subcontracting
agreement with Custom Woodcrafts, Inc. and
resume the production and maintenance work in
the plant with our bargaining unit employees.
WE WILL, on their unconditional application, re-
instate the striking employees to their former jobs,
without prejudice to their seniority or any other
rights or privileges, dismissing if necessary persons
hired on or after 8 May 1985, and give them back-
pay with interest if not timely reinstated.
WE WILL offer all employees laid off, terminat-
ed, or otherwise denied work opportunities as a
result of the unlawful contracting out of bargaining
unit work immediate and full reinstatement to their
former positions or, if they are not available, to
substantially equivalent ones, without prejudice to
their seniority or other rights and privileges.
WE WILL make whole all employees who were
laid off, terminated, or otherwise denied work op-
portunities as a result of our unlawful contracting
out of unit work.
WE WILL, on request, bargain with the Union
and put in writing and sign any agreement reached
on terms and conditions of employment for our
employees in the following bargaining unit:
All full-time and regular part-time employees
of Michigan Ladder Company, but excluding
all confidential salaried employees and all
guards and supervisors as defined in the Act.
MICHIGAN LADDER COMPANY
6 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 "
Dennis R. Boren, Esq., for the General Counsel.
John L. Cerretani and Karl D. Johnston, Esqs., of Troy,
Michigan, for the Respondent.
Edward J. Plawecki Jr., Esq., of Detroit, Michigan, for
the Charging Party.
24 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
DECISION
STATEMENT OF THE CASE
MARION C. LADWIG, Administrative Law Judge. This
case was tried at Detroit, Michigan, on 28-29 April 1986.
The charge was filed by the Union 23 August 19851 and
the complaint was issued 31 October.
The Company manufactured wooden ladders and table
tennis tables. Under its collective-bargaining agreement
with the Union, its average labor cost (wages and bene-
fits) was $11.08 an hour. For several weeks, without any
notice to the Union, the Company negotiated for a non-
union subcontractor to perform most of the production
work in the plant, based on a labor factor of $7.50 an
hour for the ladder production and $6.48 for the table
production.
The primary issues are (a) whether the Company, the
Respondent, permanently subcontracted (or contracted
out) bargaining unit work without affording the Union a
meaningful opportunity to bargain in violation of Section
8(a)(5) and (1) of the National Labor Relations Act and
(b), if so, whether an appropriate remedy should include
restoring the work to the bargaining unit employees and
reinstating unfair labor practice strikers.
On the entire record,2 including my observation of the
demeanor of the witnesses, and after considering the
briefs filed by the General Counsel, the Company, and
the Union, I make the following
FINDINGS OF FACT
I. JURISDICTION
The Company, a Michigan corporation, manufactures
ladders at its facility in Ypsilanti, Michigan, where it an-
nually ships goods valued over $50,000 directly outside
the State. The Company admits and I find that it is an
employer engaged in commerce within the meaning of
Section 2(2), (6), and (7) of the Act and that the Union
(the International and Local 769) is a labor organization
within the meaning of Section 2(5) of the Act.
II. ALLEGED UNFAIR LABOR PRACTICES
A. Subcontracting of Production Work
1. Efforts to cut labor costs
In the 1982 negotiation the Union agreed to a freeze in
wage rates and benefits in its 3-year collective-bargaining
agreement expiring 30 April 1985 (G.C. Exh. 2, Tr. 22).
In the 1985 negotiations, which began 26 March, the
Company sought a wage cut (Tr. 342). It took the posi-
tion that although its business was profitable (Tr. 140), its
wages were still "high for our industry" and "non-com-
petitive with our competitors" (R. Exh. 1). It pointed out
that many of its competitors are nonunion and that a
1984 wage survey (G.C. Exh. 10) showed that the aver-
age wage rate in the wooden ladder industry was $6.26
' All dates are in 1985 unless otherwise indicated
2 The General Counsel's unopposed motion to correct the transcript,
dated 27 June 1986, is granted and received in evidence as G.C. Exh 14.
as compared to the Company's average hourly rate of
$8.36, $2.10 an hour more (Tr. 144-145).
Meanwhile, without any notice to the Union, the
Company was making plans to subcontract the produc-
tion of its table tennis tables and most of the production
of its wooden ladders, to be done in the plant with non-
union employees at lower labor costs.
2. Secret arrangements to cut production labor costs
In the late summer of 1984, Company President
Robert Nissly orally leased some of the excess factory
space to Roy Gourley, president of Custom Wood-
crafters, Inc. (Woodcrafters), a small nonunion firm em-
ploying about three or four employees (Tr. 91, 299) to
do custom woodwork. Nissly leased Gourley 2091
square feet for an annual rent of $7440, which amounted
to $620 a month or $20.38 a day. Four and one-half
months later on 31 January they signed a written lease
incorporating these terms (G.C. Exh. 5), effective from
16 September 1984 until 15 September 1985.
Presumably on this date, 31 January (Gourley recalled
it occurring in late January (Tr. 287)), Gourley proposed
to Company President Nissly that Woodcrafters take
over the production of the table tennis tables at the
Company's plant. This would give Woodcrafters' em-
ployees greater access to the Company's spray painting
area (which they had been using in furniture finishing
when the Company was not using it to paint tables) and
enable Woodcrafters to use the table assembly area for
producing additional products "without great additional
cost" (Tr. 286-288).
About a week or two later, after President Nissly
checked on the "ramifications" of the Company's sub-
contracting this production work, Nissly (in Gourley's
words) "got back with me" and asked "would I be inter-
ested in the hill operation" (Tr. 288). Nissly was refer-
ring to leasing the mill room and other areas where the
rough lumber is graded, run through a rip saw and
molder, and made into ladder legs, tops, shelves, etc.,
ready for the Company to inspect, machine, and assem-
ble into ladders (Tr. 78-79, 106, 114-115; G.C. Exh. 4,
par. 3, p. 4). Nissly admitted that although it was Gour-
ley who proposed that Woodcrafters take over the pro-
duction, assembly, and cartoning of the tables (Tr. 113),
Nissly himself proposed-after consulting with legal
counsel (Gilbert Cox)-that Woodcrafters also take over
this additional area and equipment and furnish the Com-
pany with "whatever products that we needed for the
ladder company's operation." Nissly admitted that "This
was something that really had not occurred" to Gourly.
(Tr. 114-115.)
Over the next several weeks-without any notice to
the Union-Nissly, his legal counsel (Cox or a member
of his law firm (Tr. 118)), and Gourley worked out the
details of the subcontracting arrangement. As Gourley
credibly testified, Nissly "gave me a list of parts they
needed" and "I did the cost analysis on it and projected
what I felt we would be able to do" (Tr. 290.) As pro-
vided in the subcontracting agreement drafted by the
counsel (G.C. Exh. 13, par. 3, p. 7), the price of the
ladder parts and the table tennis tables that Woodcrafters
MICHIGAN LADDER CO
would produce in the plant for the Company (using the
Company's equipment and Woodcrafters' nonunion em-
ployees) would "be the combination of the material cost
and Subcontractor's labor factor."
The materials would be priced at cost, with any sav-
ings divided equally between the Company and Wood-
crafters (G.C. Exh. 13, par 3, p. 2). Nissly and Gourly
further agreed that Woodcrafters' labor factor would be
figured at $7.50 an hour on the ladder work and $6.48 on
the table work. These figures were sharply lower than
the Company's average labor cost of $11.08 an hour
($8.36 in wages and $2 72 in benefits (Tr. 144, 318). Thus
the Company was arranging to reduce the labor costs in
producing wooden ladder parts at $3.58 an hour and
tables at $4.60 an hour.
The labor and material costs are shown on a nine-page
tabulation of ladder parts and a one-page tabulation of
tables and parts, attached to schedule A of the executed
subcontracting agreement (G.C. Exh. 4) An example (p.
7) shows the listing of a ladder leg, located at "210,"
identified as product "C LPT 014170," described as "1-
1/16 x 2-3/4 x 24FT HEM FIP" (a 24-ft. hemlock or fir
ladder leg), 1.640 "Labor Stm." (1.64 minuses of standard
time in minutes of labor), a "Labor Unit Cost" of .205
($.205 or 20.5 cents), a "Mat'! Unit Cost" of 17.901
($17.90 in material cost for the ladder leg), with blanks
to be filled in for "Total Labor," "Total Mat'l," and
"Units Shipped." Thus, if 10 of the 24-foot ladder legs
were produced by Woodcrafters in the plant for the
Company to inspect, machine, and assemble, the blanks
would be filled in $2.05 for "Total Labor," $171.01 for
"Total Mat'l," and 10 for the "Units Shipped." The
amount of Woodcrafters' hourly "labor factor" is re-
vealed by dividing the unit labor cost of 20.5 cents by
the 1.64 minutes calculated for producing the ladder leg,
arriving at 12.5 cents a minute, $7.50 an hour. The labor
unit cost of each of the 200 ladder parts listed on the
nine pages is computed to the nearest fraction of a cent
when multiplying 12.5 cents times the standard number
of minutes expended in performing the production work.
