West Virginia Baking Co., Inc.

National Labor Relations Board - Board Decisions

Jul 31, 1990

299 N.L.R.B. 306 (N.L.R.B. 1990)

306 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
West Virginia Baking" Company, Inc. and Chauf-
feurs, Teamsters, Warehousemen and Helpers,
Local Union No. 175, affiliated with the Inter-
national Brotherhood of Teamsters, Chauffeurs,
Warehousemen and Helpers of America, AFL-
CIO. Case 9-CA-25261 •
July 31, 1990
DECISION AND ORDER
BY CHAIRMAN STEPHENS AND MEMBERS
CRACRAFT AND OVIATT
On March 13, 1989, Administrative Law Judge
Wallace H. Nations issued the attached decision.
The Charging Party filed exceptions and a support-
ing brief, and the Respondent filed an answering
brief. The Charging Party also filed a request for
oral argument.'
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 and briefs and has
decided to affirm the judge's rulings, findings, 2 and
conclusions 3 and to adopt the recommended
Order.
ORDER
The recommended Order of the administrative
law judge is adopted and the complaint is dis-
missed.
The Charging Party has requested oral argument. The request is
denied as the record, exceptions, and briefs adequately present the issues
and the positions of the parties.
We adopt the judge's conclusion for the reasons set forth in his deci-
sion, that the Respondent's statements to employees that they would be
terminated if they did not buy a distributorship did not violate Sec.
8(a)(1). The judge found that there was no nexus shown between the
statements and any union or protected activity.
We find it unnecessary to pass on the merits of the 8(a)(1) violation,
which our dissenting colleague would find. In our view, this theory was
neither alleged in the complaint nor pursued by the General Counsel at
any time. That theory is argued by the Charging Party in its exceptions,
but a charging party is not free to expand the scope of the complaint
without the consent of the General Counsel. See Winn-Dixie Stores, 224
NLRB 1418, 1420 (1976), affd. in pertinent part 567 Fid 1343, 1350 (5th
Cir. 1978). In particular, we note that the complaint allegation is framed
as a "threat of discharge" for not becoming "non union independent con-
tractors," and we do not read the General Counsel's brief to the adminis-
trative law judge as clearly presenting, in support of the independent
threat allegation, the theory that Member Cracraft would rely on for
finding such a violation.
3 We agree with the judge's conclusion that the Respondent did not
refuse to bargain in good faith over the decision to convert its driver-
salesmen to independent distributors and the effects of that decision and,
in fact, did bargain in good faith over the decision and its effects until
impasse and lawful implementation of the distributorship program. Ac-
cordingly, we find it unnecessary to pass on whether the Respondent's
decision to convert its driver-salesmen to independent distributors is a
mandatory or permissive subject of bargaining.
MEMBER CRACRAFT, .dissenting in part.
I join my colleagues in all aspects of this deci-
sion except in their conclusion that the Respond-
ent's statements to its driver-salesmen employees
that they Would be terminated if they did not par-
ticipate in the independent distributorship program
did not violate the Act. Regardless of the obliga-
tion to bargain over the decision itself, the Re-
spondent had a statutory duty to bargain over the
effects of its decision to convert to an independent
distributorship mode of delivering its product.1
The Respondent's duty to bargain over the ef-
fects of its decision to convert "provides the Union
with an opportunity to bargain in the employees'
interest for such benefits as severance pay, pay-
ments into pension fund, preferential hiring .. . at
other [employer operations], and reference letters
with respect to other jobs." 2 We have found that
the parties in the instant case bargained in good
faith over the effects of the Respondent's decision
to convert, and reached agreement on such matters
as bumping rights and priority hiring rights.
Prior to this bargaining, William Rouse, the Re-
spondent's Bluefield branch sales manager, told one
employee that on the expiration of the contract the
drivers would be required to buy their routes or
"hit the streets." Referring to the distributorship
program, Rouse told another employee that "[i]t'll
either be Flowers' [the Respondent's] way or the
highway." These statements, which conveyed the
message that those driver-salesmen who chose not
to participate in the independent distributorship
program would be terminated, were not condi-
tioned on the outcome of effects bargaining with
the Union, and in fact were made to employees
prior to the time the Union was informed of the
Respondent's decision to convert to an independent
distributorship program. Although the Respondent
subsequently fulfilled its obligation to bargain over
the effects of the decision to convert, Rouse's state-
ments announced a fait accompli anticipating a
breach of the duty to bargain over the effects of its
decision. Such a statement cannot be afforded the
protections of Section 8(c) simply because the Re-
spondent later engaged in good-faith effects bar-
gaining. 3 Accordingly, I conclude that the state-
See First National Maintenance Corp. v. NLRB, 452 U.S. 666, 681-682
(1981).
See Nathan Yorke v. NLRB, 709 F.2d 1138, 1143 (7th Cir. 1983),
enfg. 259 NLRB 819 (1981) (trustee in bankruptcy's failure to give notice
to the union and an opportunity to bargain over the effects of the deci-
sion to .terminate the employer's operations violated Sec. 8(a)(5) and (1)
of the Act).
3 See generally Safeway Stores, 266 NLRB 1124 (1983) (threat to sus-
pend employee for contacting the union before discussing problem with
management held unlawful, notwithstanding fact that employee was not
suspended and was later told she had every right to contact the union;
Continued
299 NLRB No. 37
WEST VIRGINIA BAKING CO 307
ments threatening termination violated Section
8(a)(1) of the Act
respondent failed to meet the standards for effective repudiation of un-
lawful conduct set forth in Passavant Meinonal Area Hospital, 237 NLRB
138 (1978))
Contrary to my colleagues, in my view no procedural obstacle exists
with respect to my decision to find merit in the 8(a)(1) allegation of the
complaint The complaint alleges that the Respondent failed to fulfill its
8(aX5) obligation to bargain about the decision to convert to an inde-
pendent distributorship program and the effects of this decision In the
General Counsel's bnef to the judge, the General Counsel treats the
8(a)(1) and 8(aX3) complaint allegations as part of his theory that the Re-
spondent acted in derogation of its obligation to bargain about the deci-
sion and its effects My finding that the Respondent's statements violated
Sec 8(aX1) focuses on the duty to bargain over the effects of the decision
to convert Although we have found that the Respondent did in fact
meet its obligation to bargain regarding the effects of its decision to con-
vert, the ments of the 8(a)(1) complaint allegation must be addressed
The record establishes, and the judge found, that the Respondent made
statements to its employees threatening termination if they chose not to
participate in the independent distributorship program In these circum-
stances, the theory that the Respondent unlawfully threatened termina-
tion in derogation of its obligation to bargain over effects is reasonably
encompassed in the complaint
Vyrone Alex Cravanas, Esq , for the General Counsel
John K Anderson and David H Grigereit, Esqs , of Atlan-
ta, Georgia, for the Respondent
Patrick J Szymanski, Esq , of Washington, D C, for the
Charging Party
DECISION
STATEMENT OF THE CASE
WALLACE H NATIONS, Administrative Law Judge
Based on charges filed March 25, 1988, 1 and amended
April 15, by Chauffeurs, Teamsters, Warehousemen and
Helpers Local Union No 175, affiliated with Internation-
al Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America, AFL-CIO (Union), the Region-
al Director issued a complaint and notice of hearing on
October 24, alleging that West Virginia Baking Compa-
ny, Inc (Respondent or Company), has been engaging in
unfair labor practices in violation of Section 8(a)(1), (3),
and (5) of the National Labor Relations Act (Act) Hear-
ing was held in this matter on January 18-20, 1989, in
Bluefield, West Virginia Briefs were received from all
parties on or about February 22, 1989
Based on the entire record, and on my observation of
the demeanor of the witnesses and in consideration of the
briefs submitted, I make the following
FINDINGS OF FACT
I JURISDICTION
Respondent, West Virginia Baking Company, Inc, is a
corporation engaged in the production and distribution
of baked goods at a plant located at Bluefield, West Vir-
ginia Respondent has admitted the jurisdictional allega-
tions of the complaint and I find that it is now, and has
been at all times material to this proceeding, an employer
All dates are in 1988 unless otherwise noted
engaged in commerce within the meaning of Section
2(2), (6), and (7) of the Act
II LABOR ORGANIZATION INVOLVED
It is admitted and I find that the Union is now, and
has been at all times material to this proceeding a labor
organization within the meaning of Section 2(5) of the
Act
III ALLEGED UNFAIR LABOR PRACTICES
A Introduction and Issues Presented
The complaint in this proceeding alleges that Respond-
ent West Virginia Baking Company, Inc violated Sec-
tion 8(a)(1) of the Act by threatening that it would dis-
charge its driver-salesmen if they did not agree to
become "non union independent contractors" upon expi-
ration of the then current collective-bargaining agree-
ment, violated Section 8(a)(1) and (3) of the Act by dis-
charging its driver-salesmen because of their union and
concerted activities, and violated Section 8(a)(1) and (5)
of the Act by failing and refusing to negotiate in good
faith over its decision to convert its driver-salesmen to
so-called independent distributors
The primary issues presented for determination are as
follows
1 Was the Respondent's decision to convert its driver-
salesmen employees to independent distributors a manda-
tory subject of bargaining?
2 Did the independent distributors remain statutory
employees after the conversion and did Respondent un-
lawfully withdraw recognition from the Union as their
collective-bargaining representative?
3 If the decision to convert is a mandatory subject of
bargaining, did the Respondent satisfy its burden of bar-
gaining in good faith with the Union over that decision?
4 Did Respondent threaten its driver-salesmen em-
ployees with discharge and then subsequently discharge
them because of their union or protected concerted ac-
tivities?
B Facts and Discussion Relating to the Issue of
Whether the Decision to Convert was a Mandatory
Subject of Bargaining
1 Facts describing Independent Distributorship
Program and the decision to implement it
a Respondent's reasons for creating the program
Flowers Industries, of Thomasville, Georgia, is the
parent company of Respondent It has a number of sub-
sidiaries, primarily in the Southeast, but has one as far
west as California Each subsidiary is operated as a sepa-
rate corporation and has a separate board of directors
and officers Respondent operates a wholesale bakery
with its headquarters in Bluefield, West Virginia Until
the last 2 or 3 years, its product had been delivered to its
customers by driver-salesmen who were employees of
Respondent and represented by the Union in an appro-
priate unit Such recognition had been embodied in suc-
cessive collective-bargaining agreements, the most recent
308 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
of which was effective by its terms for the period March
31, 1985, until March 26, 1988.2
At the heart of this dispute is the decision by the Re-
spondent to cease utilizing its driver-salesmen method of
distribution and instead implement an "independent dis-
tributorship" mode of delivery, The distributorship pro-
gram utilized by Respondent originated with the parent
company and is apparently used by some of its other sub-
sidiaries. The decision to implement the program rested
with the Respondent. Prior to the implementation of the
distributorship program in Respondent's Bluefield oper-
ation, it had been implemented at all other bakery loca-
tions operated by Respondent. This would amount to 12
or 13 other warehouse locations. These other implemen-
tations began in 1986 and had been completed by Janu-
ary 1987. At that time, Respondent considered imple-
menting a similar program in the territory involved
herein. It did not do so because the other conversions
were taking longer than anticipated and because Re-
spondent had received legal advice that such a move
might violate the subcontracting clause in the collective-
bargaining agreement.
Respondent has manufacturing facilities, referred to as
bakeries and sales distribution centers. These distribution
centers are where small trucks and salesmen are located.
They will range in location from 1 mile from the bakery
to as far as 100 miles. Product manufactured at the
bakery is loaded on large tractor trailers and taken to the
small distribution centers. There the product is offloaded
into small distribution trucks and delivered to the cus-
tomer by driver-salesmen. These salesmen have tradition-
ally been employees of the Company, using trucks and
other equipment owned and maintained by the Company.
Respondent owns the distribution rights to its product
brands in the areas served by the salesmen.
The distribution method used by Respondent is called
full rack service. An alternative system is the tractor-
trailer drop. Under this system, customers themselves
place their own orders with the bakery, which fills the
orders, loads them on tractor-trailers and delivers them
to the customers at night, dropping the orders in front of
the store. The customer is responsible for its own staless
and puts its own bread on its shelves. With this system
the bakery experiences difficulty in having the customer
order sufficient product. The customers also put up
ragged displays. Additionally, the bakery might have 15
or 20 individual stores loaded on a single tractor-trailer.
2 The following employees of Respondent constitute a unit appropriate
for the purposes of collective bargaining within the meaning of Sec. 9(b)
of the Act:
All hourly paid production and maintenance employees and trans-
port drivers and all salaried or commissioned driver salesmen em-
ployed by the [Respondent] at its Bluefield, West Virginia plant and
at its relay stations located at Bluefield and Beckley, West Virginia
and Keene Mountain and Radford, Virginia but excluding all stale
shop employees, all gatemen, firemen, watchmen, nurses and all
office clerical employees, guards, professional employees and super-
visors as defined in the Act and all other employees, as certified by
the National Labor Relations Board in Case 9-RC-8416.
