Transcontinental Theaters, Inc.

National Labor Relations Board - Board Decisions

Mar 17, 1975

216 N.L.R.B. 1110 (N.L.R.B. 1975)

1110 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Transcontinental Theaters , Inc.; Douglas Krutilek and
Robert Shaw, a partnership d/b/a Cynatron Enter-
prises and International Association of Theatrical
and Stage Employees, Local 169 and Service
Employees International Union, Theater Janitors
Union Local 121. Cases 20-CA-8801 and
20-CA-8886
March 17, 1975
DECISION AND ORDER
BY MEMBERS FANNING, JENKINS, AND
KENNEDY
On September 6, 1974, Administrative Law Judge
Jerrold H. Shapiro issued the attached Decision in
this proceeding. Thereafter, the General Counsel and
the Charging Party filed exceptions and supporting
briefs, and the Respondent, Transcontinental Thea-
ters, Inc., filed a brief in opposition to the exceptions.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the
National Labor Relations Board has delegated its
authority in this proceeding to a three-member panel.
The Board has considered the record and the
attached Decision in light of the exceptions and
briefs and has decided to affirm the rulings, findings,
and conclusions of the Administrative Law Judge
only to the extent consistent herewith.
The facts, which are more fully described in the
attached Administrative Law Judge's Decision, may
be summarized as follows: Respondent Transconti-
nental Theaters, Inc., herein called Transcontinental,
is engaged in the operation of motion picture theaters
in various States, including California. It operates
eight theaters in the San Francisco Bay area. The
theater in issue in this proceeding is the twin-
screened theater in Fremont, near San Francisco,
known as Showcase Cinemas I and II.
International Association of Theatrical and Stage
Employees, Local 169, herein called Local 169, and
Respondent Transcontinental are parties to a collec-
tive-bargaining agreement covering this theater, as
well as its other theaters, running from August 15,
1972, to August 14, 1976. Pursuant to that agreement
Local 169 furnishes the Fremont theater two projec-
tionists : the chief projectionist who works 35 hours
per week, and a relief projectionist who works a total
of 18 hours. Service Employees International Union,
Theater Janitors Union Local 121, herein called
Local 121, has a similar contract with Respondent
Transcontinental which provides that it employ two
janitors who collectively work a total of 42 hours a
week. Local 121's agreement with Respondent
Transcontinental has a term which runs from
February 15, 1973, to February 14, 1976.
216 NLRB No. 187
The record shows that the Fremont theater since its
opening in early 1971 operated at a loss which in
fiscal 1973 grew to $46,182. The largest single
operating expenses were the theater's labor costs or
house salaries. Because of these losses Respondent
Transcontinental decided to sublease the theater and
had discussions, beginning around October 20, 1973,
with two individuals, Shaw and Krutilek, to take over
its operations and run the business as a partnership
pursuant to a sublease with Transcontinental Thea-
ters, Inc. Shaw and Krutilek were licensed as a
partnership on November 14, 1973, to do business
under the name of Cynatron Enterprises, herein
called Cynatron. No capital was invested and no
deposit on theater equipment was required. The
record indicates that a consideration in giving the
sublease to Cynatron was the representation by
Krutilek that the partnership was capable of running
the theater with lower labor costs, and that the
partners were capable of working as projectionists.
Respondent Transcontinental, by letter dated
November 7, outlined the conditions and terms
under which Cynatron would operate the Fremont
theater. Cynatron accepted Transcontinental's terms
by the signatures of Krutilek and Shaw on November
12. On the same day Respondent Transcontinental,
by letters dated November 12, 1973, advised Local
169 and Local 121 that the Fremont theater had been
leased to Cynatron effective November 28, and
indicated that such notice was being made pursuant
to contract provisions in the collective-bargaining
agreements covering termination of employees. The
letters of November 12 constituted the first and only
notice the Unions had of Transcontinental's decision
to lease the Fremont location to Cynatron.
On November 26, 1973, Respondent Transconti-
nental executed the sublease agreement and on
November 28, as scheduled, Cynatron took over the
operation of the Fremont theater. On the same day
the two projectionists and two janitors covered by
the Union's collective-bargaining contracts with
Transcontinental were terminated.
The Unions made no effort to communicate with
Transcontinental between November 12, the date of
the above notification, and November 28. There was
communication between the Unions and Cynatron.
The Unions took the position with Cynatron that
Transcontinental still owned the theater and was
responsible for implementation of the terms and
conditions of employment as reflected in the out-
standing collective-bargaining agreements, and that
Transcontinental and Cynatron were not separate
legal entities, but partners in the operation of the
theater and bound by the existing contracts. Cyna-
tron rejected the Unions' contentions. Pickets from
both Unions appeared November 29, 1973, and were
CYNATRON ENTERPRISES
still engaged in picketing the theater the day of the
trial.
A key operative fact in this case is the formal
sublease entered into by the Respondents on Novem-
ber 26, 1973, and the provisions included therein.
The Respondents rely upon the sublease in question
to show that Cynatron Enterprises thereafter became
the employer. The Unions rely upon the subleases to
support its contention that Transcontinental had not
legally divested itself from operating and controlling
the Fremont theater.'
The term of the sublease was for 1 year, November
28, 1973, through November 26, 1974, with renewal
provisions. Its approximately 40 numbered sections
contain the standard provisions usually found in a
sublease agreement, plus the following, in an atta-
ched Exhibit A, indicating a special relationship
between the parties:
Section 33 provides that Transcontinental could
terminate the sublease upon 7 days' notice to
Cynatron if, in Transcontinental's judgment, Cyna-
tron was not operating the theater in a proper and
businesslike manner or was not producing sufficient
income.
Section 34 required that Cynatron pay to Tran-
scontinental $3,400 rent per month; 5 percent of the
box office admissions and receipts over and above
the monthly rental; and 5 percent of the gross
receipts from the sale of merchandise, food, and
drinks; and, as additional rental, Cynatron had to
pay to Transcontinental every 4 or 5 weeks an
amount equal to 75 percent of the net profits as
determined by Transcontinental.
Section 35 required a ceiling on the weekly salaries
that Krutilek and Shaw could draw, and the amount
was required to be considered as operating expenses.
Section 36 reserved to Transcontinental the power
to assist Cynatron in buying and booking films and
determining the programming until Cynatron ac-
quired the experience to do this on its own.
Other sections of the sublease provided that
Transcontinental would determine the forms on
which Cynatron maintained its daily reports; Tran-
scontinental had the right to enter the theater at all
reasonable times to determine whether it was being
properly maintained and run; in the event that
Cynatron did not promptly pay all obligations
incurred in the operation of the theater, Transconti-
nental had the right to terminate the sublease.
The sublease became effective on November 28,
1974. Cynatron has hired eight employees since its
operation began, but no projectionists. Krutilek and
Shaw operate the projectors and each draw $200 a
week in salary. They retain a part-time janitorial
service at $120 a week. Contrary to Transcontinen-
tal's situation, Cynatron's major expense is film
rental, rather than labor costs, because of the
considerable wage savings it has effected in the cost
of projection and janitorial labor.
The Administrative Law Judge concluded essen-
tially on the basis of the above factors that
Transcontinental and Cynatron were not joint
employers, and that Cynatron was the sole employer
at the Fremont theater. In reaching this conclusion
the Administrative Law Judge placed major empha-
sis on his finding that Transcontinental "neither
exercises actual, nor possesses potential, control over
the Theater's labor relations under the sublease
agreement or otherwise." Additionally, he found that
as Cynatron does not meet the Board's applicable
jurisdictional standard, he recommended that those
portions of the consolidated complaint which alleged
that Cynatron violated the Act be dismissed in their
entirety.