The labor factor for all the table tennis tables and table
parts is figured at $6.48 an hour, or 10.8 cents a minute
(to the nearest fraction of a cent in labor unit cost). An
example is the first table listed (p. 10), showing 110 min-
utes at 10.8 cents a minute equaling $11.88, the amount
written in as the "Labor Unit Cost." The "Mat'l Unit
Cost" is $71.42, the amount that is typed in
3. Plans to implement subcontracting
During the weeks of secret discussions (between 31
January and 26 March, when the Company first in-
formed the Union of its plans), Company President
Nissly and Woodcrafters President Gourley negotiated
various details to implement the subcontracting. They
agreed that Woodcrafters would employ John Osborn,
the Company's skilled maintenance man, for Wood-
crafters to perform the Company's machine maintenance
at an undisclosed flat rate. (Osborn was already doing
some work for Gourley (Tr 296). The Company had
only a limited amount of machinist work for Osborn to
do, and he was seeking more skilled work and higher
income. Instead of keeping him on the company payroll
25
and letting him use the machine shop equipment to per-
form skilled work for outsiders, Nissly agreed to lease
the machine shop and its tools and equipment to Wood-
crafters. Nissly and Gourley agreed in the subcontracting
agreement (p. 5) that the Company "shall utilize Subcon-
tractor' s maintenance employee for not less than 60
hours a month, payable on a monthly basis, at an agreed
upon hourly rate ." They solved the problem of furnish-
ing Osborn more skilled work and increasing his income
by including in the 1 April lease addendum (G.C. Exh.
6) a provision that Woodcrafters "will pay lessor a utility
charge of $2 a man hour for all outside machine shop
work performed." This provision was authorization for
Woodcrafters to permit Osborn to increase his income
by using the machine shop equipment to do skilled work
for outsiders. Around 18 March (8 days before the Com-
pany first mentioned anything to the Union about the
subcontracting) Gourley talked to Osborn and asked if
he would "be interested in this sort of thing" (Tr. 296).
Meanwhile Richard Wheeler, the Company's skilled
molder operator who quit the previous September, had
been laid off from an interim job and was "actively look-
ing for employment" (Tr. 291). During the slow winter
season Plant Superintendent David Korzik had been set-
ting up the molder, but now this setup work and oper-
ation of the mill room were taking too much time from
Korzik's supervision and other duties in the plant as the
busy spring season approached (Tr 116, 124). (Nissly
had been unsuccessful in finding a replacement for
Wheeler (Tr. 116); wood molder operators "are very dif-
ficult to find in this area" (Tr. 293).) Nissly did not take
advantage of this opportunity to rehire Wheeler to set up
the molder and to lead or supervise the mill area. In-
stead, about 15 March (Tr. 296) Gourley talked to
Wheeler about being employed by Woodcrafters as
molder operator and foreman of the area. Because the
Company was not rehiring Wheeler and keeping him em-
ployed between then and the proposed 1 April date for
the subcontracting to begin, Wheeler remained unem-
ployed during that 2-week waiting period. As Gourley
credibly testified, "I was concerned that . . I might
lose him to some other manufacturing place" (Tr. 291);
"I was getting very anxious from the standpoint that the
key person in this entire operation was a molder opera-
tor" (Tr. 293). "We had set up a date, I had suggested an
April 1 date . . and I told [Nissly that] time was of the
essence and I wanted to get rolling on this" (Tr. 294).
Gourley was also seeking other employees to perform
the subcontracted work (Tr. 291) and "started laying the
groundwork to find people . . . through the University
of Eastern Michigan . . to work on a part-time basis or
otherwise" (Tr. 297). The only company employees he
contacted, besides Osborn, were the graders. He talked
to them 27 or 28 March (following the Company's 26
March notice to the Union about the subcontracting).
(Tr. 296-297.)
Gourley revealed Nissly's assurances to him that
Nissly would subcontract the work and lease the addi-
tional plant space and the equipment to him. He had a
backlog of products to be painted, and he was waiting
until 1 April instead of using the spray painting area in
26 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
the evenings and on the weekends to finish them, as he
had done previously (Tr. 112). He was also considering
producing hardwood-type moldings in the mill room and
testified that "if we were going to go [into] the housing
market, it would be booming in the spring and I could
see that if we dillydallied with this thing into May, that I
wouldn't be able to put moldings out until July or
August" (Tr 291-292).
Building Equipment Total
Area 1-Table production $1,325 $400 $1,725
Area 2-Ladder
production 1,420 3,000 4,420
Area 3-Machine shop 175 300 475
$6,620
4. Terms of the subcontracting and leasing
On 25 March (the day before the first notice to the
Union) a member of Cox's law firm presented a complet-
ed draft of the subcontracting agreement , with a 1 April
effective date (G.C. Exh. 13). Company President Nissly,
the legal counsel, and Woodcrafters President Gourley
met, discussed the draft, and agreed to make certain
changes (Tr. 118-119, 122). The only significant changes
(Tr. 153-154) were the following: (1) To provide that
the Company shall "be responsible for inspecting" both
the raw materials used by Woodcrafters and all the prod-
ucts manufactured by Woodcrafters for quality (pars. 2
& 3, p. 4). (2) To add a product liability provision
("Contractor agrees to defend Subcontractor in any
claims filed against Subcontractor as a result of alleged
defects in the products produced" (par. 5, p. 4). (3) To
delete a damages provision ("Contractor retains the right
to recover from Subcontractor for replacement costs and
profits . . . as a result of any breach . . . of this Agree-
ment") (par. 2, p. 5). The agreement was for a term of 5
years, with one possible reopening (p 6).
Among many provisions, the subcontracting agree-
ment provides (par. 4, p. 2) that Woodcrafters has the
right "to establish and direct the method of production
of the products"-but only on condition that the "prod-
ucts are at least equal in quality to the products previ-
ously manufactured" by the Company. Then the agree-
ment in effect requires the Company to oversee and
retain responsibility for the production, as shown above,
by (a) requiring the Company to inspect both the raw
materials used and all products manufactured by Wood-
crafters in the plant, (b) holding the Company financially
responsible for any product liabilities resulting from "al-
leged defects in the products produced" by Wood-
crafters, and (c) omitting any contractual right for the
Company to recover damages from Woodcrafters for
breach of contract.
The subcontracting agreement refers to a 1 April lease
addendum (G.C. Exh. 6), which provides for the leasing
of three additional plant areas, including the equipment,
machinery, and tools. The addendum recites that area 1
contains 2449 square feet for "the manufacture of table
tennis tables," that area 2 contains 3,789 square feet for
use in "the milling & grading of parts," and that area 3
contains 544 square feet for use in "the maintenance and
repair" of the leased assets. The addendum provides that:
Additional monthly rent for these areas is as fol-
lows:
It further provides that:
The landlord shall pay to the tenant a monthly
contract fee [emphasis added] as follows:
For table tennis table assembly $1,850.00
For wood parts, milling , grading , & 7,450.00
cutting
For maintenance services 500.00
$9,800.00
Thus, the addendum to the lease provides that the Com-
pany (the landlord) shall pay Woodcrafters (the tenant) a
"monthly contract fee" that completely offsets the
amount of the rent, plus $3180-which presumably is
Woodcrafters' overhead and profit for performing the
subcontracting work with nonunion employees.
Neither the subcontracting agreement nor the lease ad-
dendum specifically provides whether the Company or
Woodcrafters has the responsibility for maintaining the
leased production equipment. I note, however , that Com-
pany President Nissly testified (Tr. 135) that before 1
April the Company had only about 15 hours a week of
machine maintenance for Osborn to do and the subcon-
tracting agreement provides that the Company "shall uti-
lize Subcontractor 's maintenance employee [Osborn] for
not less than 60 hours a month at an agreed hourly rate."
The agreement also provides (G.C. Exh. 4, par. 1, p. 5)
that the Company retains the right to use Osborn's serv-
ices "when and as required" and that all his work on the
Company's behalf "must be authorized" by a company
supervisor. I infer that the Company retains the responsi-
bility for maintaining the leased equipment. Otherwise
Nissly undoubtedly would not have obligated the Com-
pany to pay for a minimum of 60 hours a month of Os-
born's work after most of the production equipment was
leased.
The subcontracting agreement does not leave to
Woodcrafters' discretion how and when the leased pro-
duction equipment is maintained By providing in the
agreement that this maintenance work "must be author-
ized" by a company supervisor, the Company has re-
tained further control over both the production and
maintenance.
5. Oral agreement after union protests
On 26 March, after the Union presented its proposals
for a renewed collective-bargaining agreement, the Com-
pany notified the Union about the subcontracting plans,
as discussed later . The Union vigorously protested at
that meeting and again at a meeting on Friday, 29
March. Later that Friday afternoon Nissly and Gourley
met and, with a handshake, orally agreed to proceed
MICHIGAN LADDER CO.
with the subcontracting under the terms of the previous-
ly negotiated subcontracting agreement. Nissly admitted
at the trial that he and Gourley "had agreed at our meet-
ing earlier that week [on 25 March with the legal coun-
sel] to modify the original draft, which was being done."
(Tr. 122, 293.) The written agreement, effective 1 April,
was signed 17 April after the agreed modifications were
made and after the 10-page puce list was completed and
attached (Tr. 125).
6. Replacement of bargaining unit employees
At 7 a.m., 1 April, eight of the nine company employ-
ees on the subcontracted production work were removed
from their jobs and replaced with woodcrafters' employ-
ees (Tr. 13, 90, 124). The ninth production employee,
grader Scott Bruno, as well as maintenance man Osborn,
was transferred to the Woodcrafters payroll. The Com-
pany reassigned the eight replaced bargaining unit em-
ployees to work-with the approximately six remaining
unit employees-on other jobs and continued them on
the Company payroll, at the same rates of pay, until the
8 May strike (Tr. 98, 125, 366-367). The Union was still
on strike over a year later at the time of trial.