3 Respondent's bakery products are coded to ensure freshness. Such
codes allow the driver to determine the age of the product and in effect
tell the driver when to pull the product from the shelves. Most codes
allow 2 or 3 days of shelf time. Product pulled from shelves as being
beyond code is returned to the Company as "stales."
If the truck would break down, the bakery would have
to go out in the middle of the night and bring the truck
back or bring a new truck. This meant that the product
did not get into the involved supermarkets until late that
day.
Respondent's president, Richard Nolan, testified that
one of the most successful bakery operations with which
he is familiar is the one at the Holsum Bakery in Phoe-
nix, Arizona. It utilizes an independent distributorship
program which Nolan read about in trade journals. Re-
spondent's parent corporation sent representatives to
Phoenix to observe the program in action. In turn, the
parent invited Nolan to go to Port Arthur, Texas, to see
one of the parent's subsidiary operations that was in-
volved in converting to independent distributorships.
Nolan visited this operation and was impressed with it,
including the reaction of the salesmen to the program.
Upon Nolan's return, he sent the Company's vice presi-
dent of sales to Port Arthur to observe the operation.
Thereafter, the two met and discussed the pros and cons
of the operation. These actions were taken in 1985.
Nolan had also had experience with competitors utilizing
such a program. Pepperidge Farm has a distributorship
program and several of Nolan's salesmen had taken these
distributorships and seemed pleased with the arrange-
ment.
Nolan testified that Respondent converted to such a
program for several reasons. Its truck costs were exorbi-
tant; it had trouble motivating its salesmen; and it wanted
to come up with a way to recover some of its capital in-
vestment. He felt the distributorship program answered
these needs.
Respondent's truck costs ran in excess. of $40,000 a
week, a figure which includes parts, tires, fuel, and main-
tenance. How much of this figure is attributable to the
truck fleet used by driver-salesmen is not determinable
from the record. However, the record does show that
the Company once owned about 200 of the step vans
used by the salesmen. The distributorship program took
the Company out of the trucking business, insofar as it
involved store deliveries. It eliminated the Company's
parts inventory, fuel storage, and garage facilities. The
Company's delivery trucks were sold to the distributors.
Respondent believes the program provides greater sell-
ing motivation because a distributor can make more
money than an employee because his discount structure
is greater. He could also build an equity in his territory
which could be sold or passed on to heirs.
Lastly, the Company could sell the territory in which
it operated. The average price of a territory or route in
the involved area would be $30,000-35,000. This price
would be financed by Respondent at 12 percent. It
would also sell its trucks, recovering a great deal of in-
vested capital. The Respondent's controller testified that
the Company had sold trucks to distributors in the area
represented by the Union for a total of $134,043 and
routes in this territory for a total of $995,180. In its
entire operation, the Company collected a total of
$970,781 for trucks sold to distributors and $4,618,882 for
routes sold to distributors.
WEST VIRGINIA BAKING CO 309
The first distributorship program instituted by Re-
spondent was in Charleston and Logan, West Virginia, in
1986 ) By January 1987, all of the Respondents delivery
routes had been converted to distributorships except
those whose driver-salesmen were represented by the
Union These routes are located in Bluefield, West Vir-
ginia, and Radford, Keene Mountain, and Marion, Vir-
ginia Since the Company started the conversion to dis-
tnbutorships in 1986, it has made capital improvements
to the bakery at Bluefield The cost of these improve-
ments has been between $4 and $6 million In the in-
volved operation, the Company has already sold 14
routes in Bluefield, nine in Keene Mountain, 5 in Rad-
ford and 4 in Marion Throughout the rest of the Com-
pany's operation, it has sold approximately 127 routes
During contract negotiations for the latest collective-
bargaining agreement, which will be discussed in detail
later, the Union proposed an owner-operator method of
distribution as an alternative to the independent distribu-
torship proposal of Respondent Nolan testified that the
Union's owner-operator proposal was discussed on sever-
al occasions by management It addressed one of the
Company's needs, reducing truck costs, but in Respond-
ent's view would not aid in motivation nor would it pro-
vide a way to recover invested capital (by this, Respond-
ent generally means the purchase price it is able to
secure for one of its territories or routes) Respondent
did not feel that the Union's proposal was as good a mo-
tivator as the distributorship plan because it did not pro-
vide for equity to be built in the territory Respondent's
program was also devised to enable a distributor to make
more money than a driver-salesman In its presentation
to the Union, the Company stressed only the needs to in-
crease motivation and sales and cut truck expense as rea-
sons for the program, choosing not to stress capital re-
coupment as that feature of the program was of interest
only to it
b Evidence describing the operation of the program
Several witnesses testified with respect to the details
and operation of the independent distributorship program
and this testimony is set out below under appropriate
subheadings Additionally, the relationship between Re-
spondent and the independent distributor is governed by
a contract termed the Distributors' Agreement As this
appears to be a valid, judicially enforceable contract,
great weight is given to its description of the rights and
obligations of the parties under it
Clyde Joe Lester, who for 4 years was a driver-sales-
man for Respondent at its Keene Mountain facility, testi-
fied that he purchased a distributorship in June Lester's
testimony gives in some detail how the distributorship
program works as well as similarities with and differ-
ences from the dnver-salesman operation previously uti-
lized by Respondent At the time of his testimony, Lester
was unhappy with the Company because of an ongoing
dispute over problems with the Company increasing his
product orders, resulting in his - route running high
"stales"4 that cost him money
* As an employee, Lester and other dnver-salesmen returned their
stales for full credit and no charge against their Income was made by Re-
Respondent's labor counsel and chief negotiator, John
Anderson, also gave a description of some of the aspects
of the distribution program from the Company's stand-
point in the negotiation session of March 24 As that tes-
timony has little relevance on the bargaining issue, it is
included here to give a more complete picture of the
program Respondent's president, Nolan, also described
the program in some detail
(1) Territories and financing
Respondent took a defined geographical area and
mapped out defined sales temtones or routes within that
area which were sold to distributors who thereby ac-
quired the exclusive distribution rights to Respondent's
brands within that area The territories or routes sold do
not necessarily correspond to previous routes serviced
by driver-salesmen The routes to be sold were mapped
out with the purpose of making them serviceable and
reasonably profitable
Lester purchased a route which was comprised of his
old route and part of another one The financing plan
called for him to make a $2000 downpayment, a $1000
security deposit, and to purchase a truck, presumably of
his choice, from those available from Respondent Al-
though the security deposit was initially to be paid by
the distnbutor, the Respondent allowed Lester to finance
it by paying Respondent $20 per week for 1 year The
remainder of the route purchase price was financed by
Respondent at what Lester believed was a 12 percent in-
terest rate The downpayment was financed with the
truck loan at Wachovia Bank of Salisbury, North Caroli-
na, pursuant to an arrangement made with the bank by
Respondent for all prospective distributors Licenses and
tags for the truck purchased by Lester were furnished by
Respondent For a few weeks, maintenance on the truck
was performed by Respondent without charge, including
providing three new tires and lights Since that time, ve-
hicle maintenance has been Lester's responsibility
The purchase price of a route or territory is 10 times
weekly brand sales based on the average weekly sales for
a 12- to 13-week period Those distributors who had pre-
vious experience with the Company as route sales em-
ployees received a 20-percent discount on this purchage
price Company financing of the territory purchase price
and the security deposit as well as the Wachovia Bank
financing for the downpayment and truck loan were uti-
lized by virtually all persons purchasing distnbutorships,
though Respondent contends that the distributors were
free to secure financing from any source they chose
Similarly, company witnesses testified that a distributor
could purchase a route truck from any source, but that if
purchased from Respondent, the purchase price would
include putting the truck in reasonable condition
(2) Supervision
Lester testified that when he was a driver-salesman, he
was accompanied on his route by a company supervisor
spondent Under the independent distnbutorship program, the distributor
may return stales to the Company, however, he must bear a portion of
the cost of the product so returned to the Company
310 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
about once every month or two The supervisor would
check and see if the driver was picking up product on
code, making proper distnbution, making a proper rack
set, etc Since becoming a distributor, Lester is still ac-
companied on his route by Respondent's supervisors, on
a more frequent basis than before and for the same rea-
sons Lester testified that though he is not sure, he may
have the right to refuse to let a supervisor ride his route
with him On the other hand, Lester considered the help
of the supervisors to be useful I believe the best evi-
dence establishes that the distributors do not have to
accept company supervision unless they choose to do so
Anderson testified that the distributor could tell the
Company to stay off of his truck as it was his truck He
also stated that the distributor could not tell the Compa-
ny to stay out of his territory The Company still-had a
relationship with the customers and had to do certain
marketing to create a market for its product It was re-
quired to do that under the distributors agreement Also,
the Company reserved to itself the right to at least be
able to examine the market and make sure that the dis-
tributor was not leaving product out of code and stale
Anderson also testified that if the distributor was
losing business in his territory, the Company had the
right to terminate his contract Nolan testified that there
was no set standard where the Company would take this
action, but that it just would have to be determined by
the individual case
(3) Uniforms, personal appearance, and vehicle
appearance
The Distributors' Agreement requires the distributor
to maintain a clean and neat personal appearance consist-
ent with the professional image customers and the public
associate with the Company It also charges the distribu-
tor with responsibility for truck sanitation and consistent
with industry practice, requires the truck be kept clean
at all times and maintained in such condition as to pro-
vide safe, prompt, and regular service to all customers
Lester testified that as a distributor, he is required to
wear a uniform, however, on cross-examination he could
not remember being told that this was a fact and the Dis-
tributors' Agreement does not require the wearing of a
uniform He continues to wear his old driver-salesman
uniform although other new distributors who did not
work for Respondent before have purchased uniforms
from Respondent Respondent Territory Manager Steven
Harris testified credibly that distributors are not required
to wear a uniform and gave examples
Lester testified that the Company can require a distrib-
utor to clean his truck, which carries the Respondent's
name, and gave an example of the Company requiring an
extremely dirty truck to be washed He also testified that
Sales Manager William Rouse told him to shave a beard
he was growing, and he did so, though not as fast as
Rouse told him to
Nolan testified that distributors are not required to
wear a uniform and are only required to be "clean" He
further testified that beards were not allowed for sales-
men, but are permitted for distributors and many sport
them Although I have no reason to doubt Nolan's testi-
mony on this point, the word clearly has not gotten to
Rouse as his testimony reflects that he discourages the
wearing of beards by distributors
Anderson testified that the Company had no dress
code for its distributors, but that they would be expected
to abide by "industry standards" Anderson testified that
in his opinion, the matter of what is proper attire is a
matter between the Company and the individual distribu-
tor in the event a dispute arises Nolan testified on this
point that if the Company felt that a distributor did not
maintain a neat and clean appearance, it would first just
mention it to the man If the distributor ignored the re-
quest, the Company would consider this a curable breach
of the Distnbutors' Agreement and the person would
have 10 days to cure his breach At that point, if nothing
had been done, the Company would give the man a
warning and if he had enough warnings, it would take
back his territory This decision would be subject to ju-
dicial review
(4) Accounting
Accounting for Lester's operation is done by a CPA
firm from Charleston He pays part of their fee and Re-
spondent pays a part The firm used by Lester was rec-
ommended by Respondent and is used by many distribu-
tors Lester also testified that some distributors use other
accounting firms
Under the distributorship agreement between the