As for the allegations involving Transcontinental,
the Administrative Law Judge found no basis for
concluding that, in subleasing the theater to Cyna-
tron, Transcontinental was unlawfully motivated. He
found that the transaction was based upon business
considerations lacking in union animus. Accordingly,
he recommended that the portions of the consolidat-
ed complaint which alleged that Transcontinental
violated Section 8(a)(3) and (1) of the Act by
subleasing the Fremont theater, which resulted in the
termination of employees represented by Unions, be
dismissed.
As for the allegation that Transcontinental violated
Section 8(a)(5) and (1) of the Act by not giving the
Union "prior notice and a prior opportunity to
bargain about the decision to cease operating the
Theater and the effects of that decision," the
Administrative Law Judge found that the Unions
had in effect slept on their rights by never testing
Transcontinental's willingness to satisfy its bargain-
ing obligation in this respect. He rejected the Unions'
position that Transcontinental continued to operate
the theater and the Unions' contracts continued to
apply to the operation. He, therefore, recommended
dismissal of that portion of the consolidated com-
plaint alleging that Respondent Transcontinental
refused to bargain regarding the changed method in
operating the Fremont theater.
Contrary to the Administrative Law Judge, we are
unable to conclude that Krutilek and Shaw, doing
business as Cynatron Enterprises, are independent
employers whose business relationships are divorced
from Transcontinental.
In our opinion the conclusion is inescapable that
I A preexisting lease remained in existence between Fremont Meadows,
Inc., owner of the shopping center where the theater is located , as lessor,
and Transcontinental as lessee.
1112 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
the sublease allows Transcontinental to maintain
close and substantial control over Cynatron's day-to-
day operations, and permits Krutilek and Shaw little
leeway to assume the role of entrepreneurs . We find
significant that in subleasing the Fremont theater the
so-called partners were required to pay no money or
put up any deposit on the equipment . We note that
the sublease closely circumscribes how much profit
Cynatron is permitted to make by providing that
Transcontinental , in addition to rental payments and
commissions on sales of candy and refreshments,
shall receive every 4 or 5 weeks an amount equal to
75 percent of the net profits unilaterally determined
by Transcontinental. Moreover , Transcontinental
under the sublease provides the forms on which
Cynatron must maintain its daily reports, which ties
Cynatron' s bookkeeping in with its own, and also
reserves the right to assist Cynatron in buying and
booking films and determining programs . In short,
Transcontinental has not relinquished its economic
control and interest in the theater.
As for Transcontinental 's control over Cynatron's
labor relations, we disagree with the Administrative
Law Judge 's conclusion that its power in this respect
is "too remote and conjectural to warrant a finding
that Transcontinental has any meaningful control
over Cynatron's labor relations policies ." The record
is clear that the primary reason for Transcontinen-
tal's decision to sublease the Fremont theater was
that it was an unprofitable venture , and that a major
cause for this condition was its high labor costs as a
percentage of operating expenses . A factor in the
high labor costs was the wages and manning
requirements provided under its collective -bargain-
ing contracts.
In deciding to sublease the Fremont theater to
Shaw and Krutilek , as noted above , a consideration
was that they were qualified to take over the work of
the projectionists , a major labor cost item. The
Respondent undoubtedly knew , as did Shaw and
Krutilek , that profitable operation of the Fremont
theater was more feasible with lower wage scales and
manning requirements than were permitted under
Transcontinental ' s existing collective -bargaining
contracts . We find relevant in this regard that
Transcontinental in its sublease placed a ceiling upon
Cynatron's operating costs and required the partner-
ship to operate the theater within a mutually
acceptable operating budget which included a ceiling
on the weekly salary that Shaw and Krutilek could
draw.
Thus, the ceiling on wages which Cynatron could
pay was strictly limited . Indeed , the close control
over Cynatron's operations and labor costs is
indicated by the - provision in the sublease that
Transcontinental can cancel the sublease upon a
mere 1 week 's notice whenever the operation was not
being operated in a "proper and businesslike"
manner . The definition and determination as to the
meaning of "proper and businesslike ," like other
restrictions in the sublease, is unilaterally decided
upon by Transcontinental . It was to meet the
requirements of Transcontinental that one of Cyna-
tron 's first moves was to take over the work in the
projection room , and hire part-time janitors on a
contract basis.
Accordingly , we are unable to agree with our
dissenting colleague that Cynatron is an independent
business entity , and that Cynatron and Transconti-
nental operated on an "arm's-length" basis . It seems
plain to us that the economic realities and purposes
of the relationship , its substance as distinguished
from the form which our colleague emphasizes,
establish an almost complete lack of independence in
Cynatron.
It is clear, as noted above , that the main considera-
tion , and probably the only consideration, for the
subleasing of the Fremont theater to Shaw and
Krutilek was to relieve Transcontinental of the high
union labor costs in running the theater. The
selection of Shaw and Krutilek over other applicants
was admittedly based upon the fact that both were
qualified to take over the work of the union
projectionists , a major cost item . In this regard we
find significant that neither Shaw nor Krutilek had
ever before operated a theater on their own, and in
"leasing" the Fremont operation no monetary
consideration was involved . Indeed, Shaw and
Krutilek were not even required to make a deposit or
post a bond to cover the property with which they
were entrusted and over which Transcontinental
maintained its own ownership or leasehold.
As described above , Transcontinental by maintain-
ing a right to impose a ceiling on operating
expenditures , particularly labor costs , retained power
to (supervise and) oversee the operation of the
Fremont theater . This limited not only the number
and kinds of employees who could be hired , but also
the size of the labor budget . The record does not
support our dissenting colleague 's statement "that
Cynatron 's work force is completely controlled by
Cynatron alone ." Krutilek frankly and forthrightly
testified that if Cynatron felt the need to hire more
personnel and increase the cost of the payroll above
the salary figure established in the lease it would
have to inform Transcontinental and receive its
permission . This has never been an issue only
because Cynatron has managed to keep its labor cost
within the range permitted by the lease.
Nor can we dismiss, as does our dissenting
colleague, the "sublease" as merely the usual type
leasehold arrangement between a lessor and leasee.
CYNATRON ENTERPRISES
The Exhibit A provisions, attached to the approxi-
mately 40 standard provisions (specifications) specif-
ically show the close relationship and ties which
Transcontinental maintains with Cynatron.
Through the special sublease provisions, Transcon-
tinental enjoys control and meaningful supervision
over the Fremont theater's operations , and at the
same time is relieved of the manning requirements
and the burdensome wage scales of the Unions'
contracts .2 It is apparent from an analysis of the
"sublease" arrangement that Krutilek and Shaw in
fact and economic reality operate the theater for
Transcontinental on the basis of a salary plus a
commission , consisting of a fraction of the profits,
both carefully spelled out in the "sublease."
Based upon the above considerations and the
record as a whole , we see no evidence that Cynatron
was an independent employer, nor that Shaw and
Krutilek were in any sense entrepreneurs . Moreover,
in our opinion the record does not demonstrate that
Cynatron and Transcontinental reached the status of
joint employers.
The "lease" by Transcontinental was a business
arrangement , the principal consequence of which
was to allow Cynatron, or Shaw and Krutilek, to
perform labor services for Transcontinental at the
theater under - conditions which were not possible
under the collective-bargaining contracts with the
Unions. Contrary to the Administrative Law Judge,
we find that there has been no arm's-length removal
of the, operation of the Fremont theater from
Transcontinental. Instead, what has been accom-
plished is merely an arrangement in which Transcon-
tinental was able to control the operations of the
Fremont theater , receive the benefits of substantially
lower labor cost, and not be deprived of the profits
which might result.
Accordingly, we find that Transcontinental never
relinquished its ownership of the Fremont theater,
and that its relationship with Cynatron was merely
an arrangement by which it sought to place the
operation in a more profitable position, through the
reduction of labor costs. In our view Transcontinen-
tal continued to operate the theater, and Shaw and
Krutilek were its employees, or at best its agents or
managers , and the outstanding collective-bargaining
contracts with the Unions continued to be operable.