Woodcrafters' labor costs on the subcontracted pro-
duction work were much lower than 1 he Company's
labor costs. The actual wages that Woodcrafters paid the
production employees demonstrate how Company Presi-
dent Nissly and Woodcrafter President Gourley had
been able to agree on a labor factor of $7.50 an hour for
the ladder production and $6.48 for the table production.
On the ladder production, the Company had paid four
graders $ 11.40 an hour (8.68 in wages and $2 . 72 in bene-
fits), one stockhandler (now called a sorter) $11.10 ($8.38
and $2.72), and two molder operators (Wheeler and
Henry Harris) $11.19 ($8.47 and $2.72) (Tr. 316-318), to-
taling $79.08 an hour for the work of seven employees
and averaging $11.30 an hour. Woodcraft ers (which ad-
mittedly provided no benefits (Tr. 313)) paid one grader
(Bruno) $ 11 an hour, three graders $4.50, one starter
$4.50, one molder-foreman (Wheeler) $15, and one
molder operator $4.50 (Tr. 309-310, 315-316), totaling
$48.50 an hour ($30.58 below the Company's total hourly
labor costs) and averaging $6.93 an hour ($4.37 below
the Company's average hourly labor cost). This amount-
ed to a reduction in labor costs of nearly 39 percent.
On the table production, the Company had paid one
painter $11 . 16 an hour (8.44 in wages and $2 . 72 in bene-
fits) and one operator $11.09 ($8.37 and $2.72) (Tr. 317-
318), totaling $22.25 an hour for the work of the two
employees and averaging nearly $11.13 an hour. Wood-
crafters paid one group leader $5 an hour and two help-
ers $4.50 (Tr. 311), totaling $14 an hour ($8.25 below the
Company's total hourly labor costs) and a veraging $4.67
an hour ($6.46 below the Company's average hourly
labor costs). This amounted to a reduction in total costs
of 37 percent. For the ladder and table production com-
bined, the reduction in labor costs amounted to 38 per-
cent.
Thus, Woodcrafters' actual average hourly labor cost
of $6.93 for producing the subcontracted ladder parts
was 57 cents below the contractual $7.50 labor factor on
which the price of the ladder parts was based in the
27
price list attached to the subcontracting agreement, and
the actual average hourly labor cost of $4.67 for produc-
ing the tables was $1.81 below the $6.48 labor factor. Be-
cause the Company paid Woodcrafters an hourly rate for
Osborn's maintenance of the leased production equip-
ment , I infer that none of the cost of machine mainte-
nance was included in Woodcrafters' labor factor. The
Company had paid Osborn $13.64 an hour ($10.92 in
wages and $2.72 in benefits) (Tr. 317). Woodcrafters paid
him $15 an hour (Tr. 312).
I note that if the $38.83 reduction in the total hourly
labor costs (30.58 in the production of the ladder parts
and $8.25 in the production of the tables) is figured on an
annual basis for 2080 hours (40 hours times 52 weeks),
the reduction would amount to $80,776.40 a year. This is
nearly 11 times the $7440 in annual rent that Wood-
crafters was paying before the Company subcontracted
the production work.
B. The Company's Defenses
1. That it had no obligation to bargain
a. In order not to reduce wages
The complaint alleges that the Company permanently
subcontracted the work unilaterally without affording
the Union a meaningful opportunity to bargain over the
decision . The Company's first defense is that it "had no
duty to negotiate regarding the decision to permanently
subcontract bargaining unit work" (company brief at 27).
Citing Otis Elevator Co., 269 NLRB 891 (1984), the
Company states in its brief (at 33) that it is necessary to
determine whether the Company's decision to subcon-
tract certain (production and maintenance) work affected
"the scope, direction, or nature of the business" or
"whether the decision turned upon a reduction in labor
costs."
The Company's brief overlooks, or ignores, (1) the
amount of Woodcrafters' labor factor, (2) the 38-percent
actual reduction in production labor costs, and (3) the
$9000 "monthly contract fee" the Company pays Wood-
crafters to do the work with the low nonunion labor
costs. Relying primarily on President Nissly's fabricated
testimony, the Company contends in its brief (at 35) that
"the subcontracting decision was not entered into to
reduce labor costs." It further contends (at 36) that "the
Company's desire to become more competitive in terms
of its manufacturing of ladders did not have any impact
on its dealings with Custom Woodcrafters or the subcon-
tracting of work."
Nissly testified (Tr. 123, 126, 137, 158):
Q. Now, during your discussions with Mr. Gour-
ley regarding the possibility of subcontracting, did
you, at any time, discuss the wages that he intended
to pay employees of Custom Woodcrafters?
A. No, sir.
A. The wooden ladder business is a very highly
material-intensive product. And about 70 percent of
our selling price is represented by our cost of mate-
28 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
rial. Something yea to 4 to 5 percent is our labor
costs . . . .
Q. Had any of those costs changed at all since
the subcontracting?
A. In total, there is a slight reduction, because
our overhead expenses have gone down . The subcon-
tracting decision was not based upon economics. And
as it turned out, there was a slight economic advan-
tage; but that was not our reason for doing what we
did.
Q. Now . . . . you didn't discuss wages at all?
A. No, sir.
Q. Yet, as part of that subcontracting agreement,
there is a provision that deals with labor costs, is
that not correct?
A. That is true.
A. This Schedule A . . . referred to in the Sub-
contracting Agreement , is the price list which we
prepared for Custom Woodcrafters , and we said,
"This is what we will pay you for labor , and this is
what we will pay you for material ." It has nothing
to with what he is paying his people.
Q. What, if any, effect did your labor costs, in
regard to the subcontracted work, have on your deci-
sion?
A. That was not a consideration . So it had none.
[Emphasis added.]
Whether the Company or Woodcrafters President
Gourley prepared the price list, figuring the labor factor
at $7.50 an hour on the ladder production work and at
$6.48 on the table work ($3.58 and $4 . 60 an hour below
the Company 's average labor cost of $11.08 an hour),
Nissly and Gourley undoubtedly discussed the differen-
tial in the wages before Nissly agreed to pay Gourley a
"monthly contract fee" of $9800 to perform the subcon-
tracted work , paying the low nonunion wages . (As indi-
cated above, the monthly contract fee Nissly pays Gour-
ley exceeds the monthly rent Nissly charges him on the
additional building space and leased equipment by
$3180 .) Because Gourley's actual labor costs are 38 per-
cent less to perform the same production work , I consid-
er it inconceivable that Nissly 's labor costs were not a
consideration and that they played no part in his decision
to subcontract the work . Furthermore , Nissly and Gour-
ley undoubtedly discussed the wage rate Gourley would
pay maintenance man Osborn before the Company's
legal counsel provided in the subcontracting agreement
that the Company would pay Woodcrafters "on a
monthly basis , an agreed upon hourly rate for each" of
not less than 60 hours of his work a month. (By his de-
meanor on the stand , Nissly impressed me most unfavor-
ably as a witness , appearing less than candid .) I discredit,
as fabrications , Nissly's claims (a) that he did not discuss
wages at all with Gourley, (b) that the subcontracting
decision was not based on economics, (c) that the price
list had nothing to do with Gourley 's wages, and (d) that
Nissly's labor costs had no effect on his decision to sub-
contract the work.
I find no merit in the Company's contention in its brief
(at 37) that the subcontracting "was entered into primari-
ly to retain a valued tenant." Woodcrafters was paying
in rent only $7440 a year-$20.38 a day-as compared to
reduction in labor costs of over $80,000 a year, nearly 11
times that amount. I do agree with the statement in the
Company's brief (at 35) that "The Tenant wanted to con-
trol the paint spraying area and sought to do this by con-
trolling the manufacture of ping-pong tables." But I
reject the argument that "the Company was willing to
subcontract this work" to keep the tenant from leaving
the premises.
At the time Gourley was proposing to perform the
table production (4-1/2 months after he orally leased
some unused space in the factory buildings) he was sign-
ing a 1 -year lease, obligating himself to continue paying
the $20.38-a-day rent through 15 September. Instead of
Company President Nissly accepting Gourley's proposal
(to keep the tenant satisfied by subcontracting the work
of two bargaining unit employees performing the table
production), Nissly made as a counterproposal "some-
thing that really had not occurred" to Gourley. After
consulting with Attorney Cox, Nissly proposed to sub-
contract also the work of seven additional unit employ-
ees who were performing most of the ladder production.
Eventually, Nissly and Gourley reached an agreement on
Nissly's proposal, after Gourley did a cost analysis and
they agreed on a labor factor far below the Company's
labor costs.
The Company next argues in its brief (at 35) that "It
should also be noted that the subcontracting arrangement
resolved other problems facing the Company." It then
cites two problems: (1) "The Company had been unable
to hire an experienced operator to set up and operate the
molding department ." (2) "In addition, the maintenance
man has experienced discontent over the fact that he was
being under-utilized by the Company."
In making the first argument, the Company ignores the
undisputed evidence that molder operator Wheeler, the
"experienced operator" who quit the previous Septem-
ber, had been laid off from an interim job and was "ac-
tively looking for employment." Nissly undoubtedly
would have rehired him in the absence of the plans to
subcontract the work. In making the second argument,
the Company ignores the manner in which Nissly and
Gourley arranged to solve the problem of giving the
"under-utilized" maintenance man Osborn more skilled
work. Instead of Nissly retaining Osbor on the Compa-
ny's payroll and permitting him to increase his income
by using the machine shop to perform outside work,
Nissly leased the machine shop to Gourley and charged
Gourley a $2-an-hour "utility charge" for "all machine
shop work performed" by Osborn. Osborn was already
doing some work for Nissly. There was no necessity to
subcontract the Company's maintenance work to permit
Osborn to do the outside skilled work to increase his
income.