Company and distributor, the company pays $500 of the
distributor's accounting costs for the first 3 years of the
agreement Bookkeeping is the distributor's responsibil-
ity
(5) Product purchasing and returns
At the time of the conversion to the distributorship
program, driver-salesmen were compensated by base pay
of $200 per week and an 8-percent commission on brand
name products and a 4-percent commission on private
label products The distributor's net income is his gross
income less his operating and capital expenses The dis-
tributor purchases products for his territory from the
Company and title to the product passes to the distribu-
tor at the time he receives it Title did not pass to the
driver-salesmen The Company discounts the price it
charges the distributor for the product by a variety of
percentages The distributor's gross income is based on
the difference between the price he charges his custom-
ers and the discounted price charged by the company
Although the company has suggested prices to be
charged to the distributor's customers, the distributor
may change these prices up or down, except in the case
of large chain accounts
The Distributors' Agreement states that products will
be sold to the distributor at terms and prices established
by Respondent, and that Respondent will furnish sug-
gested retail prices Bid prices will be jointly established
I cannot find that the agreement speaks to the matter of
product ordering
The distributor must pay his weekly expenses such as
fuel, casualty insurance, truck repair and tires, warehouse
rent, and other operating expenses
WEST VIRGINIA BAKING CO 311
Nolan testified that the distributor orders his own
product Driver-salesmen were responsible for ordering
product, but if he did not order enough as a salesman
then it was the responsibility of his district manager to
see that he got the product A distributor does not have
that situation, he is responsible for ordering his own The
Company contends that it corrects clerical errors such as
ordering product on a day of the week on which it is not
available or ordering a quantity of product which is in-
consistent with the amount available on trays Respond-
ent contends that it does not have the authority to m-
crease a distributor's order The Company may recom-
mend an increase to a distributor If the distributor is not
immediately available, the change will be noted on the
order Respondent contends that in this situation, it con-
tacts the distributor and discusses the order The distrib-
utor may then refuse the additional order Such recom-
mended changes occur where sale items for large chains
are involved or the Company has information of which
the distributor is unaware With respect to sale items, the
Company suspends the stale allowance on such items and
recommends additional orders so a large chain account
will not run out of sale product Distributors may still
refuse extra product
Lester testified that as a distributor, he must order
from Respondent what the accounts on his route were
accustomed to receiving and additionally, more of cer-
tain products on occasion to satisfy store specials Re-
spondent has required him to take more of certain items
and take different items than those that Lester ordered
on his own He testified that if he refused to accept this
nonordered product, he would "stale" it the next week
"Stales" are returned to Respondent for credit or partial
credit on the distributor's account For a period of time,
the Company took back stales from its new distributors
and gave full credit However, pursuant to a preexisting
agreement, that has changed to a situation where only
partial credit is given Lester testified that with respect
to the forced orders he takes, he sets only the partial
credit if the product has to be "staled" Based on a dis-
pute between Lester and the Respondent regarding the
stale allowance on order increased by Respondent, I
credit Lester's testimony that a distributor can be forced
to take extra product and face at least a partial liability if
it is staled 5 Though the Distributors' Agreement does
not speak directly to this point, it does require the dis-
tnbutor to adhere to all promotions and feature pricing
with respect to the major and chain accounts in his terri-
tory Thus, it appears to me that the distributor can be
forced to take extra product, but only in connection with
a promotion involving a major or chain account
Harris testified that distributor's orders are changed
primarily to correct errors He noted one instance of a
promotion at a chain store wherein the quantity of prod-
uct to meet the demands of the promotion was in ques-
tion In this case, he had the distributor take a larger
order than he wanted, with the proviso that the Compa-
5 This dispute does tend to support Respondent's contention that It
cannot unilaterally impose its views on the distnbutors and control their
conduct Lester has refused to pay the charge for stales made against him
and if not settled by mutual agreement, presumably the matter will be
judicially settled
ny would accept responsibility for the stales resulting
from the order
Respondent has what it calls authorized accounts
which are generally the bigger accounts With respect to
these accounts, the company extends credit and does bill-
ing and collecting Lester believes that if an authonzed
account reneges on payment it will be charged back to
him, and is unsure whether he can cancel an authonzed
account The Distributors' Agreement would indicate
that the Respondent is responsible for the accounts it
creates or approves, not the distributor Lester cannot
extend credit for Respondent although he can extend
credit to customers personally, if he chooses
(6) Social Security
Lester testified that he pays half of his social security
obligation and Respondent pays half He is allowed to in-
corporate so long as he maintains majority ownership in
himself
(7) Employee assistance
When Lester was a driver-salesman, if he were sick or
on vacation, a company supervisor would run his route
As a distributor, it is his responsibility to get someone to
run the route if he is unable to do so He believes the
supervisors might do so, but are not obligated to He tes-
tified that District Manager Troy Byers delivered some
product at one time for distributors
Anderson testified it was the distributor's responsibility
to get someone to cover his route if he is off He can
hire one of the territory managers to service the route
that day and would be required to pay the Company for
the manager's time Some distributors had obtained re-
tired distributors or salesmen to cover the route for a
day Some distributors have hired helpers Nolan testified
that a salesman could not use helpers and were subject to
discipline if he had an unauthorized person on his truck,
in comparison with the distributorship situation
(8) Physical operations
Lester works out of the same location as a distributor
that he did as an employee and has the same supervisor
As an employee, he reported to work at the warehouse
at 3 a m to pick up product ordered approximately a
week before Lester testified that the Company set his
work schedule as an employee and still does as a distrib-
utor and to change his schedule, he must get company
approval As an employee, Lester ran his route in an
order that was dictated by common sense, taking into ac-
count geography and his load factor He does the same
as a distributor It would also appear from his cross-ex-
amination and the testimony of Harris that Lester has re-
fused scheduling suggestions and that he is free to set up
his own schedule and route and change it without com-
pany approval
At an account, Lester would check the bread rack for
stales and new product needed as a personal responsibil-
ity and take appropriate action As an employee he was
required to keep a route book, and wnte receipts or tick-
ets for product taken from a store or brought in His pa-
perwork as a distributor is the same in this regard, al-
312 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
though Lester is not sure that be is required to maintain
a route book. The route book spelled out many of the
procedures the salesman had to follow or be subject to
disciplinary procedures.
Nolan testified that a distributor checks in once a
week. He turns in his authorized charges daily. He does
not turn in his cash into the Company as he did in the
past, it is now his responsibility. Settlement takes place
once a week. As a salesman, it was three times a week.
The Company sends the distributor a statement for what
he bought last week and he receives that settlement on
Tuesday and then sends the Company a check that it is
to receive by the following Friday. Nolan also testified
that a distributor can sell other company's products so
long as they are not competitive with Respondent's
products.
Harris testified that distributors are not required to use
route books, though most do, and cited an example of
one distributor who had chosen not to use such a book.
As an employee, when a customer had a problem, the
customer usually called Respondent's Bluefield facility.
Lester testified that the same is true in his operation as a
distributor; although, his testimony on cross-examination
indicates to me that he is unsure on this point. The Com-
pany's position is that the distributor handles customer
problems, though this position is also at odds with its
right to call on the distributors and its customers to
ensure the distributor is performing satisfactorily.
2. Was the Respondent's decision to convert to
independent distributors a mandatory subject
of bargaining?
During negotiations, Respondent stated to the Union
that its decision to convert to an independent distributor-
ship method of delivery was not a mandatory subject of
bargaining; citing, inter alia, the decision of the Regional
Director for Region 9 in Case 9-CA-23141. The Region-
al Director determined after investigation not to issue a
complaint based on a charge that Respondent had violat-
ed the Act by refusing to bargain over its decision to im-
plement its distributorship program at another of its fa-
cilities where the driver-salesmen were represented by
the United Steelworkers. In his letter decision, the Re-
gional Director stated:
Pursuant to the distributorship system, the distribu-
tor purchases the exclusive right to distribute the
Employer's product in a specific area and provides
the truck, fuel, licenses, insurance and labor neces-
sary for delivery. The distributor is paid a commis-
sion on baked goods sold. The Employer's decision
to discontinue its own distribution system and rely
on independent distributors involved a fundamental
change in the nature and direction of the Employ-
er's operations. In this connection, the evidence
showed that the Employer was motivated by a
desire to increase its sales and share of the baked
goods market rather than factors, such as labor
costs, over which the Union has control. The deci-
sion to convert to a distributorship system, there-
fore, involved a nonmandatory subject of bargain-
ing over which the Employer was not required to
bargain. Otis Elevator Co., 269 NLRB 891 (1984).
Based on its analysis of the Supreme Court's opinion in
First National Maintenance Corp. v. NLRB, 452 U.S. 666
(1981), the Board established the principles for determin-
ing an employer's collective-bargaining obligation over
decisions such as the one at issue in this case in Otis,
supra. Although all four Board members agreed that the
employer's decision in Otis was nonmandatory, they ap-
plied different legal analyses. The Otis plurality opinion
applied a two-factor test: whether the decision turned on
a change in the nature or direction of the business or
whether it turned on labor costs. Member Dennis applied
a two-step test: (1) whether the decision was amenable to
resolution through the collective-bargaining process, and
if so, (2) whether the benefits for labor-management rela-
tions and the collective-bargaining process outweighed
the burdens placed on management.
The evidence in this case establishes that the Respond-
ent converted its employees to distributors for three rea-
sons unrelated to labor costs. The Board's decision in
Collateral Control Corp., 288 NLRB 41 (1988), puts into
question whether the plurality's labor cost test is still of
importance and seems to stress the approach of Member
Dennis. To the extent that this question is still viable, the
evidence in this case establishes that Respondent's deci-
sion was not motivated by labor cost savings, for its pro-
jections at the time of implementation were that the inde-
pendent distributorship conversion would increase its
labor costs. 6 Additionally, a goal of the program was for
the distributors to make more money than route sales
employees.
It is Respondent's contention that its decision to con-
vert was for reasons unrelated to labor costs and turned
on a change in the nature and direction of its business.
For the reasons set forth below, I agree with this conten-
tion. The first reason for the Respondent's decision was
to increase sales. The independent distributorship pro-
duced increased sales incentives in two ways. The dis-
tributor's discount rate is higher than the route sales
driver's commission rate. In addition, the distributorship
is valued based on 10 times weekly brand sales. There-
fore, a $100-per-week increase in sales would increase
the distributor's equity in his distributorship by $1000.
This equity incentive was also intended to increase sales.
Though not argued by the Company, it is also obvious
that a slackening in sales would have an adverse impact
on 'equity and present more of a threat to the distribu-
tor's independent business than it would have had on him
as an employee, as he no longer enjoys any base pay and
benefits.
The second reason for the Respondent's conversion to
distributorships was to get out of the truck business. As
the delivery trucks were sold, the Company began to
8 A self-explanatory analysis of the projected labor cost impact of the
conversion at the time of implementation is appended to this decision as
Appendix A. This analysis is supported by the record evidence and sup-
ports the conclusion that labor cost savings were not a motivating factor
in Respondent's decision to implement the conversion to independent dis-
tributorships.