2 The cases cited in the dissent to support its position do not appear
relevant to the factual situation involved here. For example , The Southland
Corporation, d/b/a Speedee 7-Eleven, 170 NLRB 1332 (1968), on which the
major reliance is placed has numerous operative facts not present here: (1)
Southland , the franchisor, and George , the franchisee , entered into a
standard franchise agreement which Southland had with a number of its
other franchised retail grocery stores in the State of California ; (2) the
franchisee was required to provide the operational capital and inventory,
and a substantial amount of the franchise cost must have been in cant; (3)
1113
Cynatron, therefore, was obligated to abide by the
contracts' terms.
Accordingly, when Local 169 and Local 121 were
notified on November 12, 1973, of Transcontinen-
tal's decision to lease the Fremont theater to
Cynatron under the circumstances herein described,
the Unions were not required to bargain over what
was a fait accompli. Transcontinental's actions
amounted to a unilateral change of wages and
working conditions under the existing contracts with
the Unions, since the contracts' provisions equally
applied whether the Fremont theater was to be run
by Transcontinental or through a working arrange-
ment with Cynatron.
Contrary to the Administrative Law Judge, we
find, therefore, that Transcontinental's conduct
thereby violated Section 8(a)(5) of the Act. Moreo-
ver, we further find that the termination, on
November 28, of the two projectionists covered by
Local 169's contract and the two janitorial employees
covered by Local 121's contract as a result of this
illegal conduct violated Section 8(a)(3) and (1) of the
Act. It is clear that the two projectionists and two
janitors were terminated because their rates of pay
were determined and affected by their membership
in a labor organization.
In view of the above, we find that Respondent
Transcontinental failed to bargain in good faith with
respect to the arrangements made with Cynatron in
regard to the changed operations of the Fremont
theater, and thereby violated Section 8(a)(5) and (1)
of the Act. We also find that the termination of
employees as a result of this illegal conduct violated
Section 8(a)(3) and (1) of the Act.
Upon the basis of the foregoing findings of fact
and upon the entire record in this case we make the
following:
CONCLUSIONS OF LAW
1. Respondent, Transcontinental Theaters, Inc.,
San Francisco, California, is, and at all material
times has been, an employer engaged in commerce
within the meaning of Section 2(2), (6), and (7) of the
Act.
2. International Association of Theatrical and
Stage Employees, Local 169, and Service Employees
International Union, Theater Janitors Union Local
121, are and, at all material times, have been labor
under the franchise agreement , exclusive control over labor relations was
vested in the franchisee ; (4) the amount store operators were permitted to
draw against anticipated profits was not subject to Southland's control; (5)
although Southland issued directives , manuals, gwdebooks, pricing sugges-
tions , and wage and personnel suggestions , whether such information was
followed was left to the business judgement of the franchisee,- and (6)
Southland had power to terminate the relationship without cause only upon
a full 30 days' notice.
1114 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
organizations within the meaning of Section 2(5) of
the Act.
3. By unilaterally changing the terms and the
conditions of wages and working conditions of the
collective-bargaining contracts in effect with the
above two Unions, Respondent has engaged in
unfair labor practices within the meaning of Section
8(a)(5) and (1) of the Act.
4. By unlawfully terminating the services of two
projectionists and two janitors employed at the
Fremont, California, theater, known as Showcase
Cinemas I and II, on November 28, 1973, Respon-
dent has engaged in unfair labor practices within the
meaning of Section 8(a)(1) and (3) of the Act.
5. The aforesaid unfair labor practices are unfair
labor practices within the meaning of Section 2(6)
and (7) of the Act.
The Remedy
It having been found that the Respondent Tran-
scontinental has been engaged in certain unfair labor
practices, we shall order it to cease and desist
therefrom and take affirmative action designed to
effectuate the policies of the Act. As Respondent
made unilateral changes in the wages and working
conditions at its Fremont theater we shall order that
it restore the status quo ante by rescinding the
arrangements it has made with Cynatron in disregard
of its collective-bargaining contract obligations with
Local 169 and Local 121. We shall further require the
Respondent to offer to the projectionists and janitors
adversely affected thereby immediate and full reins-
tatement 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, and make them whole for any
loss of earnings they may have suffered as a result of
the discrimination against them by payment to each,
respectively, of a sum of money equal to the amount
each would have earned from the date of their
discriminatory discharge to the date of an offer of
reinstatement less net earnings during such period.
This amount is to be computed on a quarterly basis
in the manner established by the Board in F. W.
Woolworth Company, 90 NLRB 289 (1950), and
including interest at the rate of 6 percent per annum,
in the manner set forth in Isis Plumbing & Heating
Co., 138 NLRB 716 (1963).
ORDER
Pursuant to Section 10(c) of the National Labor
Relations Act, as amended, the National Labor
3 In the event that 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 National Labor Relations Board" shall read "Posted Pursuant to a
Relations Board hereby orders that the Respondent,
Transcontinental Theaters, Inc., San Francisco,
California, its officers, agents , successors, and as-
signs, shall:
1. Cease and desist from:
(a) Refusing to bargain collectively with the
Unions, Local 169 and Local 121, with respect to the
terms or conditions of employment of their employ-
ees, by unilaterally changing terms, conditions of
employment, or working conditions without prior
notice to or consultation and bargaining with the
Unions.
(b) Discharging or otherwise discriminating against
employees because such employees are covered by
the Unions' contract.
(c) In any like or related manner interfering with
the rights of employees guaranteed in Section 7 of
the Act.
2. Take the following affirmative action which is
necessary to effectuate the policies of the Act:
(a) Bargain collectively with the Unions herein
involved with respect to the terms or conditions of
employment of its employees in terms of its collec-
tive-bargaining agreements with such Unions as
provided in the above section entitled "The Reme-
dy."
(b) Offer the two projectionists and the two janitors
terminated on November 28, 1973, reinstatement to
their former jobs or, if the jobs no longer exist, to
substantially equivalent positions, without prejudice
to their seniority or other rights and privileges, and
make them whole for their lost earnings in the
manner set forth in the above section entitled "The
Remedy."
(c) Restore the status quo ante by rescinding the
arrangements it has made with Cynatron in disregard
of its collective-bargaining contract obligations with
Local 169 and Local 121.
(d) Preserve and, upon request, make available to
the Board or its agents, for examination or copying,
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.
(e) Post at its theater in Fremont, California, copies
of the attached notice marked "Appendix." 3 Copies
of said notice, on forms provided by the Regional
Director for Region 20, after being duly signed by
Respondent's authorized representative, shall be
posted by the Respondent immediately upon receipt
thereof, and be maintained by it for 60 consecutive
days thereafter, in conspicuous places, including all
places where notices to employees are customarily
Judgment of the United States Court of Appeals Enforcing an Order of the
National Labor Relations Board."
CYNATRON ENTERPRISES
posted . Reasonable steps shall be taken by the
Respondent to insure that said notices are not
altered, defaced, or covered by any other material.
(f) Notify the Regional Director for Region 20, in
writing, within 20 days from the date of this Order,
what steps the Respondent has taken to comply
herewith.
IT IS FURTHER ORDERED that the complaint herein
be, and it hereby is , dismissed insofar as it alleges
unfair labor practices not found herein.
MEMBER KENNEDY, dissenting:
I do not agree with my colleagues that the evidence
supports a finding that Respondent Transcontinental
Theaters, Inc., and Respondent Cynatron Enter-
prises are a single business enterprise . The General
Counsel lacked the temerity to make that allegation
in the complaint or at the hearing, advancing instead
the contention that these two Respondents are a joint
employer. The General Counsel contends that
Respondents are joint employers of the employees
employed at the Showcase Cinemas I and II located
in Fremont, California, because Respondent Tran-
scontinental allegedly controls Respondent Cyna-
tron's labor policy vis-a-vis Cynatron's employees.