I agree with the General Counsel that these and other
purported reasons, including the first reason President
Nissly advanced at the trial (that "we had been unsuc-
cessful for over two years to sell our [85-year-old] facili-
MICHIGAN LADDER CO
ty" (Tr. 123)) are "pretextual . . . to disguise Respond-
ent's desire to reduce labor cost."
b. Because of change in scope and d erection
The Company 's brief also contends (at 34) that the
subcontracting decision "clearly affected the scope, di-
rection and nature of the Company 's business." It argues
that it is "no longer engaged" in the particular business
of manufacturing tables, is "no longer engaged" in the
particular business of performing milling and grading
work on lumber , and has "ceased providing " its own
maintenance work, and that "These facts clearly establish
that the scope and direction of the Company 's business
drastically changed ." I disagree.
The Company remains in both the table tennis table
business and in the wooden (and other) ladder business,
with no change in the capital investment . The Company
continues to market and distribute the tables and ladders,
which are still manufactured in the Company 's plant on
the Company's equipment (much of it leased to the sub-
contractor). Although employees performing most of the
production work are now on the subcontractor 's payroll,
they are performing the same work , in the same manner,
and under the same working conditions except for lower
nonunion wages and no benefits . Moreover , the work is
being done under the Company 's control . The overhead
has not been reduced by the receipt of rent because the
$9800 monthly contract fee that 1he Company pays the
subcontractor for doing the subcontracted work (with
materials at cost and with 38 percent lower production
labor costs) exceeds both the monthly rent of $6620 re-
ceived on this plant space and equipment and the month-
ly rent of $620 received on the previously rented excess
space in the factory buildings.
I agree with the Union that the facts are somewhat
similar to those in Fibreboard Corp. v. NLRB , 379 U.S.
203, 206 , 209 (1964), in which an employer was required
to bargain about contracting out plant maintenance work
to reduce maintenance costs. The Court held (179 U.S. at
213):
The Company 's decision to contract out the
maintenance work did not alter the Company 's basic
operation . The maintenance work still had to be per-
formed in the plant. No capital investment was con-
templated ; the Company merely replaced existing
employees with those of an independent contractor
to do the same work under similar conditions of em-
ployment. Therefore , to require the employer to bar-
gain about the matter would not significantly
abridge his freedom to manage the business. [Em-
phasis added.]
Justice Stewart observed in his concurring opinion (379
U.S. at 223 ) that nothing in the Court's decision imposed
a duty to bargain regarding managerial decisions that "lie
at the core of entrepreneurial control." He wrote that he
would exclude from the duty to bargain those manage-
ment decisions that are "fundamental to the basic direc-
tion of a corporate enterprise ." He stated however (379
U.S. at 224) that:
29
On the facts of this case, I join the Court 's judg-
ment, because all that is involved is the substitution
of one group of workers for another to perform the
task in the same plant under the ultimate control of
the same employer. [Emphasis added.]
I find that that is much the same as what occurred here.
I find that the Company 's decision to subcontract (or
contract out) the table tennis table production , most of
the wooden ladder production , and all the maintenance
work to be done by largely a different group of employ-
ees in the same plant under similar conditions and under
the control of the Company did not alter its basic oper-
ation.
c. Concluding findings
The Board in Otis Elevator Co., 269 NLRB 891, 893
(1984), citing First National Maintenance v. NLRB, 452
U.S. 666 ( 1981), held that management decisions that
"affect the scope, direction , or nature of the business"
are not subject to mandatory bargaining under Section
8(d) of the Act, but that in accordance with Fibreboard
all decisions that "turn upon a reduction of labor costs"
are included within Section 8(d).
After weighing all the evidence , I find it clear that the
Company 's decision to subcontract the work turned on a
reduction of labor costs and did not affect the scope, di-
rection , or nature of the business. I therefore find that
the decision was a mandatory subject of bargaining.
2. That the Union waived any right to bargain
a. Claimed company attempt to bargain
(1) The Company 's version
Company Attorney Gilbert Cox testified that when
Company President Nissly asked him what would be
Nissly's obligations to the Union regarding the subcon-
tracting part of the business , "I concluded after research
that there was a high degree of probability that we
would not have to . . . necessarily negotiate with the
Union. My advice was it would be better if we did in
fact offer it to them , the opportunity to give us their ideas
on the subcontracting proposal before he entered into the
agreement ." (Emphasis added.)
What occurred at the 26 and 29 March meetings with
the Union is in great dispute . The Company contends in
its brief (at 38) that it "did in fact make every attempt to
negotiate with the Union" regarding the decision to per-
manently subcontract the bargaining unit work . I find,
however , that assumming the testimony of the company
witnesses is accurate , the testimony reveals that Attorney
Cox was not bargaining in good faith.
Cox testified that after the Union presented its con-
tract proposals at the 26 March meeting and the Compa-
ny caucused, Plant Manager Scott Kemp and Vice Presi-
dent Mark Lippencott returned with him to the meeting
and (Tr. 327-331)
I then suggested that each of the members of the
Union get a pad of paper and pencil and write
down what I was about to say because I felt it was
30 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
important. I then said that the company was consid-
ering a proposal that had been made by Custom
Woodcrafters, which would involve subcontracting
parts of the facility. I explained that it was a pro-
posal, that we were considering it, that the proposal
date would be the following Monday. I described
... what additional parts of the facility would be
leased out . . . and then what they would be per-
forming.
I said that the plant . . . had been up for sale for
over two years without much success . That . . . the
company had leased out part of the facility to Custom
Woodcrafters [which] was not entirely happy with the
arrangement because they were having trouble
using the molding machine and more importantly
they were having difficulty in the paint department
... . and if they leased additional parts of the facil-
ity, [they] would then take over parts of our busi-
ness.
We also indicated there were some other reasons
although they were not the critical reasons.
The Company had lost a key employee and . . . they
were having trouble with keeping the maintenance
man happy and that this new arrangement might
furnish an opportunity for the parties to figure out a
way to keep him happy and keep him on board [be-
cause] he was critical.
Those are the two primary reasons I can think of
that I indicated at that time.
We . . . would probably shift some of the overhead
and . . . there was the prospect that by Custom
Woodcrafters taking over the management of that
part of the business that it could be more efficiently
managed , and more effectively produced.
I went through the specific list that described the
areas that would be leased our and the parts of the
operation that would end up being subcontracted if
.. . they could successfully reach an agreement.
I believe those were the only reasons that I indi-
cated and I know those were the most important.
The most important being the problem we had with
Custom Woodcrafters. That was the emphasis.
Mr. [Arthur] Morgan [the International represent-
ative] asked how long the company had known
about this subcontracting issue . . . . I did not re-
spond. [Mark Lippencott] said he knew about it only
two days . . . and Scott [Kemp] said two and a half
days. [Emphasis added.]
Cox further testified that at the 29 March meeting (Tr.
335-338)
I told [Morgan] we had to discuss it because time
was running short, Custom Woodcrafters was to
start right away . . . . I said , well, we are going to
put it into effect on Monday, hoping to get their at-
tention.
I said . . . it was important that we discuss this be-
cause if we didn 't it was going to go into effect . . .
and employees in the bargaining unit would be af-
fected . It was our hope that they wouldn 't lose jobs
but under the proposal they would end up working
for Custom Woodcrafters, which meant they would
have no employer . . . . We were not looking for
any kind of labor trouble , we were looking for an
opportunity to have a smooth transition.
I fully thought that the Union might discuss other
ways to handle the paint operation, which might satisfy
Custom Woodcrafters' problem . [Emphasis added.]
Plant Manager Kemp and Vice President Lippencott
gave very similar testimony to Cox's, except that they
testified that Cox paid even greater deference to Wood-
crafters' desires as reasons for the subcontracting. Kemp
testified that Cox told the Union that Woodcrafters "was
wanting to expand their business and the only way they
could expand their business was to employ these other
areas of the plant" (Tr. 356). Lippencott testified that
Cox said that Woodcrafters "had the possibility of ex-
panding their business rather significantly," that Gourley
"wanted to take advantage of that opportunity," and
"because of his inability to use our paint booth and mill-
room," the expansion of his business as he hoped "would
lead to further difficulties" (Tr. 383). Kemp testified that
Cox said, "We were just bringing up the subcontracting
issue for general discussion with the Union" (Tr. 356),
and Lippencott testified that Cox said he wished to
present it to the Union "for their reaction" (Tr. 344).
Lippencott disputed Cox's testimony that Cox did not re-
spond when Morgan asked how long the Company had
known about the subcontracting issue . Lippencott credi-
bly testified to the contrary (Tr. 330-331) that when Art
Morgan asked Gil [Cox] how long has this been going
on," Cox "explained that this had just come up, that this
was a situation that had developed rather quickly" (in-
stead of admitting the discussions with Gourley since 31
January).
The company trial counsel asked Cox, Kemp, and Lip-
pencott three virtually identical questions about both the
26 and 29 March meetings: whether any company repre-
sentative (not whether anybody) mentioned anything
about "being non-competitive," about "labor costs," or
about "concessions ." They each answered no to the
three questions about each of the meetings. (Tr. 332, 339,
357, 364, 385, 392.)
This testimony (assuming its accuracy) shows that At-
torney Cox had no intention of bargaining on the Com-
pany's plans to subcontract the production work to
sharply reduce labor costs. Cox was merely affording the
Union an opportunity "to give us their ideas before it en-
tered into the agreement" (in his words), "just bringing
up the issue for general discussion" (in Kemp's words),
or presenting the issue to the Union "for their reaction"
(in Lippencott's words).