WEST VIRGINIA BAKING CO 313
enjoy significant savings by eliminating parts inventories,
garage facilities, maintenance equipment, gasoline storage
tanks, and other costs associated with vehicle mainte-
nance and repair
Finally, the distributorship decision was motivated by
a desire to create or recoup capital resources and reallo-
cate them from distribution to production The distribu-
torship conversion produced approximately $5 5 million
in capital through the sale of trucks and territories Since
beginning its withdrawal from the distribution part of its
business, the Company has invested approximately $4 to
$6 million in the production aspect of its business It is
this reason for converting that most convinces me that
the decision was entrepreneurial in character and repre-
sented the Company's desire to improve its competitive
position by modernizing its production facility while
likely improving its sales position as well
It is also this reason that convinces me that the deci-
sion to convert was not really amenable to resolution
through collective bargaining As will be discussed in the
section of this decision dealing with the collective bar-
gaining between the Union and Respondent, the Union
proposed a distribution system based on the driver-sales-
men becoming owner-operators of their equipment, leas-
ing the equipment to the Respondent and working on a
100-percent commission basis This proposal, which was
considered by Respondent, would take Respondent out
of the delivery truck business and would have provided
incentive for increased sales effort ,on the part of the
driver-salesmen It offers nothing, however, to address
Respondent's desire to generate capital from existing re-
sources (the value of brand names and sales territories)
and allocate this capital to improving its production effi-
ciency
I agree with Respondent that it has made a fundamen-
tal change in the nature and direction of its business Al-
though I do not agree that it removed itself totally from
the business of distnbution of its products, it did remove
itself from this function to a very significant degree I be-
lieve that the degree of divestment of its distribution
function is sufficient to bring Respondent's conversion
into the ambit of the Otis plurality's view of the Board's
earlier decision in Adams Dairy, 137 NLRB 815 (1962),
enf denied in relevant part 350 F 2d 108 (8th Cir 1965),
cert denied 382 U S 1011 (1965), and distinguish it from
the Board's recent holding in Collateral Control Corp,
supra In recognizing that a distributorship conversion
may constitute a fundamental change in the nature and
direction of a company's business, the Otis plurality ex-
plained
In contrast, if Adams Dairy [citation omitted]
were before us today, we would hold that decision
to "subcontract" is not subject to Section 8(d), be-
cause the employer's decision there to discontinue
its distribution operation and to contract out that
function turned upon a fundamental change in the
scope and direction of the enterprise The employer
retained no control over the equipment or the em-
ployees in the subcontractors' distribution system
Further, no alter ego or other sham devices were
employed to disguise a unilateral reduction in labor
costs in an operation over which the employer
maintained surreptitious control As the Court of
Appeals said "[T]here is a change in basic operat-
ing procedure in that the dairy liquidated that part
of its business handling distribution of milk product
269 NLRB at 893
In Collateral Control Corp and cases cited with ap-
proval therein, the Board has continued to adhere to the
view that distributorship conversions such as that in
Adams Dairy are nonmandatory subjects of bargaining
because they involve a fundamental change in the nature
and direction of the business
If this case is analyzed under the two-step test of
Member Dennis in Otis, the same conclusion is reached
Member Dennis described the critical inquiry in the first
step of her analysis as follows
Is a factor over which the union has control (e g,
labor costs) a significant consideration m the em-
ployer's decision? A factor over which the Union
has control is a "significant consideration" if the
union is in a position to lend assistance or offer con-
cessions that reasonably could affect—i e, make a
difference in—the employer's decision If the deci-
sion is not based on a factor over which the union
has control, or if such a factor is at best an insignifi-
cant consideration in the employer's decision, the
analysis ends, and bargaining is not required
269 NLRB at 897
I have already found that labor costs were not in-
volved in Respondent's decision to convert Other fac-
tors over which the Union has significant control were
just part of the reason for Respondent's decision to con-
vert to independent distributorships The overriding
reason for this decision in my opinion was the desire to
recoup or create significant capital through the sale of its
existing saleable assets, territories, and the reallocation of
that capital to the production function Over this impor-
tant factor in this Respondent's decision, the Union had
no control nor was it really in a position to lend assist-
ance or offer concessions that could have made a differ-
ence in Respondent's decision
Although under Member Dennis' approach, the second
step would not be addressed given a negative finding on
the first, I feel constrained to do so in light of the
Board's reasoning in Collateral Control Corp, where the
Board has analyzed the facts of that case giving consid-
eration to many of the factors considered important by
Member Dennis in her second-step analysis Member
Dennis described the second step as follows
The second step in the analysis, therefore, in-
volves weighing the fact that the decision is amena-
ble to resolution through the bargaining process
("the benefit") against the constraints that process
places on management ("the burden") As outlined
in First National Maintenance, the burden elements
to be examined include, without limitation, the fol-
lowing
314 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
(a) extent of capital commitment,
(b) extent of changes in operation,
(c) need for speed,
(d) need for flexibility,
(e) need for confidentiality
Of these elements, the first two appear to be the most
important in later Board decisions To some degree the
element of need of confidentiality is also present in the
instant proceeding The evidence reflects that during ne-
gotiations the Company's competitors attempted to take
advantage to the situation, contacting the Company's
route sales drivers in an attempt to hire them away as a
means to enter the involved market Respondent's argu-
ment that speed was an element is somewhat weaker as
the evidence would indicate that its competitors could
have anticipated that it was seriously considenng con-
verting to a distributorship program for the Bluefield
driver-salesmen since it converted all of its other facili-
ties 2 years before The elements of capital commitment
and extent of changes in operations will be discussed
below
Member Dennis in Otis found that the burden imposed
on management by requiring collective bargaining over
distributorships outweighed the benefit to labor-manage-
ment relations and collective bargaining
Adams Dairy illustrates the burden elements of
extent of changes in operations and extent of capital
commitment A dairy decided to change its existing
distribution system by replacing its driver-salesmen
with independent contractors The independent dis-
tributors took title to the products at dockside and
were solely responsible for selling them Trucks
used previously by driver-salesmen were sold to the
independent distribujors
The Adcptisz;Fourt said that the case did not in-
volve "just 'She substitution of set of employees for
another Ikm [T]here is a change in basic operating
procedur Ain that the dairy liquidated that part of
its business handling distribution of milk products
[T]here was a change in the capital structure of
Adams Dairy which resulted in a partial liquidation
and recoup of capital investment" 350 F 2d at 111
Where the burden elements in a particular case
are weighty, as illustrated above, it is likely that the
decision at issue will not be a mandatory subject of
bargaining
269 NLRB at 898-899
The Board and the courts have consistently recog-
nized that where a significant reallocation of capital is in-
volved in such a decision, management's need for pre-
dictability outweighs any possible benefit of collective
bargaining General Motors Corp, 191 NLRB 951 (1971),
petition for review denied UAW v NLRB, 470 F 2d 422
(D C Cir 1972) In the instant case the Respondent
shifted almost $6 million in capital assets from its distri-
bution business to the production aspect of its business
In Collateral Control Corp, there was no capital invest-
ment or shift of significant capital from the function sub-
contracted to another function of the company involved
Both Member Dennis in Otis and the Board in Collat-
eral Control Corp considered the extent of changes in op-
erations In Collateral Control Corp, the Board stated
In Fibreboard, as summarized in the Supreme
Court's 1981 decision in First National Corp v
NLRB, supra, an employer's decision to subcontract
unit work was held to be a mandatory subject of
bargaining for three reasons First, no alteration oc-
curred in the company's "basic operation"
The maintenance work still had to be performed
in the plant No capital investment was contemplat-
ed, the Company merely replaced existing employ-
ees with those of an independent contractor to do
the same work under similar conditions of employ-
ment Therefore, to require the employer to bargain
about the matter would not significantly abridge his
freedom to manage the business [379 U S at 213]
The guard services that were contracted out are
an integral part of the Respondent's business and
were performed under the subcontract as before
[Footnote comparing Century Air Freight, 284
NLRB 730 (1987), with Adams Dairy omitted ]
Moreover, the record indicated that the Respondent
retained some control over the subcontractor's em-
ployees in issuing written instructions to Wackenhut
(subcontractor) about the performance of guard
duties under the subcontract
In finding no alteration in the Company's basic oper-
ation, the Board in Collateral Control Corp relied upon
four factors (1) the employer's management performed
the same functions after it enlisted the aid of a subcon-
tractor as it has when it employed people to perform the
subcontracted work itself, (2) the work contracted out
continued to be an integral part of the employer's busi-
ness and was performed under the subcontract as it had
been performed previously, (3) the employer retained
control over the subcontractor's employees by issumg
written instructions about the performance of guard
duties under the subcontract, and (4) there was no signif-
icant investment or withdrawal of capital
Contrary to Collateral Control Corp, there are changes
in management functions under Respondent's independ-
ent distributorship program Previously all of the factors
governing profit and loss in the distribution of the Com-
pany's products were controlled by management Most,
though not all, of those factors have not been transferred
to the distributors The distributor sets the pnce at which
he will sell his product to most customers, though not
the large chain customers He makes the final decision on
ordering product, though management still has input, and
some control, especially with promotions arranged with
large chain customers The distributor sets his own work
schedule and route, may extend credit (though not with-
draw credit from a customer to which Respondent has
already extended it), sell noncompetitive product and re-
solves customer complaints
The distributor must control stales and bears half the
risk of loss for stales above 10 percent of his gross sales
That Respondent retains any financial responsibility for
WEST VIRGINIA BAKING CO 315
stales and can require a distributor to accept promotional
orders are indicators that its distributors are not quite as
independent as those in Adams Dairy I do not find that
these two elements make the instant case sufficiently less
like Adams Dairy to find that it calls for the Board's
holding in Collateral Control Corp or Century Air
Freight There are more significant differences between
the instant proceeding and Collateral Control Corp than
there are similarities, and conversely more significant si-
milarities between it and Adams Dairy than significant
differences
For example, other changes in management functions
under the independent distributorship plan include the
requirement that the distributor also bear the complete
responsibility for his truck and bear the risk of loss even
if damage occurs on company property All of the above
factors were totally the responsibility of management
previously
In addition, the distributor exercises substantial control
over his operating expenses which previously were con-
trolled by management The distributor is free to hire
employees to assist in his business, is responsible for his
terntory in the event he cannot personally service it, and
is free to negotiate the various other costs of operating
his business such as liability insurance, accounting serv-
ices, etc Previously all of these factors were under the
control of management
Management previously exercised strict control over
how a route sales employee performed his job In areas
such as personal appearance, truck cleanliness, route
order, ordering of product, and day-to-day on the job
performance, management dictated how the job was to
be performed Now, with a few exceptions, management
can only make recommendations to distributors on run-
ning their business The distributor is free to accept or
reject these recommendations Serious disagreements are
subject to judicial resolution, not Respondent's unilateral
determination
To the extent financial statements are required of the
distributor, they are limited to two purposes which fail
to indicate an exercise of company control First, they
are used for company-distributorship settlement on a
weekly basis The more detailed financial data involving
operating expenses is required so the Company can make
FICA calculations as it is required to do under Federal
regulations governing independent contractors
The factor of whether the function being subcontract-
ed or converted (distribution function) is no longer an in-
tegral part of the company's business was discussed in
Collateral Control Corp, with the Board noting this com-
parison contained in Century Air Freight, supra at fn 9
In Adams Dairy, the employer employed drivers
to deliver its product and also sold its product to in-
dependent distnbutors who took title to the product
at the loading dock The employer decided to get
out of the distribution business altogether, unilater-
ally discontinued its delivery operations, and ar-
ranged to sell all its products to independent distrib-
utors Thus, its responsibility for and control over
its product ended at the loading dock The Otis plu-
rality stated that it would find that decision to sub-
contract not subject to mandatory bargaining be-
cause the decision involved a fundamental change in
the scope and direction of the enterprise In that
case, however, the employer retained no control
over the equipment, the employees, or the product,
or over the distribution of its product In contrast,
in the present case, the trucking services are an inte-
gral part of the business Moreover, the record indi-
cates that the Respondent retained some control
over the subcontractor's employees and operations
and had ultimate control over responsibility for the
shipping process
The Court in Adams Dairy described the fundamental
change in the basic operating procedure as follows
After the decision was made by the dairy to sell
its products dockside to the independent distribu-
tors, all of the trucks used previously by driver-
salesmen were sold to independent distributors
Adams Dairy did not finance the sales nor in any
way arrange for such financing The routes driven
by the independent distributors, though covering a
similar territory, did not correspond to the previous
routes of the driver-salesmen The independent dis-
tributors took title to the products at dockside and
Adams, thereafter legally had no concern with what
was done with the products The distributors were
solely responsible for selling the products The
work done by the independent contractors, contrary
to the situation in Fibreboard, was not primarily per-
formed in the Adams plant for the benefit of the
dairy Adams was not directly concerned with
whether or not any given distributor sustained a
profit or loss, as would have been the situation with
the driver-salesmen The only major restrictions
that Adams placed upon the independent distribu-
tors by contract related to sanitation matters and to
the maintenance of high product standards and the
maintenance of good will
Contrary to the situation in Fibreboard, then,
there is more involved m Adams Dairy than just the
substitution of one set of employees for another In
Adams Dairy, there is a change in basic operating
procedure in that the dairy liquidated that part of
its business handling distribution of milk products
Unlike the situation in Fibreboard, there was a
change in the capital structure of Adams Dairy
which resulted in a partial liquidation and recoup of
capital investment To require Adams to bargain
about its decision to close out the distribution end