Unless that is true, this Board has no jurisdiction
over Respondent Cynatron and cannot pass upon
Cynatron's conduct in this matter . The Administra-
tive Law Judge in his well-reasoned Decision found
this not proven, and therefore dismissed the charges
pendent thereon, as well as the other charges for
which he found no evidence extant to support them.4
I agree fully with his analysis and would adopt his
recommendation that the complaint be dismissed in
its entirety.
Respondent Transcontinental is a corporation
which operates 103 movie theaters in California and
other States. In 1970 it began to operate a theater in
Fremont, California, pursuant to a 25-year lease. At
the close of its fiscal year on June 30, 1971,
Transcontinental realized on the operation of the
theater a net loss before depreciation of $3,215; in
1972, a loss of $2,862; and in 1973, a loss of $46,182.
Because of this loss, Transcontinental made a
decision , not unusual in its industry, to sublease the
theater . After receiving several offers , on November
28, 1973, Transcontinental subleased the theater to
Cynatron Enterprises.
Cynatron is a general business partnership com-
posed of partners Douglas Krutilek and Robert
Shaw .5 The partnership is licensed as such to do
4 Since the majority finds that the two Respondents are a single business
entity, i.e., that the Cynatron partnership members are "employees" of
Transcontinental , the majority is thereby able to find 8(aX3) and (5)
violations simply on the basis of a "replacement" of the union employees at
the theater with the general partners.
S They had never had an employment or business relationship with
Transcontinental before the events herein occurred.
1115
business under the California Civil Code. Cynatron
began operating the theater on November 28
pursuant to its sublease from Transcontinental.
The majority finds that certain provisions of the
sublease prove that the Cynatron partners are the
employees of Transcontinental. In my view, none of
these provisions satisfy the tests set forth in Board
and court precedent which would warrant a finding
of single-employer status here.
The Board will treat separate entities as one
employer where their operation and ownership are
highly integrated. Principal factors which must be
considered in resolving this question are interrelation
of operation, common management, centralized
control of labor relations, and common ownership or
financial control. Sakrete of Northern California, Inc.,
137 NLRB 1220 (1962), enfd. 332 F.2d 902 (C.A. 9,
1964), cert. denied 379 U.S. 961 (1965). None of
these factors is controlling, but emphasis is placed
upon operational interrelationship, common man-
agement, and central control of labor relations.
Drapery Manufacturing Co., Inc., 166 NLRB 805
(1967). Just recently, in Gerace Construction, Inc., 193
NLRB 645 (1971), the Board held:
A critical factor in determining whether sepa-
rate legal entities operate as a single employing
enterprise is the degree of common control of
labor relations policies.' Thus, the Board has
found common ownership not determinative
where requisite common control was not shown,2
and the Board has held with court approval that
such common control must be actual or active, as
distinguished from potential control.3 6
i N.LR B. v. Condenser Corporation, 128 F.2d 67, 71. See also J.
Howard Jenks, d/b/a Glendora Plumbing, 165 NLRB 101; L & S
Construction Company, Inc, 155 NLRB 524; AAA Electric, Inc. and
Simms Electric Co., 190 NLRB 247.
2 Joe Robertson & Son, Inc., 174 NLRB 1073; Bel-Air Door, et al.,
150 NLRB 481.
3 Los Angeles Newspaper Guil4 Local 69, et al. (Hearst Corp.), 185
NLRB 303, enfd . 443 F .2d 1173 (C.A. 9); Poole's Warehousing, Inc., 158
NLRB 1281; Miami Newspaper Printing Pressmen 's Local 46 v.
N.LR B., 322 F.2d 405(C.A.D.C.)
In the instant case the record is clear that there is no
common ownership. Cynatron has no investment in,
no representation in, nor stock in Transcontinental.
And Transcontinental has no ownership interest in the
general partnership of Krutilek and Shaw. As for
common management, there is none in the day-to-day
operations of the theater. Cynatron supplies Tran-
6 Indeed, the Board has held , with court approval, that separate
corporate subsidiaries are separate persons, if neither the subsidiaries nor
the parent exercises actual, as opposed to potential , control over the day-to-
day operations or labor relations of the other . Los Angeles Newspaper Guild,
Local 69, et aL (Hearst Corp.), 185 NLRB 303 (1970). Knight Newspapers,
138 NLRB 1346 (1962), enfd. sub nom. Miami Newspaper Printing
Pressmen 's Local No. 46 v. N.L.R.B., 322 F.2d 405 (C.A.D.C., 1961).
1116 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
scontinental with daily reports on forms prescribed by
Transcontinental so that Transcontinental can com-
ply with the requirement of its master lease in giving
the same reports to the owner of the theater, but only
Cynatron controls the composing of those reports and
their content. Transcontinental may inspect the thea-
ter to see if it is properly run, but it does not appear
that it has ever done so. Transcontinental also may
terminate the lease upon 7 days' notice if it is not run in
a businesslike manner, or if Cynatron does not pay its
obligations. But as the sublease expressly provides,
Cynatron is solely responsible for its debts. Thus, all
that the termination rights give Transcontinental is the
right, if necessary, to rid itself of a failing and/or
insolvent tenant. There is no evidence that Transconti-
nental has ever used this power to gain an active role in
the day-to-day management of the theater. Further-
more, the sublease is for a full 1-year term, a substan-
tial leasehold. As the Board stated in Clark Oil &
Refining Corporation, 129 NLRB 750 (1960), the power
to terminate on short notice because in the grantor's
view the grantee is conducting an unsatisfactory oper-
ation still leaves a substantial tenancy, a condition not
usually attached to master-servant relationships, and
one which does not negate independent contractor
status.
The sublease also reserves to Transcontinental the
power to assist Cynatron in renting films and
determining programming until Cynatron acquired
sufficient experience. This did not give Transconti-
nental the power to require Cynatron to follow its
desires in this regard, nor is there any evidence that
Transcontinental ever attempted to do so. Further-
more, as the Administrative Law Judge found,
Cynatron in fact bids for and books its own films.
This is a significant managerial task, since Cynatron
must compete with numerous area theaters when
bidding to the film companies for such items as first-
run rights on particularly popular films.
Respondgnt Transcontinental and Respondent
Cynatron do not share financial control of Cynatron.
The majority appears to find sections 34 and 35 of
the sublease significant here. Section 34 requires
Cynatron to pay Transcontinental $3,400 per month
plus 5 percent of the box office admissions and
receipts less the guaranteed minimum monthly rental
($3,400), and 5 percent of the gross sales of
merchandise, food, and drink. However, the record
reveals that this clause is nothing more than a mirror
image of the master lease between Transcontinental
and the owner of the shopping center, and is in fact
the basic monthly rental of the theater. The profit
Transcontinental realizes, if any, is the 75 percent of
the net profits of the 4- or 5-week period as
7 E.g., the record proves that the advertising budget has gone from $350
to $400 or $500 a week and that the partnership has increased its salaries
determined by Cynatron's operating period. This is
where Transcontinental will make a profit on the
theater, if it realizes any at all. Contrary to the view
of my colleagues, Cynatron's promise to pay 75
percent of its net profits is legally sufficient and
substantial consideration, under the law of contracts,
for the right to use Transcontinental equipment and
furnishings together with the leasehold rights of
occupation and use.
Section 35 of the sublease provides: "35. Before
computing 75 percent of the net operating profits,
subleasee shall be allowed to draw the sum of $250
per week as a salary which said sum shall be
considered an operating expense of said theater."
The record shows that the operating expense budget,
including the amount of Cynatron's partnership
salary draw, advertising, etc., is set by mutual
negotiation between Cynatron and Transcontinental.
Indeed, the first such budget was determined entirely
by Cynatron and submitted to and accepted by
Transcontinental as reasonable. The budget has been
revised several times by Cynatron since the inception
of the sublease, with no more formality than simple
notification of that fact to Transcontinental.? Trans-
continental President Lippert testified without con-
tradiction that the operating budget is important
only to assure Transcontinental that Cynatron, with
whom Transcontinental had had no prior experience,
would remain in operation.