MICHIGAN LADDER CO 31
It is apparent that Attorney Cox deliberately misled
the Union about the subcontracting. According to this
testimony, he did not even mention the reduction of
labor costs. He talked about "if' the Company and
Woodcrafters "could successfully reach an agreement,"
instead of revealing that the day before, a member of his
law firm was present when agreement was reached on
the subcontracting terms. Cox pretended that this had
"just come up" and that the Company was considering
"a proposal that had been made by Custom Wood-
crafters." Yet since sometime in February, the Company
and Woodcrafters had been negotiating an agreement
based on the Company's proposal that it subcontract both
ladder and table production involving the jobs of 9 of
the approximately 15 bargaining unit production work-
ers. This company proposal was admittedly " something
that really had not occurred" to Woodcrafters President
Gourley, whose January proposal was merely to take
over the table production, involving only two bargaining
unit jobs.
As quoted above, Attorney Cox claimed that the most
important reason for the subcontracting and what he em-
phasized the most to the Union was "the problem we
had with Custom Woodcrafters." (Tr. 330), because
Woodcrafters was "having trouble using the molding
machine and more importantly they were having difficul-
ty in the paint department" (Tr. 328). (As found below,
Woodcrafters had never used the molding machine.) As-
suming that Cox did tell the Union about Woodcrafters'
painting problem, this as found above was merely a pre-
text for the subcontracting, and even if not, it would be a
reason for subcontracting the two-employee table pro-
duction, not the seven-employee ladder production work.
This was further deceit.
Cox claimed that Company President Nissly directed
him to consider alternative to the subcontracting and
that "I fully thought that the Union might discuss other
ways to handle the paint problem, which might satisfy
Custom Woodcrafters' problem" (Tr. 338). Cox made no
other suggestion of anything the Union could have pro-
posed to resolve the subcontracting issue . (Neither does
the Company's brief, which argues (at 26) that the Com-
pany was willing to negotiate about the decision and
make changes in the arrangement if a viable alternative
was presented.) Even if the painting problem were an
actual reason for the Company's decision to subcontract
the work, the Company's brief disputes Cox's claimed
expectation of a possible union solution. It argues (at 37)
that the "Union had no control over the problem that
the Company faced in regard to the spray painting booth
and possible loss of a valued tenant."
Moreover, Attorney Cox revealed that the Company
was not seeking any alternatives to subcontracting by
telling the Union (according to his testimony) that "We
are not looking for any kind of labor trouble, we were
looking for an opportunity to have a smooth transition"
(Tr. 337).
At the trial President Nissly revealed (perhaps inad-
vertently) his true attitude about Attorney Cox's dealings
with the Union on the subcontracting issue. He claimed
he was open to receiving the Union's input, but when he
related his discussion with Cox about the two meetings
with the Union , he testified : "That was the last remain-
ing hurdle in terms of implementation" (Tr. 157).
(2) Credibility of company witnesses
Almost uniform testimony was given by Attorney
Cox, Plant Manager Kent, and Vice President Lippen-
cott, as well as by assembler Richard Castle Jr. (a former
union steward who abandoned the strike and returned to
work (Tr. 408)). I find that part of this practically uni-
form testimony reflects adversely on the credibility of
these four company witnesses. I refer to their claim that
Cox told the Union in the 26 March meeting about
Woodcrafters' problem in using the molding machine.
Cox claimed that he said that "custom Woodcrafters
was not entirely happy with the [leasing] arrangement
because [in part] they were having trouble using the
molding machine" (Tr. 32). Kent claimed that Cox stated
that "there was a gentlemen's agreement" between Com-
pany President Nissly and Woodcrafters President Gour-
ley that Woodcrafters "would have access to the mold-
ing equipment and none of this had transpired" (Tr. 354).
Lippencott claimed that Cox said "Custom Woodcrafters
as part of their agreement had had the right to use our
millroom which would involve the molders and this had
not worked out as well as Custom Woodcrafters had
hoped" (Tr. 32.) Castle claimed that Cox said that "Roy
Gourley, owner of Custom Woodcrafters was not get-
ting enough time on the [molder] operating" (Tr. 41).
To the contrary, the evidence is clear that there was
no oral agreement permitting Woodcrafters to operate or
have access to the molder and that Woodcrafters had
never used it. As described by President Nissly, the
molder "is the most sophisticated machine that we had"
with "four to six knives in each one of these heads .. .
all cutting" and a molder setup man has a "highly re-
sponsible position" (Tr. 116.) Gourley had no one who
could operate the machine. Both he and Nissly testified
that there was an oral agreement that Woodcrafters
could use the spray painting area when available, not the
molder (Tr. 112, 285). Both of them testified that Gour-
ley proposed that he take over the table production to
solve his painting problem, but neither of them testified
that they had any oral agreement to permit Woodcrafters
to use the sophisticated molding machine that an oral
agreement for its use had not worked out as well as
Woodcrafters wanted, or that Gourley was not getting
enough time on the machine as a reason for subcontract-
ing ladder production. As discussed above, it was Niss-
ly's proposal-after he consulted with his legal counsel-
that the Company lease the additional area and equip-
ment (including the molding machine) and have Wood-
crafters begin doing ladder production.
The Company is apparently aware of the untruth of
this testimony. Although its brief cites much of Cox's,
Kemp's, and Lippencott's testimony, it deletes their ref-
erences to Woodcrafters' agreed use of the molder and
completely ignores this part of their testimony. (Cox,
Kemp, Lippencott, and Castle did not impress me as
being entirely forthright while testifying.) The record
does not explain how all four of them could have made
32 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
the same error. I discredit this part of their practically
uniform testimony.
its subcontracting plans. In brief, Cox gave the following
reasons:
(3) Concluding findings
As found, the Company and Woodcrafters had been
secretly negotiating several weeks to reach an agreement
on subcontracting production work and replacing most
of the union-represented production workers with
Woodcrafters' nonunion employees, who would do the
same work in the plant at lower pay and no benefits. On
25 March the two parties met and agreed on changes to
be made in the Company's completed draft of the sub-
contracting papers. On 26 and 29 March Company At-
torney Cox discussed with the Union the subcontracting
of the work but (according to the Company's version of
the meetings) made no mention of the reduction in labor
costs-or the "monthly contract fee" the Company had
agreed to pay Woodcrafters to do the production with
the low labor costs.
On considering the context of the meetings and assum-
ing the truth of the quoted company version of the meet-
ings with the Union, I find in agreement with the Gener-
al Counsel that Attorney Cox presented the Union a fait
accompli, an accomplished fact. I find that Cox was en-
gaging in sham bargaining and was merely going
through the formality of negotiating with the Union
before giving Woodcrafters the final go-ahead. I infer
that he was merely "making a record" for defending a
likely unfair labor practice charge rather than seeking an
agreement with the Union on the subcontracting issue.
b. Claimed union waiver
(1) No waiver under Company's version
The Company contends in its brief (at 38) that the
Union waived any right it had to negotiate about the de-
cision to permanently subcontract the bargaining unit
work because the Union "steadfastly refused to discuss
the issues." This waiver defense, however, is inapposite if
the Company's subcontracting plans were already an ac-
complished fact, rendering bargaining on them futile.
As held in the often-cited Ladies Garment Workers v.
NLRB, 463 F.2d 907, 918-919 (D.C. Cir. 1972), "It is
well settled that when a union has sufficiently clear and
timely notice of an employer's plan to . . subcontract
and thereafter makes no protest or effort to bargain
about the plan, it waives its right to complain that the
employer acted in violation of Section 8(a)(5) and (1)."
The court further held, however, that "Notice of a fait
accompli is simply not the sort of timely notice on which
the waiver defense is predicated." As similarly stated
more recently in Gulf States Mfg. v. NLRB, 704 F.2d
1390, 1397 (5th Cir. 1983), "It is . . . well established
that a union cannot be held to have waived bargaining
over a change that is presented to it as a fait accompli."
Under the version of the 26 and 29 March meetings
given by the company witnesses, Attorney Cox's 26
March notice to the Union was nothing more than in-
forming it of a fait accompli. The above-quoted reasons
that he gave for the subcontracting decision demon-
strates that the Company was determined to implement
(a) That the Company had been unable to sell the
plant-although the Company advances no theory
for this being relevant to the decision to subcon-
tract.
(b) That the Company wanted to keep Wood-
crafters a tenant for the rent income, lowering the
Company's overhead-although the rent that
Woodcrafters was paying amounted to only $20.38
a day.
(c) That Woodcrafters President Gourley had
been unhappy about not getting sufficient access to
the spray painting area-although at the time Gour-
ley proposed to take over the table production, he
was signing the written lease obligating himself to
pay the rent through 15 September anyway.
(d) That the Company had lost a key employee,
molder Wheeler-although the Company knew that
Wheeler was then actively seeking employment at
the plant.
(e) That the Company wanted to keep mainte-
nance man Osborn happy by increasing his skilled
work and income-although the Company had al-
ready decided to accomplish this by permitting him
to do outside work in the machine shop.
(f) That the subcontracting "would probably shift
some of the overhead"-although the "monthly
contract fee" that Company President Nissly pays
Gourley for his overhead and and profit increased
the Company's overhead.
(g) That there was a "prospect" that the subcon-
tracted work would be "more efficiently man-
aged"-although the only changes being made were
to place a group leader (paid $5 an hour) over the
table tennis area and to have molder Wheeler work
as a molder-foreman, under whatever supervision
Gourley might contribute, under the oversight of
company supervision.