of its business would significantly abridge its free-
dom to manage its own affairs
I agree with the Respondent that its conversion to dis-
tributors is practically identical to that in Adams Dairy in
all controlling respects First, as in Adams Dairy, title to
the product passes to the distributor at dockside The
company legally has no concern or control over what
the distributor does with the product Should the distrib-
utor choose to do so, he may return a certain percentage
of the product to the Respondent and receive a stale
316 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
credit In addition, however, the distributor may dispose
of that product in other ways Further, as in Adams
Dairy, the trucks previously used by driver-salesmen
were sold to the independent distributors The responsi-
bility and control over every aspect of the truck is the
distributors'
The instant case is stronger than Adams Dairy in that
the Company had sold to the distributors the nght to dis-
tribute its brands within a defined geographic area Al-
though the Company did not finance the sale of the
trucks, it did provide an option through Wachovia Bank
by which the distnbutors could finance the sale The
Company also offered to finance the territories itself
Both of these appear to be arm's-length transactions with
significant interest involved Moreover, the distributors
were free to find different financing if they chose to do
so I do not believe that the financing options made
available, or the Respondent's stale policy or its promo-
tion ordering policy are an insufficient mdicia of control
or continuity in the basic operating procedure to take
this case out of the Adams Dairy precedent As was the
case in Adams Dairy, the Respondent here changed its
basic operating procedure in that the distribution busi-
ness has been liquidated and a fundamental change in the
Company's capital structure has taken place since capital
has been reallocated from the distribution function to the
production process
For all of the reasons set forth above, I find that the
instant case is governed by the Board's decision in Otis
Elevator and its holding in Collateral Control Corp is not
applicable Accordingly, under the guidelines set forth in
Otis Elevator, I find that Respondent's decision to con-
vert its driver-salesmen employees to independent distrib-
utorships was not a mandatory subject of bargaining and
Respondent was not obligated to bargain over the deci-
sion
C Did the Independent Distributors Remain Statutory
Employees After the Conversion and Did Respondent
Unlawfully Withdraw Recognition from the Union as
their Collective-Bargaining Representative'
General Counsel argues that Respondent retained suffi-
cient control over the method of distribution of its prod-
uct and sufficient control over the distributors to negate
their status as independent contractors Thus, Respond-
ent's alleged refusal to bargain over its employees'
method of distribution constitutes an unlawful unilateral
change in terms and conditions of employment
In support of this position, General Counsel asserts
that the record shows that Respondent waived the cash
downpayment for the routes, providing virtually all of
the financing and accounting for the distributors, pays
$500 of the cost of such accounting services during the
first 3 years of the distributorship, purchased the requi-
site licenses and tags, provided free maintenance and re-
pairs on the vehicles purchased by the distributors, re-
quires the distributors to wear uniforms and to maintain
an appearance acceptable to Respondent, regularly in-
structs distributors regarding vehicle maintenance and
upkeep, regularly assigns supervisors to ride with distrib-
utors, checking stock rotation and displays, reimburses
distributors for stale stock, prohibits distributors from
selling stale items, requires distributors to purchase cer-
tain products, and exercises final approval of sales of
routes by distributors Citing Roadway Package System,
288 NLRB 196 (1988), and Mission Foods Corp, 280
NLRB 251 (1986)
I disagree with this position both on factual as well as
legal grounds In the two cases cited, the Board clearly
states that neither the jobber arrangement in Mission
Foods nor the MD driver arrangement in Roadway ex-
hibited entrepreneurial or proprietary characteristics
found in true independent contractor relationships In the
instant case, the independent distributors have purchased
territories wherein they have the exclusive distribution
rights to Respondent's brands, pay upwards of $35,000
for these rights The rights may appreciate if the distribu-
tors' business increases from the date of purchase and
such rights may be sold The Distributors' Agreement
states that the distribution rights are owned by the dis-
tributor and may be assigned, transferred or sold, in
whole or in part, by the distributor, subject to the writ-
ten approval of the assignees', transferees' or purchasers'
qualifications by the Company The Company also re-
tained the right of first refusal under the same terms of-
fered by a potential purchaser I do not believe that these
conditions inhibit the salability of the routes nor detracts
from the proprietary Interest of the distributor
With respect to vehicle maintenance, it is clear that
the distributor is responsible for this aspect of his busi-
ness, and the Company merely put the vehicles sold to
distributors into proper operating condition before trans-
ferring them to the distributors Again, the distributors
purchased these vehicles from the Company and have an
unfettered right to sell them whenever and to whomever
they please Loans which they secured from the Wacho-
via Bank are their loans and not the Company's loans
The payment of the first $500 of accounting costs for
the first 3 years of the agreement appears to me to be
nothing more than a means to get around the reluctance
of a prospective purchaser of a distributorship who may
not know the cost of accounting services This induce-
ment does have a 3-year limitation, and the choice of ac-
countants is up to the distnbutor I find this similar to
the startup stale policy, which was much more generous
than the ongoing stale policy
I cannot find from the record that Respondent can re-
quire distributors to wear uniforms although it may en-
courage this practice Likewise, I cannot find that the
Company regularly instructs distributors on vehicle
maintenance and upkeep I cannot find that the Company
regularly assigns supervisors to ride with distributors,
though it may request that they do so and a distributor
may agree I find that the distributors can refuse to allow
a supervisor to ride with him
The Distributor's Agreement prohibits the sale of stale
stock to the general public, but otherwise authorizes the
sale of such merchandise to purchasers who are not com-
petitors of the Company
Compare the facts of this case as set forth immediately
above and in the preceding section of this decision with
the factual situation in Mission Foods, a company also in
WEST VIRGINIA BAKING CO 317
the business of producing and selling food items As
found by the Board at 252
The Employer alone sets and makes adjustments
to the jobbers' routes, sometimes after requests by
the jobbers and at other times over the objections of
jobbers [compare with the instant case where routes
and stops are set by the distnbutor without need of
company approval], determines the frequency of
calls upon major (chain store) accounts, which con-
stitute approximately 90 to 95 percent of the dollar
volume in each territory [the responsibility of the
distributor in the instant case], and gives detailed in-
structions regarding servicing and stocking of each
account [the responsibility of the distributor, with at
most company advice], sets all prices [herein Re-
spondent suggests retail pnces which can be
changed except for promotional and feature pricing
for chains, in which case the distributor receives a
special discount], adds unordered merchandise to
the jobber's order which the jobbers are required to
sell [herein only for promotions], and often has
switched jobbers back and forth between company
driver and jobber status according to what it felt
was most advantageous to the Company at that par-
ticular time [not the case herein] The Employer
also disciplines the jobbers through written warn-
ings and threats of loss of loading privileges [in the
instant case, the Distributor's Agreement governs
disputes and unilateral discipline is not part of the
agreement] Further, although the jobbers may pur-
chase or lease their trucks, if they lease they must
do so through the employer The Employer retains
the option of repurchasing any trucks it "sold" to
the jobber in the event the jobber leaves [not the
case herein] Although the jobbers are responsible
for their own vehicles and, with some restrictions
exercised by the Employer, may hire and use help-
ers on their routes, they do not have a proprietary
interest in those routes as they cannot sell them, and
the Employer may change them unilaterally and
without notice to, or further recourse by, the affect-
ed jobbers [emphatically not the case herein]
For the reasons stated, I believe that the cases relied
upon by General Counsel on this point, Roadway and
Mission Foods, are inapposite I agree with Respondent
on this point that independent contractor status of its dis-
tributors is established when the facts of this case are
viewed in light of the Board's decisions in Bellacicco &
Sons, 249 NLRB 877 (1980), and Gold Medal Baking Co,
199 NLRB 895 (1972)
D Regardless of Whether the Decision to Convert is a
Mandatory Subject of Bargaining Did the Respondent
Satisfy Its Burden of Bargaining in Good Faith with
the Union over that Decision,
1 Events leading to negotiations
Douglas Church, the union business representative re-
sponsible for servicing the Respondent's involved unit
for much of the term of the 1985 to 1988 contract, testi-
fled that in June or July 1986, he met with Nolan and
Respondent's personnel director, Paul Dearfield Nolan
informed him that the Company wanted to sell routes to
the drivers, that the Company would draft individual
contracts for each driver who would purchase his truck,
and buy the product Church replied that if the Compa-
ny did this, the Union would strike Church inquired
why the Company wanted to go to this plan Nolan said
m effect that the drivers were content and not sufficient-
ly motivated They had no incentive to sell more prod-
uct Church testified that he believed that the Company
was going to implement the distributorship plan in the
very near future at the time of this conversation He had
had discussions with the drivers and had heard reports
that the Company had gone to such a program in other
areas Church also indicated that the Union had a dis-
agreement with the Company over insurance, which
would result in a strike if it were not solved
Both Nolan and Dearfield tesified about this meeting
with the only significant difference being a lack of detail
Both testified that the meeting ended abruptly when
Church learned of its purpose and voiced his adamant
objection Nolan then stated that Respondent took no
steps to implement the distributorship program after that
meeting and before negotiations began He also stated
the supervisors were not instructed by the Company to
meet with driver-salesmen about the program before ne-
gotiations started and supervisors were not told prior to
negotiations that the Company had reached a decision
with respect to the plan as no such decision had been
reached Nolan, as did Dearfield and Anderson, testified
that such a decision was reached on March 22
Steven Harris, currently a territory manager for Re-
spondent, was employed as a driver-salesman from Octo-
ber 1985 until his promotion to a management position in
March 1988 He testified that in March 1987, he attended
a meeting at the Bluefield warehouse with the driver-
salesmen assigned to that location and Union Steward L
T Miller and Doug Church Miller and Church told the
drivers that the Company was planning to sell their
routes at the expiration of the current collective-bargain-
ing agreement and that the only way to prevent it was to
stick together and join the Union The assembled drivers
were told that the Company had sold the routes in all of
its other areas and would sell the Bluefield routes upon
expiration of the agreement Church mdicated that the
Company should not sell the Bluefield routes and that if
need be, the Union would shut the bakery down to pre-
vent their sale
Michael Woodbndge, a former employee of Respond-
ent, testified that he had a conversation with Respond-
ent's Bluefield Branch Sales Manager William Rouse
when he was hired in July 1987 Woodbndge stated that
Rouse told him that he should be aware that the Compa-
ny was going to distributorships when the current con-
tract expired
Employee Ben Bailey III testified that prior to June
1987, Rouse asked him if he was going to purchase a
route Bailey replied that he had heard nothing about
this Rouse told him that he would receive information
318 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
and that it could be one or two things, "It'll either be
Flowers' [Respondent's] way or the highway"
William Smith, a 17-year employee of Respondent and
a union steward, testified in this proceeding At the time
of hearing, he had been on sick leave for some time and
had been employed as a driver-salesman at Respondent's
Keene Mountain warehouse prior to going on leave
Smith testified that in the fall of 1987, around the end of
October or the first of November, Bill Rouse informed
him that as of contract time, the driver's routes would be
sold and the salesmen would either have to buy their
routes and become independent distributors or they
would have to hunt for a job Smith stated that he asked
Rouse if he were sure about this and Rouse said he was
very sure, and that if a driver did not buy a route, he
would have to "hit the streets"
Rouse testified that he did not learn until April 1988
that the Company was going to implement the independ-
ent distnbutorship program in his territory, which is the
territory involved in this proceeding He testified that
there was a lot of talk going on prior to that and he
passed on what he heard to higher management He had
been instructed not to comment on rumors because he
did not know the answers He admitted having discus-
sions with route salesmen during the 1988 negotiations
and told them that no decision had been made about the
program He testified that prior to October 1, 1987, no
one had asked him about the distributorship conversion
With regard to the Smith conversations, Rouse said he
told Smith that a decision had not yet been made and
that as of that time, he did not know what the Company
was going to do He also told Smith that as of that time,
the Company was not working on anything He denied
the statements attributed to him by Smith
Smith testified he received similar information from his
district manager, Troy Byers, who said to him, "if you
want your job, you'll buy your route" Around the first
of February 1988, Smith stated that Charlie Thomas, Re-
spondent's Bluefield district manager, came to the Keene
Mountain facility to ride the drivers' routes and remap
them Thomas told Smith that Rouse had sent him to
remap so they could split the routes up so they would be
profitable when they sold them
Smith also related a conversation he heard between
Rouse and extra man Eddie Wells at the time of Wells'
hiring in November or December 1987 One of the ques-
tions Rouse asked Wells was whether he would buy a
route in March With respect to this conversation, Rouse
testified that Wells said he had heard rumors about the
distributorship program and Lasked Rouse about it Rouse
told him that at that time the Company did not know
what avenue it was going to take with the program
Wells then said he wanted to know because he did not;
want to leave his present job and go into a new one
blind Rouse told him that the program was something
that had gone on in the northern end of the State of
West Virginia, but for his group, he did not know
Rouse also testified that he started working on route
restructuring, which resulted in the routes sold to distrib-
utors, in the first part of October 1987 He testified that
the restructuring was done because there was a lot of
overlapping in the existing routes and they needed to be
restructured, presumably for efficiency He also worked
up sales figures for the routes which were used to devel-
op the pro forma performance analyses shown to pro-
spective distributors Rouse testified that the restructur-
ing process was similar to ones done in the past and was
done to improve service and profitability He acknowl-
edged that Troy Byers was involved in the route restruc-
turing in a purely advisory capacity and gave Rouse no
hint that the restructuring information was going to be
used to set up the distnbutorship routes
About 2 weeks prior to the beginning of negotiations,
Rouse asked Smith whether he thought any of the Keene
Mountain drivers would buy routes and Smith replied
that none of the 10 drivers or the extra man were inter-
ested Rouse then said that if they were not going to buy
the routes, they should go ahead and quit so he could
get replacements
With respect to the various conversations set forth
above wherein Rouse is involved, I credit the employees'
versions of the conversations I did not consider Rouse
to be particularly credible and found his testimony with
respect to the reasons for route restructuring and gather-
ing of associated financial data to be patently unbeliev-