The majority contends without citation of authori-
ty that on this basis Respondents are a single
business enterprise, and that Cynatron has no
entrepreneurial status. Such a finding is contrary to
the evidence. The Administrative Law Judge found,
as the General Counsel alleged in his complaint, that
Respondents are separate business entities. Trans-
continental has no ownership interest in Cynatron.
Cynatron has its own business license, maintains its
own bank accounts and books of account, employs
its own accountant, purchases its own tax advice, is
completely and solely responsible for paying its own
operating expenses , sets its own admission prices,
and bids for its own films. I know of no case, nor
does the majority cite one, where such a business
entity has been held by the Board to be "employees."
I do know of cases to the opposite effect. In The
Southland Corporation, d/b/a Speedee 7-Eleven, 170
NLRB 1332 (1968),8 the Board was faced with two
issues: (a) whether Southland, the franchisor and
owner of the retail grocery store, and George, an
individual, were a single employer (i.e., whether
George was an employee of Southland), and (b)
whether Southland and George were a joint employ-
er, which is what the General Counsel alleged in the
and granted itself travel allowances.
8 See also cases cited supra.
CYNATRON ENTERPRISES
instant case . The facts showed that Southland built
and owned the store , outfitted it with fixtures and
goods, and then leased it to the franchisee George.
As here, George paid no cash. Southland provided
bookeeping services and maintained George's bank
accounts. George could not withdraw profits below a
fixed net worth, and could not take a draw unless he
worked in the store. Southland received 55 percent of
the adjusted gross profits (in the instant case the
figure is 75 percent of net profits) of the franchise.
Despite Southland's policy manual, Southland's
retail pricing arrangement , and Southland 's right to
terminate without cause upon 30 days' notice, the
Board , including Member Jenkins, found that
Southland did not "so control the means by which
George operates his store to warrant finding his
employees to be employees of Southland. We find
George to be an independent contractor."
In so concluding , the Board found that there was
no evidence of centralized control of labor relations;
i.e., that Southland had "ever exercised any control
over any of the terms of employment of the store
employees." So also here, where the record clearly
supports the General Counsel 's specific allegation in
the complaint: "II. (f) At all times since November
28, 1973 [the effective date of the sublease] , Respon-
dent Cynatron has hired, fired, disciplined and
supervised the employees employed at the Showcase
Cinemas I and II in Fremont , California ." In view of
the foregoing , I believe that the Board can reach no
conclusion other than that Respondent Transconti-
nental and Respondent Cynatron are independent
contractors and separate employers within the
meaning of Section 2(2) and 2(3) of the Act.
There remains the second issue raised in Southland
and raised here by the complaint ; i.e., whether
Transcontinental and Cynatron are joint employers. I
agree fully with the Administrative Law Judge that
they are not. The critical factor in determining
whether a joint employer relationship exists is the
degree of control which one entity has over the labor
relations policy of another .9 On this issue (but not on
the single employer issue), the Board stated in
Southland, supra, that:
It is immaterial whether this control be actually
exercised so long as it may potentially be
exercised by virtue of the agreement under which
the parties operate .4 In the instant case Southland
neither exercises actual, nor posesses potential,
control over the store 's labor relations under the
franchise agreement . It is undisputed that George
alone and exclusively hires, fires, and in every
other respect sets the terms and conditions of
employment of the store's employees . There is no
1117
evidence that the clear language of article 14 of
the franchise agreement granting complete con-
trol over store labor relations to the franchisee
has ever been disregarded by the parties or that
Southland has ever sought to interpret the
agreement in such a way as to vest in itself the
right to influence George's labor relations poli-
cies.5
In its brief Petitioner advances the contention
that Southland "in practice does keep a check on
the number of employees, their hours and wages,"
by means of article 21 of the franchise agreement.
Article 21 states that if the franchisee's payroll
"exceeds 8 percent of net sales for said preceding
week, or $200, whichever is greater, the remit-
tance (the owner's weekly draw) may be reduced
by the amount of such excess ." But it does not
require George to reduce the number of hours or
wages of its employees.
We are of the opinion that the impact of this
contractual provision upon George's employees is
too remote and conjectural to warrant a finding
that Southland has any meaningful control over
George's labor relations policies. Moreover, there
is no evidence that George has ever been affected
by this provision. Indeed, the record shows that
George does not even take a draw. Further, even
if George did accept a draw it would be sheer
speculation to assume that the terms of employ-
ment of his employees would in any way be
affected by the draw restriction.
Thriftown, Inc., 161 NLRB 603. Although in Thriftown the
Board found the ternunation clause in the parties' agreement to be
significant in establishing a joint employer relationship, this was
found to be so because of the "special nature of the relationship,"
i.e., a discount department store in which all the leased departments
were under one roof and were held out to the public to be part of an
integrated enterprise. Moreover, the lease agreement specifically
reserved to Thriftown the right to control its lessees' labor relations,
a right which would normally be exercised in order to prevent a
dispute involving one lessee from adversely affecting the operation of
the entire store.
S In this regard it is noteworthy that on one occasion a customer
complained to Southland about the conduct of a clerk in George's
store . Although a Southland representative suggested to George that
the employee be fired , George rejected the suggestion and continued to
employ the clerk. Southland thereafter made no attempt to alter
George's decision.
For the foregoing reasons we find on the present
record that George and Southland are not joint
employers of the store employees within the mean-
ing of the Act. Accordingly, as George is the sole
employer and as George's annual retail sales are
less than the Board's minimum retail jurisdictional
standards , we find that it will not effectuate the
policies of the Act to assertjurisdiction herein, and
we shall dismiss the petition.
9 S.A.G.E, Inc of Houston and its Licensees, 146 NLRB 325 (1964).
1118 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
So also do I find here. Again, I refer to the General
Counsel's admission that Cynatron hires, fires,
disciplines, and supervises its own employees. Fur-
thermore, Cynatron's operating budget limitation is,
unlike in Southland, largely self-imposed and altered
as Cynatron thinks is required. The record shows
that Cynatron's work force is completely controlled
by Cynatron alone. Furthermore, Transcontinental
has never attempted to participate in or influence a
labor relations decision by Cynatron.
All of which should leave one puzzled as to the
reasons for prosecution of this case. But after more
than 20 years of legal experience in the regions of this
Board , my memory is refreshed by the trial attorney's
candid concession on the record that:
To be absolutely candid, one of the reasons I was
having difficulty answering your questions is I
have been unable to find the answers myself
because some bright legal theoretician in Wash-
ington came up with these violations based on
case citations from which inferences are drawn.
Principally among these cases appears to be
Jackson Manor Nursing Home, Inc., and/or Isaac
Mizrahi d/b/a Jackson Manor Nursing Home, Snap-
per Creek Nursing Home and Arch Nursing Home, 194
NLRB 892 (1972). I agree with the Administrative
Law Judge that reliance upon Jackson here is
unwarranted. The "potential control" which the
Board found there existed in fact. The lease agree-
ment there reserved to the lessor the right to be
present and to fully participate in collective-bargain-
ing sessions, and required the lessor's approval
before execution of any labor contract by the lessee.
Jackson Manor is clearly inapposite. The instant case
is controlled by Southland, supra, since here there is
no evidence of "potential control." In my view
Transcontinental and Cynatron are not joint employ-
ers of Cynatron's employees.
For all of the foregoing reasons, I would adopt the
Administrative Law Judge's well-reasoned Decision,
and would dismiss the complaint in its entirety.
APPENDIX
NOTICE To EMPLOYEES
POSTED BY ORDER OF THE
NATIONAL LABOR RELATIONS BOARD
An Agency of the United States Government
WE WILL NOT fail or refuse to bargain collec-
tively in good faith with the International
Association of Theatrical and Stage Employees,
Local 169, and Service Employees International
Union, Theater Janitors Union Local 121.
WE WILL NOT unilaterally, without notice to or
consultation with the above Unions, make
changes in wages , working conditions, or terms of
employment.