(h) That Woodcrafters "wanted to expand their
business"-although that fact would be relevant to
the Company's decision to subcontract only if the
expansion into the company production areas would
result in a reduction in the Company's labor costs
for the subcontracted work.
I find that all these purported reasons for the subcon-
tracting are clearly pretextual, given "to disguise Re-
spondent's desire to reduce labor costs."
Assuming this testimony about what Cox informed the
Union is accurate, the Company was merely seeking the
Union's comments or reaction to the Company's eight
pretextual reasons for contracting out the bargaining unit
work. Attorney Cox did not even mention the Compa-
ny's actual reason for subcontracting the production
work, to reduce the labor costs (assuming no ulterior
motive on the Company's part). Thus, in contending that
the Union "steadfastly refused to discuss the issues," the
Company is referring to all or several of these pretexts
for its subcontracting plans. Union bargaining on these
"issues" could not have changed the Company's decision
MICHIGAN LADDER CO.
(after several weeks of planning) to contract out most of
its production work in the plant, based on a labor factor
of $7.50 and $6.48, far below the Company's average
labor cost of $11.08 an hour. Bargaining on the pretex-
tual reasons would have been irrelevant to the real issue
of reducing labor costs. In fact, the Company at one
place in its brief admits that it did not expect the Union
to propose any alternative to the Company's subcontract-
ing the work. When arguing that the Company "had no
duty to bargain regarding its decision to subcontract
work to Custom Woodcrafters in April," the Company's
brief (at 37) asserts that
The Union had no control over Customer Wood-
crafters or the problem that the Company faced in
regard to the spray painting booth and the possible
loss of a valued tenant. The Union had no control
over Custom Woodcrafters' desire to enter into new
areas of business or John Osborn's desire to expand
his work. Since the Union had no control or ability
to resolve the major problem which led to the con-
tracting, there was no duty to bargain concerning
that decision.
Moreover, as quoted above, Attorney Cox testified at
one point (Tr. 329) that "the two primary reasons" he in-
dicated to the Union for the subcontracting included the
loss of the key employee (Wheeler) and the trouble
"keeping the maintenance man [Osborn] happy." Of
course , good-faith bargaining on these purported reasons
would have required that Cox reveal that Wheeler was
then seeking employment at the plant and that the Com-
pany had already found a way to keep Osborn happy, by
permitting him to perform outside work in the machine
shop. If the Company had not been determined to imple-
ment the subcontracting plans, Cox undoubtedly would
have revealed these facts and would have offered to dis-
cuss Osborn's outside work and to bargain on promoting
Wheeler or increasing his wages to avoid the subcon-
tracting.
The fact that the Company's subcontracting decision
was final (contrary to its contention) is further indicated
by its conduct immediately after the second (29 March)
meeting , "the last remaining hurdle in tei ms of imple-
mentation ." President Nissly and his wife (as the sole di-
rectors of separate corporations owning the real property
and the business ) held special meetings of the boards of
directors and approved the terms of the previously nego-
tiated lease addendum and subcontracting agreement, ef-
fective 1 April (G.C. Exhs. 7 & 8). Then Nissly met with
the Woodcrafters president and gave him the go-ahead,
with a handshake. The subcontracting was implemented
at the beginning of the next workday.
I find that the Company's subcontracting plans were a
fait accompli when Attorney Cox announced them to the
Union. I further find that under these circumstances, the
Company was not acting in good faith and that any bar-
gaining on the subcontracting decision 'was futile. I
therefore reject the Company's waiver defense, based on
its quoted version of the facts.
33
(2) No waiver under the General Counsel's version
Three of the General Counsel's witnesses were Inter-
national Representative Morgan, Local 769 President Jim
Bailey, and Plant Chairman (shipping clerk) Rex North.
Bailey attended the 26 March meeting . Morgan and
North attended both the 26 and 29 March meetings, but
North left the first meeting during the caucus (before
company attorney first informed the Union of the Com-
pany's subcontracting plans).
According to their testimony, Cox told them that the
Company had the right to subcontract the work and that
the Company definitely was going to implement the sub-
contracting plans the following Monday morning, 1
April.
Representative Morgan and President Bailey recalled
that after the caucus in the 26 March meeting, Attorney
Cox told them to take their pencils and pads out and
take notes because what he was going to tell them was
very important. Morgan recalled that Cox said the Com-
pany was contracting out work on 1 April, that they
would no longer be in the business of making ping pong
tables and other work that he mentioned, that they "had
a right to subcontract" the work, and that the changes
would be made "whether you like it or not" because
"they have to be more competitive .. . with other
ladder companies in the other part of the country." (Tr.
21-22, 26-28, 417, 420.) Bailey recalled that Cox said
that beginning 1 April the Company was going to sub-
contract ping pong tables and other work to Wood-
crafters "because we have to be more competitive with
other parts of the country" (Tr. 61-62). He recalled that
the Company did not offer to bargain on the subcon-
tracting, "they just said they were going to do it come
4/1/85" (Tr. 77). Plant Chairman North ( who impressed
me most favorably as an honest, forthright witness) testi-
fied that at the 29 March meeting Cox said "before we
go too much further let me be sure that Rex knows what
we are talking about." Cox then said "we are going to
subcontract the jobs on the hill, the lumber grading, the
ping pong area and [some work in the extension ladder
area] as of April 1, 1985." Cox explained that the Com-
pany was getting out of business for those items because
it was not competitive with other ladder companies that
had much lower rates of pay and much less benefits. (Tr.
82, 94-96.) Cox insisted that "under the law they were
going to do it on April 1st" (Tr. 426-427). (I note that,
as quoted above, Cox admitted at the trial (Tr. 335) that
he told the union in the 29 March meeting, "well, we are
going to put it into effect on Monday.")
The General Counsel's witnesses further testified that
the Union vigorously protested at both meetings, taking
the position that this was "our work" under the UAW
agreement until its 1 May expiration and that the Com-
pany did not have the right to and should not take away
the work before then (Tr. 26, 54, 93, 95-96, 413-414,
418-419, 426). Although Morgan contended at the meet-
ings that the work was nonnegotiable under the agree-
ment until 1 May (Tr. 94, 97, 103), he proceeded at both
meetings to engage in futile bargaining on the real issue
before them, whether the Company would abandon its
decision to contract out the bargaining unit work to a
34 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
nonunion employer. Morgan asked Attorney Cox "how
could they justify subcontracting those jobs when he
knew there would be a loss of jobs and wages for the
employees who were under a UAW contract with
Michigan Ladder Company" (Tr. 82). Morgan pointed
out that the Union had agreed to a freeze in wages and
benefits 3 years before, and said that if the Company
could prove it was losing money, "we would be willing
to take concesssions" before the union membership (Tr.
22, 27, 63, 83, 93, 97, 416). Morgan said "we have done
this work for 25 years" and that he felt the subcontract-
ing was unfair and violated their agreement (Tr. 28, 62,
417-419). He also talked about their good relationship,
said the Company was always willing to work out prob-
lems, and asked why the Company was taking the posi-
tion of subcontracting "whether we liked it or not after
all the employees had been through," supporting the
Company (Tr. 24, 29).
One difficulty in evaluating the widely different ver-
sions given by the General Counsel and company wit-
nesses is that none of the notes made at the meetings
were produced at the trial. Company Vice President Lip-
pencott took notes at the 26 March meeting (Tr. 380)
and Plant Manager Kemp admittedly "took extensive
notes during all meetings" (Tr. 350). Yet, without expla-
nation, the Company did not produce the notes as cor-
roboration of the company version. Neither did the Gen-
eral Counsel request production of the notes. Under
these circumstances I do not speculate whether the notes
would support the Company's testimony or whether they
contain references to Cox's citing the need to become
more competitive and the Union's offer of possible con-
cessions, as the General Counsel's witnesses recalled. (I
do note that the Company's trial counsel asked the com-
pany witnesses if "any company representative" men-
tioned concessions, not if the Union did.)
Even though, the General Counsel's witnesses
Morgan, Bailey, and North all recalled Attorney Cox's
stating that the subcontracting was necessary for the
Company' to become more competitive and Representa-
tive Morgan's referring to possible concessions, I find it
unnecessary in resolving the issues in this case to rely on
any of their disputed testimony about the Union's offer-
ing or the Company's seeking concessions in these late
March meetings . (The Company contends that the first
mention of concessions , labor costs, and being competi-
tive was at the 17 April negotiating session , when the
Company raised the need of concessions.) I do, however,
credit and rely on their testimony that Attorney Cox
made it clear that the Company was going to implement
the subcontracting on 1 April (showing that the subcon-
tracting was presented as a fait accompli ) and that, al-
though Morgan stated that the work was nonnegotiable
under the union agreement until 1 May, he proceeded at
both the 26 and 29 March meetings to protest the sub-
contracting and to engage in futile bargaining on the real
issue, whether the Company would abandon its decision
to contract out the bargaining unit work (not waiving
the Union's bargaining rights). (The three General Coun-
sel witnesses , and particularly North, impressed me by
their demeanor on the stand as being honest witnesses
trying to give an accurate account of what happened.)
I therefore find that the credited testimony of the Gen-
eral Counsel witnesses confirms the General Counsel's
contention that the Company "presented a fait accompli
to the Union," that the Company "was committed to im-
plement subcontract effective April 1 regardless of the
Union's response," and that the Union did not waive its
right to bargain on the subcontracting decision.