able I am not sure whether the testimony involved was
intended, inter aim, to support the only 8(a)(1) violation
alleged in the complaint, to wit, that on or about March
1988, Respondent threatened the dnver-salesmen in the
unit with discharge upon expiration of the contract
unless they agreed to become "non union independent
contractors"
In the event that the involved testimony is intended to
support this complaint allegation, I find that no violation
occurred even though I do find that the drivers were
threatened with termination in the event they did not
purchase a distributorship There has been no antiunion
ammus shown on the part of Respondent and there has
been no nexus shown between the threats of termination
and any union or other protected activity There is cer-
tainly no testimony or other evidence that any driver-
salesman was threatened with discharge unless he agreed
to become a "non union" independent contractor Simi-
larly, the Respondent's decision to implement the distrib-
utorship program and its ultimate implementation, which
resulted in the termination of unit employees as driver-
salesmen, has not been shown to have been motivated in
any way by antiunion animus or because of the employ-
ees' union or other protected activity Rather, I find that
Respondent took the action it did for the legitimate busi-
ness reasons that it has given in this record
2 Negotiating sessions and events surrounding them
January 25 Session
Ken Hall, business representative and chief negotiator
for the Union, testified that the first meeting over con-
tract negotiations for the current collective-bargaining
agreement was held on January 25 This was a meeting
between Hall and John Anderson, Respondent's inde-
pendent labor attorney and chief negotiator At this
meeting, dates were set for negotiations and Anderson
asked Hall what the most important issues were from the
WEST VIRGINIA BAKING CO 319
Union's position Hall replied that insurance would be
the prime issue Anderson replied that he believed that
the proposed shift from driver employees to independent
route salesmen would be the most important Anderson
stated that though he was not certain at that time, he be-
lieved that the Company intended to implement the pro-
posed change All of the above recitation is based upon
Hall's version of the meeting
Anderson testified in general similarly He also stated
that Hall indicated at this meeting that the distributorship
program would be a major problem from the Union's
standpoint, that they were not interested in the system
Anderson denied that he told Hall that Respondent in-
tended to implement the plan, stating that he did not
know as of the 25th whether the plan was even going to
be part of the Respondent's proposals He had a meeting
scheduled the following day to determine with company
management what the Company's proposals would be
Anderson also testified that Doug Church stopped by the
meeting for a few minutes and related that he hoped the
Company was not thmkmg about trying the distributor-
ship program To the extent a credibility determination is
necessary, I credit Anderson's testimony that he did not
indicate at this meeting that Respondent was going to
implement the distributorship program
Prior to the 25th, Hall testified that he had heard
rumors that the Company was interested in going to the
independent distributorship program, but had not re-
ceived clear notification from the Company of its inten-
tions
February 25 Session
The first actual negotiating session was held on Febru-
ary 25 The Union bargaining committee consisted of
Hall, Grover Marion, president of Local 175, and several
employee bargaining committee members, including Bill
Smith and L T Miller Respondent's committee consist-
ed of Anderson, Dick Nolan, president of Respondent,
Paul Dearfield, Company personnel manager, and Steve
Avers, an mhouse counsel for Respondent
The meeting began with the parties exchanging pro-
posals The Union proposed some 38 changes from the
old contract while the Company proposed 8, including
the change in driver status 7 Both sides explained their
proposals to the other and the Union indicated that al-
though it opposed all the company proposals, its major
concerns were with the Company's insurance proposal,
part-time employee proposal and the proposal to change
the driver-salesmen to independent distributors The
Union indicated that it wanted the status of the driver-
salesmen to remain the same and had no interest in the
distributorship program
Anderson testified that he replied that the Company
felt the program was in its best long-term interests and
that the Company would hold small group meetings with
the employees to explain the program He mentioned
7 The record contains a great deal of testimony descnbmg each negoti-
ating session Much of this testimony relates to matters in negotiation
which are not at issue in this case Although this evidence, as with all
evidence presented, has been considered on the matter of credibility, It is
not recited here unless It bears directly on an issue in question
that because the proposal was a complex one it was not
fair for the Company to expect the Union, at some point,
to explain the proposal and that the Company would ex-
plain it to the employees Hall does not remember any
notice of such meetings being given and none of the par-
ties notes of the February 25 session reflect such notice
Under the circumstances, I do not find that notice of the
employee meetings was given There was no substantive
discussion at this meeting
March 11 Session
o
According to Hall, the next meeting, held March 11,
began with the Union offering two additional proposals
One was a proposal to increase the holiday pay for the
driver-salesmen and the other was to add a new classifi-
cation in the sanitation department Hall also told Ander-
son that it was his policy to present in writing for ratifi-
cation any agreement reached during negotiations For
that reason, he felt that negotiations must be concluded
in time for the Company's final offer to be put in writing
by March 24 so the Union could hold a ratification vote
on March 25
The Company then responded to the union proposals,
discussing its reasons for disagreement Hall testified that
there was no discussion of the independent distributor
proposal and related proposals as the Company took the
position that it had decided to implement the independ-
ent distributorship plan and saw no need to discuss the
proposals relating to driver-salesmen Hall testified that
at the meeting's end, Anderson said that he recognized
that the independent distributorship proposal was a
major issue to the Union, but that management had made
a decision to implement the plan In response to the
Union's question as to why this decision had been made,
Anderson replied that management felt it was in the best
interest of the Company The Union registered its objec-
tion and Anderson informed the Umon that Respondent
did not have to negotiate on this issue, that the only
reason that the issue was on the table was as a courtesy
to let the Union know that the Company was going to
implement it because of the historical good relationship
between the parties The Union presented no alternative
proposals to the independent distributorship program at
this meeting nor did it take a position with respect to the
Company's assertion that it was a nonmandatory subject
of bargaining
Anderson gave a slightly different version of how the
meeting began and the order of presentation On the
matter of the distributorship program, Anderson testified
that Bill Smith said that employees in Keene Mountain
had already been contacted by one of Respondent's com-
petitors in an attempt to get the driver-salesmen to work
for them if Respondent went to a distributorship system,
and break the Keene Mountain market Anderson also
testified that because of the Union's adamant opposition
to the distribution proposal, to create some type of bar-
gaining, he tried to convey that the proposal was a non-
mandatory subject of bargaining He indicated that Re-
spondent had received three different decisions regarding
the proposal But, that even though it was a nonmanda-
tory subject of bargaining, because of the longstanding
320 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
good relationship between the parties, Respondent had
wanted to bring it to the table so that the parties could
have a full opportunity to review the proposal and let
the Union have whatever input it thought appropriate
Anderson testified that at this point, the Company had
not made a final decision as to whether it was going to
be implemented He denied telling the Union on March
11, that the Company had already made a decision to go
to the independent distributorship program In his testi-
mony, Dearfield also said that no one from the Company
indicated on this date that a final decision had been
reached with respect to the program
Anderson appears to me to be a careful and truthful
person and I credit his testimony that he did not specifi-
cally tell the Union at this session that the Company had
decided to implement the plan On the other hand, the
entire tenor of his comments could easily lead a rational
person to believe that the Company had made such a de-
cision Hall could well have believed that he heard in
this session that the decision to implement the plan had
been made, although I believe that he actually just drew
this inference from Anderson's statements
Also at this meeting, the Company presented its insur-
ance proposal, which the Union rejected, insisting on the
Union's own health and welfare plan
Unilateral Meeting of Company Officials with
Driver-Salesmen
Hall testified that he held a membership meeting for
the purpose of requesting strike sanction from the Inter-
national Union in the event a stnke was deemed neces-
sary At that meeting, Hall was informed that Respond-
ent had called the dnver-salesmen to meetings where it
presented them with documents relating to the independ-
ent distnbutorship program Hall learned of these meet-
ings on or about March 15 Hall indicated at one point
that management may have given notice of its intention
to meet with the driver-salesmen, but could not recall
His notes of bargaining sessions do not reveal such
notice being given 8
Church testified that in the negotiations leading to the
1985 contract, the Company had made various proposals
regarding Insurance and had met with the employees to
explain these proposals without objection Anderson tes-
tified that these meetings were held during negotiations
without prior notice to the Union
Employee William Smith testified that the Company
had scheduled a meeting for driver-salesmen in Vanzant,
Virginia for a Wednesday in March to discuss the dis-
tributorship program, but that no drivers showed up
Later that month, Nolan and Dearfield met with the
Keene Mountain drivers following a Nolan request of
Smith that he get the men to talk with him Nolan said
he wanted to explain the distributor program to the men
At the meeting, Smith stated that Nolan explained to the
men that the Company was going to sell the routes and
8 Although the amended charge alleged direct dealing with employees,
this was not alleged in the complaint, nor was It litigated by the General
Counsel Accordingly, this Issue is not before the Board Koons Ford of
Annapolis, 282 NLRB 506 (1986), Electrical Workers 1BEW Local 1186,
264 NLRB 712 (1982)
gave them various documents explaining the program
(G C Exhs 2-8) Smith testified that at this meeting
Nolan did not attempt to require anyone to make com-
mitment
Driver-salesman Ben Bailey III testified he attended
one of these meetings where Nolan said that the routes
would be sold, but did not ask anyone present to pur-
chase a route
Former driver-salesman Robert Nipper testified that he
attended such a meeting, which was also attended by Joe
Lester Nipper testified that in response to his inquiry of
Nolan of what would happen if he was not interested in
becoming a distributor, Nolan told him to check with
Dearfield about his unemployment benefits He testified
that Dearfield told him that he would be on unemploy-
ment status Dearfield denied this conversation occurred
I credit Dearfield's denial This testimony is contrary to
other testimony relating to these meetings given by em-
ployees attending them and nothing was asked of Lester
about it, though he appeared as a witness It was also al-
legedly made at a time when Respondent was uncertain
what the status would be of driver-salesmen who did not
purchase a route, as indicated by statements made in ne-
gotiations
Nolan and Dearfield were present at the employee
meetings and testified about them They stated that at the
beginning of each meeting, Nolan explained to the as-
sembled employees that management was there to ex-
plain the distributorship program This was a proposal
that the Company had made to the Union, that it was in
negotiations and that a final decision had not been made
on the program No one would be asked to make a com-
mitment or sign anything
After this opening statement, Nolan explained the dis-
tributorship agreement in detail He passed out various
documents relating to the program as he discussed them
Nolan would then go over the financial pro forma pre-
pared for each driver-salesman These documents would
show the employee what he had made for a particular
period as an employee and show a breakdown of project-
ed income and expenses for a like period as a distributor
When this document had been explained, Nick Fadero,
Respondent's controller, would explain how the territory
purchase, including the truck purchase, could be fi-
nanced Financing with the Company was available for
the territory purchase price and was the overwhelming
choice of new distributors, however, a distributor was
free to pay the purchase price in cash or with other fi-
nancing Financing of the truck purchase was available
through the Wachovia Bank After this presentation,
Dearfield would explain an available truck insurance
package, a business insurance package, and a health in-
surance package Then, a CPA who works with a
number of distributors would explain how to go into
business as a sole proprietorship, partnership or corpora-
tion, giving the various advantages and disadvantages of
each form He also would go into how one could set up
bookkeeping At this point, the meetings would end
WEST VIRGINIA BAKING CO 321
March 22 Session
Hall testified that at the next negotiating session, held
March 22, the majonty of the union proposals were still
on the table and the parties went through them The
Company refused to respond to the union proposals re-
garding driver-salesmen stating that it was not interested
in driver-salesmen proposals as it had a proposal for in-
dependent distributorships Hall stated that there was no
give-and-take on this issue, although there was move-
ment on other issues The Union's position on the driver-
salesmen issue was to retain that status and it offered no
other alternative to the Company's distributorship pro-
gram at this time
Anderson testified that Hall made the first reference to
the distributorship program on this date, stating that the
Union was opposed to the independent distributorship
system and that it was not there to negotiate members'
jobs away He also testified that Nolan gave a very de-
tailed explanation of the program to the Union at the
meeting, including how the territories or routes were de-
termined and pnced He stated the Union had few ques-
tions The Union did object that the Company did not
have anything to sell as it did not own store shelf space
Nolan explained that the Company was selling the exclu-
sive distribution rights to products and labels that it did
own, analogizing it to a McDonald's type of franchise
Anderson testified that Miller raised an objection that the
territories were not large enough, that there was not
enough room to grow Nolan responded to this and ulti-
mately, Miller's objection was addressed in the next ne-
gotiating session
The parties' positions on insurance remained fixed
March 23 Session
Anderson testified that Ater the March 22 session, he
met with company officials and told them that they had
to make a decision with respect to the distributorship
program and its implementation Given the Union's op-
position to the plan, if the Company was not going to
implement it, he wanted to know so that he could use
the withdrawal of the proposal to the Company's strate-
gic advantage He said the Company decided then to go
ahead with the program, that they were prepared to stay
with it
At the next session, held March 23, Hall testified that
Anderson opened the meeting by informing the Union
that the independent distributorship program proposal
would be in the Company's final offer During the meet-
ing, the Union and the Company stated that this proposal
would be a strike issue for the Union as well There was
quite a bit of discussion at that meeting relating to the
proposal, and Nolan was asked if he had met with the
driver-salesmen regarding the independent distributorship
program Nolan acknowledged that he, Dearfield, and
other members of management had presented the pro-
gram to the employees
The Union also inquired what would be the status of
the driver-salesmen if they did not buy a route Accord-
ing to Hall, Anderson said the Company was not sure at
that point, but they would be in layoff status, voluntary
quit status or terminated Hall testified that Nolan ac-
knowledged that he had made' statements to the driver-
salesmen to the effect that there were outsiders waiting