WE WILL NOT terminate employees in violation
of our contracts with the above-named Unions, or
otherwise discriminate against employees because
they are covered by our contracts with the above-
named Unions.
WE WILL offer full reinstatement with backpay
plus 6-percent interest to the two projectionists
and two janitorial employees terminated at our
Fremont theater on November 28, 1973.
WE WILL rescind the arrangements we have
made with Cynatron in disregard of its collective-
bargaining contract obligations with International
Association of Theatrical and Stage Employees,
Local 169 and Service Employees International
Union, Theater Janitors Union Local 121.
WE WILL NOT in any like or related manner
interfere with, restrain, or coerce employees in the
exercise of their rights guaranteed in Section 7 of
the Act.
TRANSCONTINENTAL
THEATERS, INC.
DECISION
STATEMENT OF THE CASE
JERROLD H. SHAPIRO, Administrative Law Judge: Upon
an unfair labor practice charge filed by International
Association of Theatrical and Stage Employees, Local 169
on December 5, 1973, and another charge filed on January
16, 1974, by Service Employees International Union,
Theater Janitors Union Local 121, the General Counsel of
the National Labor Relations Board , by the Regional
Director of the Board, Region 20, on June 12, 1974, issued
an order consolidating the two cases and issued a
consolidated complaint against Respondent Transconti-
nental Theaters , Inc., and Respondent Douglas Krutilek
and Robert Shaw d/b/a Cynatron Enterprises, hereafter
collectively called Respondents , alleging that Respondents
violated Section 8(a)(1), (3), and (5) of the National Labor
Relations Act, herein called the Act . Respondents filed
answers denying the commission of the alleged unfair labor
practices , and a hearing was conducted on July 23, 1974.1
Upon the entire record and from my observation of the
demeanor of the witnesses , and having considered the
posthearing briefs submitted by General Counsel and
Respondent Transcontinental and the written statements
of position submitted by Respondent Cynatron and the
Charging Parties, I make the following:
i The posthearing request of Attorney Michael Roger to enter his
appearance on behalf of the Charging Parties is granted.
CYNATRON ENTERPRISES 1119
FINDINGS OF FACT
I. THE BUSINESS OF THE RESPONDENTS
Respondent Transcontinental Theaters , Inc., is a Dela-
ware corporation engaged in the general business of
operating movie theaters in California and elsewhere.
During its past calendar year Transcontinental Theaters
received gross revenues in excess of $500,000 from its
theater operations and purchased and received goods and
supplies valued over $50 ,000 for its operations in Califor-
nia, directly from suppliers located outside California.
Respondent Transcontinental Theaters , Inc., admits it is
engaged in commerce within the meaning of Section 2(6)
and (7) of the Act . Based on the foregoing, I find that it will
effectuate the policies of the Act to assert jurisdiction over
Transcontinental 's operation involved herein.
Respondent Cynatron Enterprises is a general partner-
ship composed of partners Douglas Krutilek and Robert
Shaw who operate a movie theater in Fremont , California,
known as Showcase Cinemas I & II, pursuant to a sublease
with Respondent Transcontinental Theaters , Inc. No
commerce data was placed in the record with respect to the
business operation of Cynatron Enterprises and the
General Counsel concedes that Cynatron Enterprises, by
itself, does not meet the Board's applicable jurisdictional
standard . Unless Cynatron Enterprises is a joint employer
with Transcontinental Theaters , Inc., as discussed later, the
Board would not assert jurisdiction over its operation
involved herein.
11. THE LABOR ORGANIZATIONS INVOLVED
I find that International Association of Theatrical and
Stage Employees, Local 169 , herein called Local 169, and
Service Employees International Union , Theater Janitors
Union Local 121, herein called Local 121, and collectively
described herein as the Unions, are labor organizations
within the meaning of Section 2(5) of the Act.
III. THE ALLEGED UNFAIR LABOR PRACTICES
On November 28, 1973, Respondent Transcontinental
ceased operating the Theater and terminated its projection-
ists and janitors . On the same date , Respondent Cynatron
commenced operating the Theater pursuant to a sublease
agreement with Transcontinental.
The General Counsel , as alleged in the consolidated
complaint, in substance contends that Respondent Trans-
continental Theaters in violation of Section 8(a)(3) of the
Act subleased the Theater operation and terminated the
janitors and projectionists because the employees were
represented for the purposes of collective bargaining by the
Unions, and in violation of Section 8(a)(5) of the Act
subleased the Theater without affording the Unions
adequate notice or an opportunity to bargain about the
decision to sublease and the impact of the decision on the
employees . In addition , it is alleged that Transcontinental
continues to act as a joint employer over the operation of
the Theater and that Transcontinental and Cynatron, as
joint employers, are under a duty to honor and abide by
Transcontinental 's contracts with the Unions and that, in
these circumstances , by unilaterally altering the terms and
conditions of employment of the Theater's projectionists
and janitors, Respondents violated Section 8(a)(5) and (1)
of the Act. Finally, the General Counsel alleges that
Respondent Cynatron , as a joint employer , was a party to
the unlawful discharge of the Theater's projectionists and
janitors and as such violated Section 8 (a)(3) and (1) of the
Act.
Respondent Cynatron Enterprises defends on the follow-
ing grounds : (1) The record does not establish a joint-
employer relationship between Cynatron and Transconti-
nental; (2) the Board does not have jurisdiction over
Cynatron's business operations ; (3) Cynatron has bar-
gained in good faith with the Unions.
Respondent Transcontinental Theaters , Inc., defends on
the following grounds : ( 1) The Board should defer decision
in this matter under its doctrine in Collyer Insulated Wire,
192 NLRB 837 (1971 ); (2) Transcontinental in subleasing
the Theater was motivated by legitimate economic reasons
and prior to entering into the sublease it gave the Unions
ample opportunity to bargain about the decision and the
effects on the employees involved.
A. The Setting and the Contentions of the Parties
Respondent Transcontinental Theaters in about 1970
commenced to operate a movie theater in Fremont,
California, known as Showcase I & II, herein called the
Theater, pursuant to a lease agreement with the developer
of the shopping center in which the Theater is located.
Under Transcontinental's operation the Theater regularly
employed two projectionists and two janitors. The janitors,
who were represented by Local 121 , and the projectionists,
who were represented by Local 169, were covered by
separate collective -bargaining agreements . Transcontinen-
tal's most recent collective-bargaining agreement with
Local 121 covers the Theater 's janitors plus the janitors
employed in several other theaters operated by Transconti-
nental, and is effective from February 15, 1973, until
August 14, 1976 . Its agreement with Local 169 covers the
projectionists employed in several theaters operated by
Transcontinental, including the Theater , and is effective
from February 21, 1973 , until August 14, 1976.
B. The Alleged Joint-Employer Relationship between
Respondents
Respondents are independent business entities : Trans-
continental has no ownership interest in Cynatron.
Cynatron has its own business license , maintains its own
bank accounts and books of account , is solely responsible
for paying its own operating expenses , and hires, fires,
disciplines , and generally supervises its employees without
consulting Transcontinental . In this regard the General
Counsel, as alleged in the consolidated complaint , admits
"Respondent Cynatron has hired , fired, disciplined and
supervised the employees employed at the [Theater ]" since
November 28, 1973.
The sublease entered into by Respondents is for a term
of 1 year with an option for Cynatron to renew for an
additional period of 12 months. Cynatron pays a monthly
rental plus 5 percent of the Theater's admissions and 5
percent of the moneys received from the sale of food and
1120 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
drink on the premises , plus 75 percent of the net monthly
operating profits.