Although I assume the accuracy of much of the com-
pany witnesses' testimony about the two meetings, I spe-
cifically discredit another part of their almost uniform
testimony. Cox, Kemp, and Lippencott claimed that the
Union withdrew its objections or acquiesced in the sub-
contracting plans, stating that it did not care as long as
members of the bargaining unit were not hurt or affected
(Tr. 333, 362, 388-389). Although the Company kept the
displaced employees on the payroll at their same wages
until the strike began, it was obvious that contracting out
most of the production work would adversely affect the
bargaining unit employees. Plant Chairman North credi-
bly testified that Representative Morgan told Attorney
Cox at the 29 March meeting that Cox "knew there
would be a loss of jobs and wages for the employees,"
and Cox admitted telling the Union at the same meeting
(Tr. 336) that bargaining unit employees "would end up
working for [the nonunion] Custom Woodcrafters." I
discredit this claim and credit the denials (Tr. 27, 30, 64,
83) that the Union agreed to the subcontracting.
C. Finding of Unlawful Refusal to Bargain
The Company had a profitable business, but it desired
lower labor costs to become more competitive with
other ladder companies . In 1985 it did more than negoti-
ate a freeze in wages and benefits as it did in the 1982
negotiations with the Union. Before seeking a wage cut,
President Nissly consulted Attorney Cox, who had been
"involved in many negotiations relating to subcontract-
ing" (Tr. 322), and decided to contract out most of the
bargaining unit work.
At the time, Nissly was renting some excess space in
the Company's factory building to Woodcrafters Presi-
dent Gourley. When Gourley, in January proposed
taking over the Company's two-employee production of
table tennis tables, President Nissly consulted Cox and
decided to contract out also most of the ladder produc-
tion work, displacing 9 of the approximately 15 produc-
tion workers. Nissly retained Cox or his law firm to pre-
pare the subcontracting papers, deal with the Union on
the subcontracting, conduct the contract negotiations
with the Union, and later defend the Company in this
unfair labor practice proceeding.
President Nissly and Gourley engaged in secret negoti-
ations for several weeks before the negotiations with the
Union began 26 March. Nissly agreed to contract out
maintenance work also. In return for Gourley's perform-
ing the subcontracted production and maintenance work
in the plant with nonunion labor (paying the production
employees wages that were 38 percent lower than the
Company's labor costs), Nissly agreed to purchase the
manufactured products from Gourley and pay him a
"monthly contract fee" of $9800. This fee would reim-
burse Gourley for the entire amount of the $6620 month-
MICHIGAN LADDER CO.
ly rent that Nissly charged him for the additional factory
space and the equipment and tools used to perform the
subcontracted work-netting Gourley $3180 a month.
The drafted subcontracting papers, prepared by Attor-
ney Cox's law firm, scheduled the subcontracting to
begin 1 April, a month before the 30 April expiration of
the collective-bargaining agreement.
On 25 March a member of Attorney Cox' law firm
was present when Nissly and Gourley concluded their
negotiation of the subcontracting terms , agreeing on
changes for the counsel to make in the drafted papers.
On the next day, 26 March, Attorney Cox informed the
Union of the Company's subcontracting plans . As found
(assuming the quoted company testimony is accurate),
Cox presented the subcontracting as a fail accompli. He
deliberately misled the Union concerning the subcon-
tracting , gave clearly pretextual reasons for the subcon-
tracting without even mentioning the purpose of reduc-
ing labor costs, and engaged in sham bargaining at both
the 26 and 29 March meetings with the Union. After this
"last remaining hurdle in terms of implementation,"
Nissly met with Gourley and, with a handshake, gave
him the go-ahead. Over the Union's continuing vigorous
objections, Nissly and Gourley proceeded to implement
the subcontracting on schedule. Gourley hired 2 of the
10 displaced bargaining unit employees . Nissly kept the
other eight on the payroll, with no change in pay, until
the 8 May strike was provoked (as discussed below.)
At the trial, Attorney Cox was a principal witness in
the Company's defense. As found, he and two company
officials gave some practically uniform testimony that is
discredited as untruths. Also as found, President Nissly
gave fabricated testimony about the subcontracting and
his motivation.
The General Counsel contends that the Company per-
manently subcontracted the work unilaterally without af-
fording the Union a meaningful opportunity to bargain
over the decision. The Company contends that in the ab-
sence of any subcontracting restrictions in the union
agreement , it had no duty to bargain because the scope
and direction of the Company's business "drastically
changed" and because its subcontracting decision did not
turn on a reduction of labor costs . It further contends
that the Union "waived any right it had to negotiate."
Although Attorney Cox's law firm drafted the subcon-
tracting papers and participated in the negotiating with
Woodcrafters President Gourley-giving the counsel
firsthand knowledge of the subcontracting terms-and
even though the company brief was signed by one of the
trial counsel, a member of Cox's law firm, the brief
argues that the subcontracting decision did not turn on a
reduction of labor costs. The brief relies primarily on
President Nissly's fabricated testimony. It overlooks, or
ignores , the amount of Woodcrafters' labor factor. As
discussed above, the price list attached to the subcon-
tracting agreement is based on a labor factor of $7.50 an
hour for the ladder production and $6.48 an hour for the
table tennis table production, as compared to the Compa-
ny's labor costs of $11.08 an hour. The brief also over-
looks or ignores the actual 38-percent reduction in pro-
duction labor costs and the $9800 monthly contract fee
that Nissly pays Gourley (less the $6620 rent that Nissly
35
charges Gourley) for performing the subcontracted work
with nonunion labor.
As found , ( 1) the subcontracting did not affect the
scope , direction , or nature of the business ; (2) the Com-
pany 's decision to subcontract the work turned on a re-
duction of labor costs; (3) the Company presented the
Union a fait accompli and engaged in sham bargaining;
and (4) there was no waiver of the Union's right to bar-
gain . Accordingly, I agree with the General Counsel that
the Company unilaterally subcontracted (or contracted
out) bargaining unit work without affording the Union a
meaningful opportunity to bargain on the decision. I
therefore find that the Company failed to bargain in
good faith, violating Section 8(a)(5) and (1) of the Act.
D. Unfair Labor Practice Strike
International Representative Morgan 's 29 March warn-
ing to Company Attorney Cox "the subcontracting
would be the main hangup in the negotiations " proved
accurate. The subcontracting, along with the proposed
wage cut (Tr. 342), remained a major obstacle to an
agreement in the negotiations . In fact , the Company's po-
sition on subcontracting became a greater threat to the
existence of the bargaining unit when Cox submitted a
written proposal on 17 April to grant the Company the
contractual right to subcontract all the bargaining unit
with the Union."
Morgan credibly testified (Tr. 54) that in the 29 March
meeting.
We said to Mr. Cox the fact that we believe that
the subcontracting would be the main hangup in the
negotiations . . . . We felt that work belonged to
us. I think we ought to discuss that.
Cox, however, continued to maintain , both at that meet-
ing and after the subcontracting was implemented 1
April, that the Company had and was exercising the
right to subcontract the work. (The remaining negotia-
tions before the 8 May strike were held on 2,4q7, and 25
April and 6 and 7 May, as testified by Plant Manager
Kemp, who took extensive notes at all the meetings.)
At the 2 April meeting the Union tried to get Presi-
dent Nissly to come to the bargaining table to discuss the
subcontracting , but he refused (Tr. 416). The meeting
began with a discussion of what reason the Company
had for the subcontracting (Tr. 84). After Attorney Cox
left and Representative Morgan arrived , Plant Chairman
North asked "how they could justify taking the union
jobs away from union employees" and giving the jobs to
nonunion workers . Plant Manager Kemp stated that the
Company had "gotten out of that part of the business.
(Tr. 65, 74.)
It was at the next meeting on 17 April that Attorney
Cox presented the written proposal giving the Company
the right, without negotiations, to subcontract all the
bargaining unit work on the premises . The proposal (R.
Exh. 2), dated 17 April, stated that
The company shall have the right to continue to
subcontract, or increase and/or reduce the extent of
subcontracting all or any part of the work per-
36 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
formed in the past by members of the bargaining
unit without first negotiating with the Union. This
right shall include, but not be limited to, the sub-
contracting of work performed by another company
on Michigan Ladder premises.
Explaining his motivation for proposing such a far-reach-
ing proposal, Cox testified (Tr. 343-344) that "we didn't
want the arbitrator determining what we could do under
the next contract" and the "only way we could make
sure that we got it resolved for the future was to put it
into the contract negotiations . . . . As I recall, frankly
we asked for more than we were willing to agree to."
Assistant UAW Regional Director Curtis McGuire
(who had joined the union negotiating team) told Attor-
ney Cox, "I have known . . . a long time that you have
a reputation of busting unions" and that he felt Cox
"came to the ladder company to get the Union out." Cox
denied it. (Tr. 33, 86.) Cox testified, "I have been in-
volved in many negotiations relating to subcontracting
work," that the company approached him in early 1985
"regarding possible subcontracting work," and that the
Company retained him "to represent the company in
regard to its labor matters in 1985" ( Tr. 322-323). De-
fending the Company's good faith in bargaining, the
company brief (signed by one of the trial counsel mem-
bers of Cox's law firm) observed (p. 40) that the "Com-
pany retained a highly-experienced practitioner in the
field of labor law to act as its spokesperson in these ne-
gotiations" and that "Mr. Cox testified that he held prior
discussions with Mr. Nissly regarding the subcontracting
possibilities and that Nissly had sought his advice on this
subject."