to buy the routes Anderson testified that the Company
had a list of persons who had made inquiries about pur-
chasing a route that had been converted to a distributor-
ship elsewhere in the ompany's operation Hall said
Nolan told L T Miller, a bargaining committee member
and a present driver-salesman that, "You have a decision
to make on Saturday (the old contract expiration date) "
Marion testified that at this meeting, Nolan acknowl-
edged that he had discussed the distributorship program
with outside people, that the routes would be sold and
that the drivers would have to make a decision by the
end of this contract whether they were going to buy a
route
Hall testified that the Union from the beginning had
sought bumpmg nghts into the unit for the driver-sales-
men In the expinng contract, the sales and production
departments were separate and sales employees could not
bid or bump into the production department
After discussion on independent distributorship pro-
gram, Hall testified that it was clear that the Company
was not going to negotiate on the issue and he informed
the Company that the Union felt the Company was not
bargaining in good faith and the Union was contemplat-
ing filing charges with the NLRB To this, Hall said An-
derson replied, "I've fought this battle before, and I'm
ready to fight it again" Hall stated that Anderson's justi-
fication for this statement was that he had discussed the
distributorship program with the Union Marion testified
that Anderson said that he did not have to talk to the
Union about this issue, that he had been through this
before, and it was a nonmandatory bargaining issue An-
derson stated that Respondent had Board decisions that
indicated that the distributorship conversion was a non-
mandatory subject of bargaining, that despite those deci-
sions, Respondent had brought the issue to the table, that
it had not precluded discussion on any issue but, that the
Union had not been interested in discussing it
Anderson testified that the distributorship program
was kept as a proposal and included in the Company's
final offer for two reasons First, he stated the Union was
treating it as a proposal and had identified it as a strike
issue He testified it needed to be resolved through nego-
tiations Second, Anderson was concerned that the sub-
contracting provision of the old contract could be inter-
preted in arbitration as prohibiting the Company's ac-
tions Additionally, a proposal in the current negotiations
called for all products produced in the bakery to be de-
livered by bargaining unit employees Anderson felt this
provision could be interpreted as covering the dnver-
salesmen
On cross-examination, Hall stated that there had been
a discussion of what the Company would do with regard
to the routes in the event of a work stoppage at the expi-
ration of the contract The Company indicated that it
would run them with management personnel Respond-
ent did not say it would implement the distributorship
program
At this meeting, the insurance issue was also identified
by the Union as a strike issue
322 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
March 24 Session
The next session was held on March 24 and according
to Hall opened with Anderson informing the Union that
he did not agree with it filing unfair labor practice
charges, but that the Union had that right and to go
ahead if that is the way the Union felt Anderson provid-
ed the Union with a copy of the Regional Director's de-
cision that the subject of distributorships was a nonman-
datory subject of bargaining The decision dealt with the
same program as was being proposed in the contract ne-
gotiations which Respondent had implemented in its
Charleston, West Virginia operation over the objection
of its union employees Anderson testified that at about
this point he indicated that the program was a nonman-
datory subject of bargaining, that the Company had put
the proposal on the table and that it had been prepared
to discuss any and all aspects of the proposal He further
indicated that it did not need the Union's agreement as
the matter was a business decision
There was then discussion of the status of drivers who
did not purchase a route, with Anderson indicating that
they would be in layoff status The Company indicated
that it was willing to give these drivers priority hiring
rights, but they would have no seniority when hired,
except for vacation and holidays
Hall testified that the Union then asked for a copy of
the independent distributorship program and was told
that the Company did not have one at the meeting, but
that driver-members of the bargaining committee had
copies and the Union could get one from them Marion
testified that this request was made at the previous meet-
ing on March 23 I believe the parties' notes of the ses-
sions conclusively establish that March 24 was the actual
date of this request This request was not renewed
throughout the remainder of negotiations I do not view
the Respondent's response as any indication of bad faith
as the fact was, it did not have a copy of the program
and some of the union committee members did have one
In response to an inquiry, the Company said it would
not pay health, welfare, and pension benefits for the in-
dependent distributors as they would not be employees
Marion testified that Anderson said that the distributors
would not belong to the Union as they would not be em-
ployees Anderson's version of this was that the distribu-
tors would not be members of the bargaining unit as they
were not employees, whether they stayed members of
the Union was their decision to make He testified that
Hall said the Teamsters would not allow them to remain
members if they were not covered by the collective-bar-
gaining agreement
A number of specific inquiries about the details of the
distributorship program were made during this session
Though the responses to these questions may well be rel-
evant on some issues, they are not in the context of this
bargaining session, except to note that the Company did
attempt to answer the Union's questions about the plan
Detail about the Company's responses will be found in
that portion of this decision dealing with the operation of
the plan
After a caucus, the meeting ended with the Company
giving the Union its final offer (J Exhs 6(a), (b), and
(c)) After a further caucus, the Union informed the
Company that it would recommend the offer to the em-
ployees if the Company would accept the union insur-
ance proposal and drop the independent distributorship
proposal The Company responded, no To this point in
negotiations, neither party had moved at all on their
original positions with respect to driver-salesmen vs in-
dependent distributors Nor had any significant move-
ment occurred with respect to the insurance issue
Anderson testified that as of March 24, the Company
was and had been willing to discuss any and all aspects
of the distributorship proposal By "discuss," Anderson
said he meant to open the topic of conversation up for
any type of negotiations, questions, or positions that the
parties wanted to make
Ratification Vote of March 25
On March 25, the Union filed the instant unfair labor
practice charge contending the Company had violated
the Act by directly dealing with unit employees and bar-
gaining to impasse over a nonmandatory subject of bar-
gaining Also on this date, the employees voted 121 to 29
to reject the Company's final offer A strike began on
March 27, which lasted until May 14 During the period
of the strike several more negotiating meetings were
held
April 11 Session
At the request of a Federal mediator, Phil Bradley, the
parties met again on April 11 Bradley asked the parties
to bring him up to date on the status of bargaining, with
Anderson telling him the two big issues were insurance
and the independent distributorship program According
to Hall, Anderson told the mediator that the program
was a nonmandatory subject of bargaining
The Union gave the mediator as remaining proposals
and he asked the parties to separate Bradley met sepa-
rately with the parties for about 2 hours According to
Hall, he told the Union that the Company was not going
to move on the issues, that the only reason the independ-
ent distributorship proposal was still on the table was be-
cause the Union had questions about it Anderson testi-
fied similarly, pointing out that the mediator had told the
company representatives that the Union was adamant on
the insurance and distributorship issues Anderson indi-
cated that the Company discussed the matter for a while
and then put its final offer back on the table for an addi-
tional 5-day period The meeting then ended
On April 15, the Union filed an amended unfair labor
practice charge contending that the Respondent had re-
fused to bargain in good faith over its decision to imple-
ment the distributorship plan and the effects of such de-
cision, and further that the Respondent had implemented
a system of independent distnbutorships and terminated
the route salesmen on March 27
April 18 Session
On Apnl 18, the parties again met, both in a fairly pn-
vate session between the primary negotiators and later
with the full negotiating committees The record is not
totally clear when certain events occurred on this date,
though on the whole, there is agreement that they did
WEST VIRGINIA BAKING CO 323
occur According to Hall, he began the meeting by in-
forming the Company that its final offer had again been
turned down Hall testified that there were a number of
questions about the independent distributorship program
The Company again said it would not pay pension or
health and welfare benefits for the distributors The
Company also stated, according to Hall, that it must
maintain certain controls over the distributors, indicating
that there would be supervisors on the routes with the
distributors to maintain freshness and shelf stock The
Company indicated that its reason for going to the inde-
pendent distributors was to give the people more incen-
tive to increase sales The Union inquired how sales
could increase as the Company presently controlled
about 95 percent of the market The Company responded
it did not know what percentage of the market it con-
trolled
At this meeting, the Union asked if the Company
would supply the driver-salesmen with a truck and
assign them a territory The Union also indicated that it
was willing to move on the matter of more incentives for
the driver-salesmen to increase sales It proposed de-
creasing their base pay and increasing commissions The
Company indicated that that was not what it had in
mind The Company again said that it did not have to
bargain over the independent distributorship program
and put its final offer of March 24 back on the table
Anderson testified about this meeting and to the extent
his testimony differs from that of Hall and Marion, or
adds to it in some relevant way, it will be noted Ander-
son indicated that at this meeting the Union cited him to)
a Board decision which to the Union established that the
distributorship program was a mandatory subject of bar-
gaining Anderson said he had not read the case and
pointed out he had a decision from the involved Board
Region directly on point
Anderson also took the position that if the distributor-
ship program had been a mandatory subject of bargain-
ing, that the Union had had the opportunity to bargain
about it The Union took the position that the program
was a fait accompli at the time the Company presented
it Anderson denied this
Anderson testified that at this meeting the subject of
implementation had come up He advised the Union that
the Company had chosen not to implement the system
up to that point, but that it did have a legal right to do
so and that it could not hold off doing so mdefimtely He
also indicated that before the Company did start to im-
plement that he would contact Hall and advise him of
that decision As of April 18, the routes were being run
by management personnel and no irreversible action had
taken place The meeting ended
April 19 Session
On April 19, the parties met again, with according to
Hall, the Union indicating its seriousness at ending the
strike It proposed that the driver-salesmen become
owner-operators whereby they would purchase trucks,
lease them to the Company, and all of their income
would come from commissions The Union believed that
this would address the Company's incentive concern as
well as a concern of the Company that employees did
not take good care of the company trucks Hall testified
that Anderson said the Company would look at this pro-
posal, but hoped it was not the Union's last proposal on
the issue because he could not recommend it to his
client
The Union also reurged its proposals on bumping
rights and the Company indicated it would reconsider its
position on these issues Hall testified that the Company
also proposed to change the term of the new contract,
which had been a proposed 3-year one, to a 4-year con-
tract
Anderson testified about this meeting and his testimo-
ny was similar to Hall's He did note that at this meeting
that he volunteered to delay implementation of the dis-
tributorship program for 6 weeks to let the effects of the
strike settle The meeting ended
April 20 Session
According to Hall, on April 20, the parties met with
the Company reducing its proposed term of contract to
42 months and the Union urging its owner-operator plan
Hall testified that the Company was concerned about
this proposal because a salesman would not have an in-
centive to build up his territory by getting new stops and
increasing sales because he would be afraid that once he
did, the Company would take some of the stops off his
route and put them another salesman's route The Union
indicated it would be willing to negotiate terms whereby
the Company could assign a salesman a specific territory
just as it would under the distributorship plan Hall
stated that Anderson said that the Company did not
want to pay health, welfare, and pension because these
things were already calculated into the distributorship
plan Hall said that Anderson indicated that the Compa-
ny was going to the independent distributorship plan and
had sold over a thousand distributorship routes through-
out the country At another point in the record, Ander-
son agreed that this figure may be 50 percent of the
routes of Respondent nationwide
Hall said he then told the Company that the Union
had been willing to move significantly on the driver-
salesmen matter, but that the Company had made no
movement At the close of the day, the Company pre-
sented an offer involving a 3-year contract with the same
wage increase, the distribution program, and the bump-
ing rights with the exclusions proposed by the Union
The insurance was still as proposed by the Company
The meeting ended
April 21 Session
This meeting began with the Union making a counter-
proposal to Judge's Exhibit 7, the Company's strike set-
tlement offer The Union agreed with the bumping rights
proposal, term of contract and wages It still disagreed
with the insurance proposal With respect to the distribu-
torship proposal, the Union stood by its owner-operator
proposal and the Company rejected it, with Anderson
stressing its lack of equity incentive The Company
agreed to give certain employees, including driver-sales-
men who did not buy a route, limited bumping rights
into production At this meeting union committee
324 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
member L T Miller inquired about one of the provi-
sions of the distributorship program relating to the con-
sequences of the death of a distributor Miller may have
asked to have the provision amended, but the Company
attempted to assure him that his fears about the provision
were groundless The meeting ended with the Company
presenting the Union with a strike settlement offer
having a deadline of April 26 This date was subsequent-
ly extended to the April 27
April 27 Vote
On April 27, the employees voted to proceed with the
unfair labor practice case against the Respondent and not
to vote on the strike settlement proposal
May 5, 11, and 12 Sessions
The parties again met on May 5 No positions changed
at this meeting and the Federal mediator suggested that
the Union have the employees vote on what they could
accept On May 11, the employees again voted, but this
time voted to accept the Company's stnke settlement
offer and return to work, with the proviso that the
NLRB charges not be dropped On the May 11 the em-
ployees presented themselves for work, but the Company
refused and said the Union must speak with Anderson
Hall and Anderson met on May 12 Hall said Anderson
indicated that the Company was not going to implement
the distributorship program for 6 weeks for the routes
that had not been sold Anderson testified that this agree-
ment had been made on April 19 or 20, as noted earlier
Hall testified that Anderson had called him on April 28
and informed him that the Company was going to start
selling routes Hall wrote Anderson on May 28 stating
the Union's objection and warning the Company that it
inform prospective purchasers of routes of the pending
NLRB litigation
May 13 Settlement
On May 13, the parties agreed to the terms of the set-
tlement and the employees returned to work the next
day
May 27 Letter
On May 27, Hall sent a letter to Dearfield complaining
that the Company was implementing the distributorship
program without waiting 6 weeks as agreed and stating
that this would be a violation of the strike settlement
agreement
3 Did Respondent bargain in good faith over the
decision to convert and the effects of that decision?