In urging that Transcontinental is a joint employer the
General Counsel does not dispute that in practice
Transcontinental does not exercise any direct control over
Cynatron's business operations, rather the General Coun-
sel's position is that Transcontinental indirectly exercises
or has the potential to exercise such control by virtue of
certain arrangements under which Cynatron has agreed to
operate the Theater . Specifically:
1. Transcontinental may enter the Theater "at reasona-
ble times" to inspect and determine whether Cynatron is
properly operating the business , and may terminate the
sublease if it believes Cynatron is not operating the Theater
"in a proper and businesslike manner and in a manner not
producing sufficient income" or if Cynatron does not
"promptly" pay its operating expenses.
2. Transcontinental has imposed a ceiling on the
weekly salary drawn by Cynatron.
3. Transcontinental reserves the power to assist Cyna-
tron in buying and booking films and determining the
Theater's programming, until Cynatron acquires the
experience to do this on its own.2
4. In addition to a monthly rental , Cynatron must pay
75 percent of the net operating profits to Transcontinental.
5. Transcontinental has placed a ceiling upon Cyna-
tron's operating costs. In this regard, Respondents agreed
that Cynatron would operate the Theater "within a budget
that is mutually acceptable to all parties." The "mutually
acceptable" operating budget agreed upon by Respondents
is $650 a week . This includes labor costs as well as other
costs of operation such as advertising, utilities, etc.
Generally, Cynatron spends less than the ceiling and has
not tried to increase the ceiling . One of Cynatron's
partners, Douglas Krutilek , testified that if Cynatron
desired to increase its operating budget above the imposed
ceiling that "more likely than not [Transcontinental ] would
approve it or say it was all right" and further testified that
it was his understanding that an increase in the operating
budget would be a matter negotiated by Respondents. The
foregoing and Transcontinental 's ability to terminate the
sublease if it feels the Theater is not being operated in a
businesslike manner so as to produce sufficient income, in
my view , establish that Transcontinental has the power to
effectively set a ceiling on Cynatron 's operating costs.
I do not believe that the above factors separately or
together establish the existence of a joint-employer
relationship between Transcontinental and Cynatron. I
realize that a critical factor in determining whether such a
relationship exists is the control which one party exercises
over the labor relations policy of the other and that it is not
material whether this control be actually exercised so long
as it may potentially be exercised by virtue of the
agreement under which the parties operate. See The
Southland Corp. d/b/a Speedee 7-Eleven, 170 NLRB 1332,
1334 (1968). Transcontinental neither exercises actual, nor
possesses potential, control over the Theater's labor
relations under the sublease agreement or otherwise.
Cynatron alone and exclusively hires, fires, disciplines, and
in all respects sets the terms and conditions of employment
and otherwise supervises the Theater's employees.
In the consolidated complaint the General Counsel
alleges that "Respondent Transcontinental has controlled
the labor relations policy of Respondent Cynatron by its
right to determine operating costs, including labor costs, of
Respondent Cynatron." As I have found above, Transcon-
tinental does in effect have the power to place a ceiling on
the Theater's operating expenditures. I am of the opinion,
however, that the impact of this power is too remote and
conjectural to warrant a finding that Transcontinental has
any meaningful control over Cynatron's labor relations
policies. Moreover, there is no evidence that Cynatron has
been affected by Transcontinental's ability to impose a
ceiling on operating expenditures. The record reveals that
Cynatron's expenditures have generally not even reached
the ceiling.
For the foregoing reasons, I find that Transcontinental
and Cynatron are not joint employers of the Theater's
employees within the meaning of the Act. See Hychem
Constructors Inc., et al., 169 NLRB 274 (1968), where the
Board found that a corporation was not a joint employer of
its subcontractor's employees simply because it retained
the power, under a cost-plus contract providing for
reimbursement of labor expenses, to (1) police the
subcontractor's wage rates and (2) enforce its own safety
and security rules . Also see Southland Corp. d/b/a Speedee
7-Eleven, 170 NLRB 1332, 1334 (1968), where the Board in
concluding that a franchisor and franchisee were not joint
employers of the employees involved rejected the conten-
tion that the franchise contract's termination clause and
the provision limiting the franchisee's weekly draw
reflected the franchisor's control over labor relations. I
have considered Jackson Manor Nursing Home, Inc., 194
NLRB 892 (1972), relied on by the General Counsel, and
believe that in certain material respects it is factually
distinguishable from the instant situation. There the
amended lease agreement stated that during the term of the
lease, the lessor had the right to be present and to fully
participate in any and all collective-bargaining sessions.
Further, the agreement stated that the lessor's consent
must be obtained before the lessee could enter into any
labor agreement or contract. These contractual provisions,
unlike the ones involved in the instant case , place the lessor
in a definite position to influence all of the lessee's labor
policies.
Since I have found that Transcontinental and Cynatron
are not joint employers of the Theater's employees, it
follows that Cynatron is the sole employer. Accordingly, as
Cynatron does not meet the Board's applicable jurisdic-
tional standard, it will not effectuate the policies of the Act
to assert jurisdiction over its operation, and for this reason
I shall recommend that those portions of the consolidated
complaint which allege that Cynatron violated the Act be
dismissed in their entirety.
2 Cynatron by the date of the hearing was apparently doing its own
buying, booking, and programming.
CYNATRON ENTERPRISES 1121
C. The Motive of Respondent Transcontinental in
Subleasing the Theater
The consolidated complaint alleges that Respondent
Transcontinental violated Section 8(aX3) and ( 1) of the Act
by subleasing the Theater and terminating the employment
of the employees represented by the Unions.
The undisputed evidence pertinent to this allegation can
be stated briefly . In its fiscal year ending in June 1973,
Transcontinental lost $46 , 182 operating the Theater. In the
fall of 1973, it was common knowledge that Transconti-
nental was attempting to sublease the Theater . One of the
prospective lessee 's, Cynatron , was told by the officials of
Transcontinental that the reason it desired to sublease the
Theater was it was losing money . There is no evidence that
Transcontinental bore any ill will or animus toward the
Unions as the term is used in cases such as this, involving
violations of Section 8(aX3) of the Act . Transcontinental
has a long history of collective bargaining with the Unions
and there is no evidence that this relationship has been
other than harmonious . As a matter of fact the principal
official of Local 169 testified that Local 169 has had a
"wonderful relationship" with Transcontinental and its
president for "many, many years."
The General Counsel , in substance , urges that since
labor costs constitute the largest percentage of Transconti-
nental's 1973 operating expenses and that since such costs
are determined by the Unions' collective-bargaining
agreements, it follows that in ceasing to operate the
Theater because it was losing money Transcontinental was
penalizing the projectionists and janitors because their
rates of pay were determined and affected by the fact they
had selected the Unions to bargain for them. The General
Counsel urges that , in subleasing the Theater , Transconti-
nental violated Section 8 (a)(3) "because the [sublease] to
Cynatron was designed for the purpose of drastically
reducing the labor costs which were determined by the
collective-bargaining agreements between the two Unions
and Transcontinental."
In my opinion the contention that Transcontinental's
sublease of the Theater was discriminatorily motivated is
based on speculation and conjecture which constitutes too
thin a reed upon which to base a violation of Section
8(aX3) of the Act. On the other hand, it is undisputed that
Transcontinental subleased the Theater because it was
losing money. There is no evidence of animus by
Transcontinental toward the Unions nor is there evidence
that its bargaining relationship with Local 121 has been
anything less than harmonious and with regard to Local
169, Transcontinental and Local 169 have enjoyed a
wonderful bargaining relationship for many, many years.
Under these circumstances , I am not prepared to say that
the General Counsel has demonstrated by a preponderance
of the evidence that in subleasing the Theater to Cynatron
that Transcontinental was unlawfully motivated . Accord-
ingly, I shall recommend that this portion of the consoli-
dated complaint be dismissed.3
S In view of this finding, I have not deternuned the applicability to this v.
Darlington Manufacturing Co., 380 U .S. 263 (1%5).