At the next meeting on 25 April, Union Attorney
Leonard Page also entered the negotiation. As Repre-
sentative Morgan credibly testified (Tr. 34), Page told
Attorney Cox that he felt the Company did not have a
right to subcontract the work out. It is undisputed that
Cox responded "we did it in Garwood and we have the
right to db it here, and we are going to do it." Cox was
evidently referring to the Board's decision in Garwood-
Detroit Truck Equipment, 274 NLRB 113 (1985), decided
2 months earlier when the Company was consulting At-
torney Cox and negotiating the subcontracting terms
with Woodcrafters. Page insisted that what happened at
Garwood should not be compared with what was going
on at the plant (Tr. 35).
I note that in Garwood-Detroit the employer was in the
distribution business of selling truck equipment parts and
in the garage business of mounting and servicing truck
equipment. Being "unable to meet its financial obliga-
tions," it decided to abandon the garage business by con-
tracting out the mounting and service work and to oper-
ate only as "a manufacturer's representative-type of orga-
nization," selling truck equipment and "using various
venders to perform the labor." The employer's "essential
purpose" was to "reduce its overhead costs across-the-
board . . . to remain in business." The subcontractor
paid a specific percentage of the employer's rent and
utility bills, plus a monthly fee to rent the garage equip-
ment (in contrast to President Nissly's increasing the
Company's own overhead by paying subcontractor
Woodcrafters for doing the subcontracted work with
lower labor costs a "monthly contract fee" of $9800-
which is $3180 more than the $6620 monthly rent Nissly
was charging Woodcrafters). The Board concluded that
under Otis Elevator Co., 269 NLRB 891 (1984) (on which
I rely above), the employer "had no duty to bargain
with the Union about its subcontracting decision" be-
cause its decision to contract out the work did not turn
on labor costs "but rather turned on a significant change
in the nature and direction of its business." I find the
case is clearly distinguishable.
Also in this 25 April meeting, Union Attorney Page
asked Company Attorney Cox for information about the
subcontracting and for a copy of the contract between
the Company and Woodcrafters. It is undisputed that
Cox stated some of the material may be hard to come by
and that it may take a little time to get copies, but he
would supply Page with the documents. (Tr. 34, 66, 88.)
Despite this promise, the evidence is also undisputed that
Cox failed to furnish the copies. By the time of this
union request, both the subcontracting agreement and
the lease addendum, showing the terms of the subcon-
tracting, had been signed. The Company offers no expla-
nation for continuing to conceal from the Union the sub-
contracting terms that undoubtedly would have been
useful for meaningful bargaining.
Instead of supplying Attorney Page the subcontracting
information as promised, Cox wrote him a five-page
letter on 6 May (2 days before the strike began) "to clar-
ify the Company's position and proposals" on the two
major issues-subcontracting and economic concession-
that separated the parties in the negotiations (R. Exh. 1).
Cox began by stating (par. 2):
First, I want to address the issue of subcontract-
ing. As I stated to the committee and Mr. Art
Morgan, UAW International Representative, on
March 26, the Company was considering subcon-
tracting at that time for a number of reasons, the
most important of which was the fact that a major
tenant, Custom Woodcrafters, Inc., was dissatisfied
and considering leaving the premises.
By continuing to assert this pretextual reason for the sub-
contract, Cox demonstrated that the Company still con-
sidered the subcontracting a fait accompli.
Later in the letter (p. 3) Attorney Cox made a new
proposal "modifying" his 17 April proposal (which
would have given the Company the right, without any
negotiations , to subcontract all the bargaining unit work
on the premises). Purportedly as "a further attempt to re-
solve this issue," he proposed language that would con-
firm the Company's asserted right to subcontract most of
the bargaining unit work to Woodcrafters ("the practice
currently in effect"):
The Company and the Union agree that the Compa-
ny may continue to subcontract consistent with the
practices currently in effect and the practice that
has existed in the past. Before the Company makes
significant changes in its subcontracting practice in
the future it will first offer to discuss the subcon-
MICHIGAN LADDER CO.
tracting practice change with the Union and, if the
Union desires , negotiate with the Union concerning
these changes.
Under this proposal , the subcontracting to Woodcrafter
would remain a fait accompli . Furthermore , the proposal
at least implied that the Company would be given the
contractual right to subcontract the remainder of the bar-
gaining unit work to Woodcrafters under the phrase,
"consistent with the practice currently in effect." But
even if the proposed language were construed to mean
that further subcontracting to Woodcrafters would be a
"significant" change, the proposal implied that the Com-
pany would have the contractual right anyway , subject
only to notice and bargaining (reminiscent of Attorney
Cox's sham bargaining at the 26 and 29 March meetings).
(The evidence does not reveal whether the Company
planned to contract out the remainder of the production
work to Woodcrafters . I note , however , that despite the
38-percent reduction in the production labor costs, Presi-
dent Nissly claimed (Tr. 126), and there is no evidence
to the contrary , that "as it turned out," the subcontract-
ing was only a "slight economic advantage ." The sub-
contracted work was being performed at a great saving
in labor costs , but the Company was having to pay
Woodcrafters a $9800 "monthly contract fee-less $6620
monthly rent-to do the work nonunion . I consider it
unlikely that the Company would continue the subcon-
tracting of only that portion of the production work for
such a slight economic return . As a practical matter
though there may be other alternatives lo contracting
out all the production work. As e.ramples , the Company
could resume the work with its own employees after the
subcontracting had had the desired effect in assisting it
obtain concessions from the Union, or it could resume
the work if the Union were eliminated from the plant.)
At the time both these subcontracting proposals were
made, Woodcrafters was performing the subcontracted
work and the Company was going to the expense of
keeping all the displaced employees on the payroll with-
out any change in pay . (Attorney Cox had conceded that
there would be insufficient work remaining after the sub-
contracting to give employment to the displaced bargain-
ing unit employees . As quoted above , he testified (Tr.
336) that he informed the Union at the 29 March meet-
ing that under the subcontracting proposal "they would
end up working for Custom Woodcrafters .") If, howev-
er, the employees went on strike in protest and the Com-
pany succeeded in defending its unilateral subcontracting
under the recent Garwood-Detroit decision , the striking
union members would be outside the plant and the Union
might be effectually eliminated.
I find that Attorney Cox was not seeking to resolve
the subcontracting issue in good -faith bargaining in
making his 17 April and 6 May subcontracting proposals
that would give the Company a contractual right to con-
tract out the current amount of (and perhaps all) the pro-
duction work to Woodcrafters. I find that he instead was
demanding that the employees ratify the unlawfully im-
plemented subcontracting of bargaining unit work and
was seeking to provoke a strike . See Maietta Contracting,
265 NLRB 1279 fn . 1 (1982), in which an employer made
37
a proposal that "the company specifically has a unilateral
right to subcontract or sell all or any portion of its busi-
ness." The Board held that "it is clear that, in this case,
this onerous request was part of Respondent 's strategy to
provoke a bargaining impasse."
On the first day of trial before the Company began
putting on its defense , company trial counsel argued (Tr.
103) that "The General Counsel 's stated legal theory is
that the strike was caused by the Employer 's refusal to
bargain over the issue of subcontracting . . . . General
Counsel 's prima facie case has not been met ." I disagree.
As found , Company Attorney Cox engaged in sham
bargaining at the 26 and 29 March meetings . I find that
between then and the 8 May strike he continued to
engage in sham bargaining on the subcontracting issue,
treating the unilateral subcontracting as a fait accompli,
with no intention of bargaining in good faith on the
issue . I further find that this failure to bargain in good
faith was a major cause of the strike . Accordingly, I
agree with the General Counsel and the Union that the
strike was an unfair labor practice strike.
CONCLUSIONS OF LAW
1. By contracting out bargaining unit work without af-
fording the Union a meaningful opportunity to bargain
over the decision, the Company engaged in unfair labor
practices affecting commerce within the meaning of Sec-
tion 8(a)(5) and (1) and Section 2(6) and (7) of the Act.
2. The strike that began 8 May was an unfair labor
practice strike from its inception.
REMEDY
Having found that the Respondent has engaged in cer-
tain unfair labor practices , I find it necessary to order it
to cease and desist and to take certain affirmative action
to effectuate the policies of the Act.
The Respondent , having contracted out the bargaining
unit work without engaging in good -faith bargaining,
must cancel its "subcontracting " agreement with Wood-
crafters , resume the production and maintenance work
with bargaining unit employees , and bargain with the
Union. Fibreboard Corp. v. NLRB, 379 U . S. 203, 209
(1964). The record contains no evidence that resuming
the work would be unduly burdensome.
The Respondent must also offer the unfair labor prac-
tice strikers , on their unconditional applications to return
to work , immediate and full reinstatement to their former
jobs or , if those jobs no longer exist , to substantially
equivalent positions , without prejudice to their seniority
and other rights or privileges previously enjoyed, dis-
missing if necessary persons hired on or after 8 May
1985, and make the strikers whole for any loss of earn-
ings and other benefits they may have suffered from any
refusal by the Respondent to reinstate them in a timely
fashion , by paying to each of them a sum of money equal
to what would have been earned during the period be-
ginning 5 days after the date on which each uncondition-
ally offers or has offered to return to work to the date of
the Respondent 's proper offer of reinstatement , less any
net interim earnings, as prescribed in F. W. Woolworth
Co., 90 NLRB 289 (1950), plus interest as computed in
38 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
Florida Steel Corp., 231 NLRB 651 (1977). If, however, the backpay period will begin on the date of the uncon-
the Respondent did already or does reject, delay, or ditional offer to return to work. Newport News Shipbuild-
ignore any unconditional offer to return to work or ing, 236 NLRB 1637 (1978).
attach any unlawful conditions to its reinstatement offer, [Recommended Order omitted from publication.]