General Counsel did not allege nor litigate the Compa-
ny's overall bad faith in negotiations I find no evidence
of bad-faith bargaining on the part of Respondent in the
negotiations in question To the contrary, there is abun--,
dant evidence of the Company's good faith, including
numerous concessions to reach agreement, appearance at
15 formal and informal negotiating sessions, the parties'
good-bargaining relationship, a 95-cent-per-hour wage
proposal over 3 years, and the parties' ultimate agree-
ment Indeed, the parties engaged in hard bargaining
over the admittedly important insurance issue and man-
aged to reach agreement, with Respondent's position
prevailing I do not believe that the distnbutorship issue
was in a materially different posture
From the recitation of events leading to the negotia-
tions, two things appear clear First, the Respondent was
very seriously considering implementing the conversion
and probably intended to do so Second, the Union had
clear notice of the Respondent's desire to convert the
driver-salesmen to independent distributors, and had ex-
pressed its adamant opposition to such conversion to the
Company From the very outset of negotiations, the par-
ties' positions - on this issue were relatively fixed, Re-
spondent proposing- conversion and the Union insisting
on maintaining the employee status of the driver-sales-
men To the date of the filing of the unfair labor practice
charge giving rise to this proceeding, the Respondent
had not moved from its position nor had the Union
moved from its position No alternatives to the conver-
sion plan were offered by either party until well into the
strike, and after the filing of all unfair labor practice
charges
In spite of the Respondent's belief that the matter of
conversion to independent distributorships was a non-
mandatory subject of bargaining, it brought the issue to
the table as a proposal and repeatedly expressed its will-
ingness to discuss any and all aspects of the proposal
This willingness was not really tested by the union nego-
tiators From February 25 through March 22, the Union
did not offer alternatives or even ask questions regarding
the distributorship plan This was in spite of the fact that
Nolan had described the program in detail on March 22
After March 22, the Union did ask questions although
it proposed no alternatives until April 19, almost a month
into the strike, which was brought about by the parties'
disagreement on at least the insurance issue as well as the
distributorship issue The record is uncontradicted that
the Company answered all of the Union's questions As I
have heretofore found, the Company did not announce
its intention to have the distributorship program in its
final offer until the March 23 meeting, almost a month
after the negotiations began When the Union did offer
an alternative on April 19 and 20 (the owner-operator
proposal with 100-percent commission), the Company
considered the proposal during caucuses and gave a rea-
sonable explanation for rejecting the proposal it failed to
provide the equity sales incentive and it did not result in
recouping the capital it felt was inherent in its territories
and brand names
It is uncontradicted that the Respondent placed the
distributorship issue on the table as a proposal on Febru-
ary 25 There is no real contention that as of that date,
the Company had reached a final decision on its distribu-
torship proposal Although I have found that this deci-
sion was announced at the March 23 session, even the
Union does not contend that it was announced before
March 11 On bnef, neither General Counsel nor the
Union argue that the distributorship program was a fait
_ accompli when the negotiations began and I find that it
was not Although the Respondent was arguably in a po-
sition to implement the plan at about that time (it had
WEST VIRGINIA BAKING CO 325
tentative territories, Pro formas, available financing and
Distributors' Agreements in hand), it had not signed up a
single distributor In fact no implementation took place
until on or after April 28
I cannot find that the Company's failure to change its
position on the distributorship issue during negotiations is
proof of bad-faith bargaining or a refusal to bargain over
the issue In all the circumstances, adamant insistence on
this proposal does not constitute bad-faith bargaining or
a refusal to bargain In Atlanta Hilton & Tower, 271
NLRB 1600, 1603 (1984), the Board stated
It is necessary to scrutinize an employer's overall
conduct to determine whether it has bargained in
good faith "From the context of an employer's
total conduct, it must be decided whether the em-
ployer is lawfully engaging in hard bargaining to
achieve a contract that it considers desirable or is
unlawfully endeavoring to frustrate the possibility
of arriving at any agreement" D Lunsford
Plumbing, 254 NLRB 1360, 1370 (1981) quoting
from West Coast Casket Co, 192 NLRB 624, 636
(1971) enfd in relevant part 469 F 2d 871 (9th Cir
1972) ] A party is entitled to stand firm on a posi-
tion if he reasonably believes that it is fair and
proper or that he has sufficient bargaining strength
to force the other party to agree NLRB v Ad-
vanced Business Forms Corp, 474 F 2d 467 (2d Cir
1973)
[A]n adamant insistence on a bargaining position is
not of itself a refusal to bargain in good faith, Neon
Sian Corp v NLRB, 602 F 2d 1203 (5th Cir 1979)
I believe it is clear that the parties achieved impasse in
their negotiations prior to the Company's implementation
of the distributorship proposal on April 28 By that date
the parties had met in 12 formal and informal sessions
and spent approximately 25 hours on the distributorship
issue At their last session on April 21, the Union insisted
on its owner-operator proposal and the Respondent in-
sisted on the distributorship proposal, reiterating its ra-
tional reasons for rejecting the owner-operator plan
There is no evidence of bad-faith bargaining by Re-
spondent during the course of negotiations The employ-
ees had rejected the distributorship proposal twice and
refused even to vote on it a third time on April 27
Clearly, the parties were at impasse and the Company
lawfully implemented the distributorship proposal Team-
sters Local 688 (Air-Ways Cab), 277 NLRB 1518, 1526-
1527 (1986), Taft Broadcasting Co, 163 NLRB 475
(1967)
It is equally clear that the Company met its duty to
bargain in good faith over the effects of the distributor-
ship program As noted above, the Union was advised of
the distributorship proposal on February 25 The Union's
reaction to this proposal was to insist on driver-salesmen
employee status On March 23, the Union through its
bargaining committee member L T Miller said it was
unfair for an employee with a number of years of service
simply to be out of work Anderson replied he was will-
ing to listen to any proposal the Union had on that issue
On the same day, the Union asked what would happen
to those drivers who chose not to buy a distributorship
Anderson replied that no decision had been made, but
they would probably be on layoff status The Union pre-
sented no proposals at that point
The Company's offer the next day included priority
hiring rights for route sales employees who did not
select distributorships This offer was included in the
Company's final offer made later that day After rejec-
tion of the final offer by the Union, the parties continued
to negotiate over the effects of the distributorship pro-
posal As a result, the Company made certain additional
proposals regarding the effects For example, the Union
suggested a delay in implementation of the distributor-
ship proposal to give the business an opportunity to build
back up to its prestrike and preumon boycott levels The
Company agreed with this and mcluded a proposal for a
6-week delay in implementation in its April 21 final offer
The Union also requested bumping rights for those em-
ployees who chose not to purchase a distributorship The
Company agreed to bumping nghts as proposed by the
Union The parties ultimately achieved agreement on the
effects issue
D Ultimate Conclusions with Respect to the Issues
Based on the fmdmgs set forth above and for the rea-
sons stated, I find and conclude that Respondent's deci-
sion to convert its driver-salesmen to independent distrib-
utors was not a mandatory subject of bargaining, that the
independent distributors did not remain statutory em-
ployees after the conversion and Respondent did not un-
lawfully withdraw recognition from the Union as their
representative, that Respondent did not refuse to bargain
in good faith over the decision to convert and the effects
of that decision and in fact, did bargain in good faith
over such decision and its effects until impasse and
lawful implementation of the distributorship program,
and that Respondent did not threaten its driver-salesmen
with discharge and ultimately discharge them because of
their Union or other protected activity In sum, I find
that Respondent did not violate Section 8(a)(1), (3), and
(5) as alleged in the complaint
CONCLUSIONS OF LAW
1 Respondent is an employer engaged in commerce
within the meaning of Section 2(2), (6), and (7) of the
Act
2 The Union is a labor organization within the mean-
ing of Section 2(5) of the Act
3 Respondent has not engaged in any of the unfair
labor practices alleged in the complaint
On these findings of fact and conclusions of law and
on the entire record, I issue the following recommend-
ed9
9 If no exceptions are filed as provided by Sec 102 46 of the Board's
Rules and Regulations, the findings, conclusions, and recommended
Order shall, as provided in Sec 102 48 of the Rules, be adopted by the
Board and all objections to them shall . be deemed waived for all pur-
poses
326 WEST VIRGINIA BAKING CO
ORDER
The complaint is dismissed in its entirety
Appendix A
The projected labor cost impact of the conversion at
the time of implementation can be calculated by totalling
the cost to the Company of all payments to the distribu-
tors and subtracting from that the distributors' operating
expenses formerly incurred by the Company Thus, those
costs which have simply been transferred from the Com-
pany to the distributor should be reduced from the dis-
tributors' total receipts to determine the net effect of the
conversion on the Company's labor costs
The distributor's principal and interest payments for
the truck and the territory, however, should not be de-
ducted Unlike operating costs incurred by the distribu-
tor, the Company receives no concomitant reduction in
its expenditures as a result of the distributors' investment
in the territory and truck Although the principal and in-
terest for the territory and principal for the truck is paid
back to the Company, the Company in return had sold
its capital assets to the distributors The result of the
transaction is that these capital assets pass from the Com-
pany to the distributors at the Company's expense
Should the Company ever decide to return to the distri-
bution business, it would be necessary to repurchase the
temtones and purchase additional trucks Thus, the net
effect of the increased discount rate which enables the
distributors to purchase the territory and truck from the
Company is to increase the Company's labor costs
The calculation of the net effect of the conversion on
the Company's labor costs is as follows
Total yearly cost to the Company of the distributor-
ship—$1,438,356
Total Weekly Gross Income (C 12-14) X 52
weeks = $1,422,356
$500 per year accounting costs
(T456)
X 32 distributors =$16,000
Total yearly savings to the Company from the dis-
tributorship conversion (labor costs and other costs
transferred to distributors)= $1,248,136 85
Route gross earnings (C 12-14) X 52 weeks=
$811,408 00
Vacation Pay (C 10)

49,097 59
Holiday Pay (C 10) 12,840 00
A&S and Sick Leave (C 10) 2,22000
Health Insurance
$137,640 00 ($31000 (T 383) 1 X 37 employees X 12
months)
- $21,509 28 (total weekly employee $116,130 72
contributions X 52 weeks) (C 11, T
347)
Pension $95 33 (T 343) X 37 42,326 52
employees X 12 months
Jury Duty (T 343) 000
Life Insurance (C 10) 000
Workers Compensation
West Virginia Warehouse $1 55 rate X $72 75
(weekly route gross earmngs/100) (C 14, T 449) X
52 Weeks
$5,863 65
Virgima Warehouses $ 43 rate X 83 29 (Total Vir-
ginia Warehouses weekly route gross eammgs/100)
(C 12-13, T 449) X 52 weeks= $1,862 37
Total $7,726 02
Uniforms
$24800 X 13 periods
(T 449) 3,22400
Casualty Insurance
$3000 X 52 weeks X
34 Distributor
(GC 12-14) 53,040 00
Truck Costs Fuel
Fuel Adjustment2 (T 447-48),
C 12-14
1 This is the cost of Teamsters' Option 3 coverage which is the most
expensive available Although not all of the route sales employees pur-
chased the most expensive coverage the precise breakdown is not avail-
able For the purpose of calculating the labor cost impact of the distribu-
torship program, however, the cost savings to the Company of the health
insurance will be assumed to be the maximum
2 The fuel adjustment is an additional amount paid by the Company to
those drivers whose vehicles are driven over 400 miles per week to com-
pensate them for additional repairs required due to the additional mile-
age The fuel and fuel adjustment numbers were based on an actual study
of Company costs for its fleet of vehicles which included labor, material,
and all other costs and is, therefore, an accurate reflection of the Compa-
ny's savings as a result of the transfer of these costs to the distnbutors
The fuel adjustment figure is deducted from the fuel figure because the
adjustment is an additional payment by the Company to the distributor
Thus, the Company's actual fuel cost transferred to the distributor is the
net figure
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD

327
Keene Mountain Warehouse
$466-$63=$403 X 52 weeks=$20,956
Radford and Marion Warehouses
$521-$163=358 X 52 weelcs=$18,616
Bluefield Warehouse
3 The Tires and Repairs costs were based on an actual study of Com-
pany costs for its fleet of vehicles which Included labor, material, and all
other costs and is, therefore, an accurate reflection of the Company's sav-
ings as a result of the transfer of these costs to the distributors
• The miscellaneous expenses cover those expenses transferred by the
Company to the distributors such as licenses and business franchise fees
5 The warehouse expense is paid by the distributors to the Company to
defray the Company's cost of heat, light, etc in providing a warehouse
to the chstnbutors
° At the hearing, the Company presented evidence that it reduced the
number of routes in Bluefield from 17 to 14 As there were 37 mutes pre-
viously, and only 32 distributorships, the fate of two routes is not clear in
the record The reduction in Bluefield, however, was considered neces-
sary by Respondent regardless of the conversion to distributors There-
fore, any savings attributable to this reduction was not a savings resulting
from the Company's decision to convert to distributors However, even if
$690-$180=$582 X 52 weeks=$30,264
Total $69,836 00
Total Tires and Repairs Costs3
(C 12-14) X 52 weeks= $47,476 00
Miscellaneous4 3,328 00
(C 12-14) X 52 weeks
Warehouse3
(C 12-14) X 52 weeks 29,484 00
Net Increase in the Company's labor Costs—
$190,219 156
the wages and benefits from those additional five drivers is factored Into
the above calculation, the Company's labor costs still increase as a result
of the conversion The benefit costs calculated above include the five ad-
ditional drivers The route gross earnings for the five additional drivers
can be accurately estimated by dividing the total route gross earnings on
Company Exhibits 12 through 14 by 32 distributors and multiplying that
figure by five route sales employees The resulting route gross earnings
arguably saved by the Company is $126,782 50 Thus, the net labor cost
Increase to the Company, even including the reduction in the number of
routes, is $63,436 65