D. The Alleged Failure of Transcontinental To
Afford the Unions an Opportunity To Bargain Over
its Decision To Sublease the Theater and Over the
Effects of that Decision
The consolidated complaint alleges that Transcontinen-
tal violated Section 8(a)(5) and (1) of the Act by subleasing
the Theater without giving the Unions "prior notice and a
prior opportunity to bargain about the decision and/or the
effects of the decision ." The undisputed facts pertaining to
this allegation are as follows.
On November 12, 1973 , Respondents executed a "letter
of agreement" which clarified the conditions and terms
under which Cynatron was to operate the Theater. On the
same date Transcontinental , by letters, notified the Unions
it intended to cease operating the Theater November 28
and terminate the janitors and projectionists represented
by the Unions.
Local 121 was informed by Transcontinental:
We wish to advise you that we have subleased [the
Theater ] to [Cynatron Enterprises Inc.]. They will take
over operations of the Theater on November 28, 1973.
This note is being sent to you in accordance with the
two weeks notice required per our contract ... .
Section 8 of Local 121's contract with Transcontinental
provides that, "two weeks notice shall be given by either
party for termination of employment .... "
Local 169 was informed by Transcontinental:
... effective November 28, 1973, [the Theater] has
been leased to [Cynatron Enterprises]. They will take
over the operation on November 28. This letter is being
sent to you according to the provision in Article 3,
Section 1 of our contract.
Section 1 of article III of Local 169's contract with
Transcontinental provides that when Transcontinental
desires "to dispose of a person employed " it will give 2
weeks' notice of termination or 2 weeks ' salary in lieu of
notice . Also, section 10 of article IV of the contract
requires Transcontinental to give Local 169 2 weeks'
written notice "on any curtailment of operation . . . and
two weeks written notice on any closing of theaters or
termination of employment."
On November 26, 1973 , Respondent executed the
sublease agreement and on November 28, as scheduled,
Cynatron took over the operation of the Theater. The
Unions made no effort to communicate with Transconti-
nental between November 12, the date of Transcontinen-
tal's notification it was ceasing to operate the Theater, and
November 28 , the date Cynatron took over the Theater.
There was communication between the Unions and
Cynatron. The Unions , however, eventually refused to
bargain with Cynatron because of a belief that their
existing contracts with Transcontinental were binding
upon Cynatron because , in the Unions' opinion, Transcon-
tinental had not legally divested itself from operating the
Theater but was in partnership with Cynatron. The Unions
1122 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
took a similar stand when, pursuant to the grievance-
arbitration procedure contained in their contracts with
Transcontinental, they grieved over Transcontinental's
sublease of the Theater and the termination of the
employees.
I do not believe, as alleged in the consolidated com-
plaint, that Transcontinental violated Section 8(aX5) and
(1) of the Act by not giving the Union "prior notice and a
prior opportunity to bargain about the decision to cease
operating the Theater and the effects of that decision." On
November 12, 1973, the Unions were notified by Transcon-
tinental that it intended to cease operating the Theater on
November 28, 1973. The General Counsel's characteriza-
tion of this notification as a fait accompli affording the
Unions no meaningful opportunity to bargain, in my view,
is unjustified. The opportunity existed for the Unions to
discuss the matters involved herein between November 12
and November 28. Yet, it was not until after November 28,
when they filed their grievances, that the Unions contacted
Transcontinental. There is no evidence that Transconti-
nental would not have bargained over its decision to cease
operating the Theater or over the impact of the decision
upon the janitors and projectionists. The Unions never
tested Transcontinental' s willingness to satisfy its bargain-
ing obligation in this respect .4 When the Unions finally did
contact Transcontinental, to grieve over Transcontinental's
conduct, they raised no question about the basis for the
decision to sublease the Theater or the impact upon the
bargaining unit employees, but instead took the position
that Transcontinental continued to operate the Theater in
partners with Cynatron and that the Unions' contracts
continue to apply to the operation. Under all the
circumstances , I do not believe that the General Counsel
has sustained the burden of establishing a violation on this
aspect of the cases Cf. Kingwood Mining Co., 210 NLRB
844 (1974); Association of Motion Picture and Television
Producers Inc., 204 NLRB 807 (1973); Corpus Engineering
Corp., 195 NLRB 595, 595-596 (1972). Accordingly, I shall
recommend that this portion of the consolidated complaint
be dismissed.
4 The record does not demonstrate that it was too late for Transconti-
nental to bargain meaningfully over its decision to sublease the Theater.
The sublease was not executed until about 2 weeks after the Unions
received notification of Transcontinental's intent.
5 In view of this finding, it is unnecessary for me to deternune whether
Transcontinental was obliged to bargain with the Union over its decision to
cease operating the Theater.
6 The collective-bargaining agreements involved herein contain broadly
worded grievance-arbitration provisions culminating in impartial arbitra-
tion . The Unions' grievances filed against Transcontinental , by joint
agreement of the Unions and Transcontinental, were consolidated and
scheduled to be heard early in June 1974 before an arbitrator. Cynatron,
however, declined to become a party to the proceeding before the arbitrator
and because of this it appears that the arbitration was canceled.
r The consolidated complaint alleges , in substance, that Cynatron and
Transcontinental are jointly responsible for the alleged discriminatory
E. Whether the Board Should Decline To Act at
this Time and Leave the Unions and
Transcontinental To Use their own agreed-upon
Procedures for Resolving the Dispute
I turn next to Respondent Transcontinental's contention
that, pursuant to the doctrine established by the Board in
the case of Collyer Insulated Wire, 192 NLRB 837 (1971),
that at Transcontinental's request the Board should defer
decision in those matters affecting Transcontinental until
the pending arbitration proceedings are completed; refer-
ring to the grievances initiated by the Unions against
Transcontinental under the governing collective-bargain-
ing contracts.° Transcontinental apparently acknowledges
that this contention has no merit insofar as it is directed to
the allegations of the consolidated complaint that Cyna-
tron has violated Section 8(a)(1), (3), and (5) of the Act,
since Cynatron is not and has never been a party to the
governing collective-bargaining agreements and would not
be bound by the arbitrator's award, and has specifically
refused to become a party to the arbitration. As to the
allegations of the consolidated complaint pertaining to
Transcontinental, the Collyer defense , is a more trouble-
some issue . For Transcontinental's alleged unlawful
conduct, namely, the cessation of the Theater operation,
the resultant termination of the Theater's employees, and
the adequacy of its notification to the Unions, are all issues
plainly cognizable under the grievance-arbitration proce-
dure embodied in Transcontinental's contracts with the
Unions. But, since the Board, in any event, is required to
hear this matter in order to determine those allegations
pertaining to Cynatron's alleged misconduct and because
Cynatron's alleged misconduct is inextricably bound up
with the unlawful conduct attributed to Transcontinental,7
I shall recommend that the Board decline to defer to the
grievance-arbitration provisions of the governing contracts
but instead, under the special circumstances involved
herein, decide whether Respondent Transcontinental has
violated the Act as alleged .s Cf. Sheet Metal Workers'
International Association, Local 17 (George Koch Sons), 199
NLRB 166(1972).
[Recommended Orders omitted from publication.]
discharge of the employees involved herein and are jointly responsible for
refusing to bargain with the Unions . Also, I note that it was because of the
fact that Cynatron's conduct was inextricably entwined with Transcontinen-
tal's that the parties found themselves unable to proceed with a scheduled
arbitration hearing absent the presence of Cynatron.
a 1 have considered the Board's Decisions in Joseph T. Ryerson & Sons,
199 NLRB 461 (1972) and J. Weingarten, Inc., 202 NLRB 446 (1973), and
find they are distinguishable for the reason that in those cases the deferable
and nondeferable matters were not, as in the instant case , inextricably
entwined.
9 In the event no exceptions are filed as provided by Sec. 102.46 of the
Rules and Regulations of the National Labor Relations Board , the findings,
conclusions , and recommended Order herein shall, as provided in Sec.
102.48 of the Rules and Regulations , be adopted by the Board and become
its findings, conclusions, and Order, and all objections thereto shall be
deemed waived for all purposes.