                                                                                                                           Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-13-1998

Dorsey Trailers Inc v. NLRB
Precedential or Non-Precedential:

Docket 96-3392,96-3578




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Filed January 13, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 96-3392 and 96-3578

DORSEY TRAILERS, INC.,
NORTHUMBERLAND PA PLANT,

       Petitioner in No. 96-3392

v.

NATIONAL LABOR RELATIONS BOARD,

       Respondent

NATIONAL LABOR RELATIONS BOARD,

       Petitioner in No. 96-3578

INTERNATIONAL UNION, AUTOMOBILE, AEROSPACE &
AGRICULTURE IMPLEMENT WORKERS OF AMERICA,
and its LOCAL 1868,

       Intervenor

v.

DORSEY TRAILERS, INC.,
NORTHUMBERLAND PA PLANT,

       Respondent

On Petition For Review and for Enforcement
of a decision and order of
the National Labor Relations Board
(NLRB No. 4-CA-21968)
Argued June 26, 1997

BEFORE: GREENBERG and McKEE, Circuit Judges,
and GREENAWAY,* District Judge

Filed January 13, 1998

Michael S. Mitchell, Esq. (argued)
Robert E. Larkin, III, Esq.
Fisher & Phillips
201 St. Charles Avenue, Suite 3710
New Orleans, Louisiana 70170

Attorneys for Petitioner/Cross-
Respondent, Dorsey Trailers

Robert J. Englehart, Esq. (argued)
Charles P. Donnelly, Esq.
Aileen A. Armstrong, Esq.
National Labor Relations Board
1099 14th Street, NW
Washington, D.C. 20570

Attorney for Respondent/Cross
Petitioner, National Labor
Relations Board

Stephen A. Yokich (argued)
United Auto Worker's International
 Union
1757 N Street, N.W.
Washington, D.C. 20036

Attorney for Intervenor,
Local 1868

_________________________________________________________________

*Honorable Joseph A. Greenaway, Jr., Judge of the United States
District Court for the District of New Jersey, sitting by designation.


                                  2
OPINION OF THE COURT

GREENAWAY, JR. , District Judge.

The critical issue before this Court is whether petitioner
Dorsey Trailers, Inc. ("Dorsey") violated the National Labor
Relations Act (the "Act") when it entered into a
subcontracting agreement without first negotiating with its
employees' union representatives. The National Labor
Relations Board (the "Board" or "N.L.R.B.") reversed the
Administrative Law Judge's ("ALJ") conclusion that no such
violation existed.

Dorsey now appeals the Board's Decision and Order
which holds that Dorsey violated sections 8(a)(1) and (5) of
the Act.1 Dorsey also appeals the Board's decision that it
shall provide its union employees with lost overtime
payments incurred as a result of the subcontracting
violations. Cross-petitioner N.L.R.B. seeks enforcement of
its order. This Court will grant the petition for review but
will enforce the Board's Decision and Order in part.

I. FACTS

Dorsey manufactures platform and dump trailers in its
Northumberland, Pennsylvania plant.2 The United Auto
Worker's International and its Local 1868 (the "Union") is
the exclusive bargaining representative for Dorsey's
_________________________________________________________________

1. The Act states, in part:

         (a) It shall be an unfair labor practice for an employer--

       (1) to interfere with, restrain, or coerce employees in the
exercise
       of the rights guaranteed in section 157 of this title;

         . . .

         (5) to refuse to bargain collectively with the representatives of
his
         employees, subject to the provisions of section 159(a) of this
title.

29 U.S.C.A. SS 158(a)(1) & (5).

2. Dorsey's other plants, which are not involved in this action, are
located in Alabama, Georgia and South Carolina.

                                  3
production, maintenance and stock room employees. 3 A
collective bargaining agreement, effective from March 4,
1992 to March 1, 1995, governed the relationship between
Dorsey and the represented employees.

On November 14, 1994, a trial was held before the
Honorable Karl H. Buschmann, the administrative law
judge assigned to this matter. The ALJ made the following
findings of facts which provide the factual basis for our
consideration:4

       In 1993, in response to a rising backlog of work orders
       and increasing customer demand, the petitioner
       entered into an informal agreement with Bankhead
       Enterprises in Atlanta, Georgia, an independent
       company, which had the capability to produce flatbed
       and dump trailers. Pursuant to this informal
       agreement, the petitioner engineers the unit, purchases
       the material, and ships the material . . . and
       engineering packages to Bankhead, which then
       supplies the labor for assembling the trailers. Prior to
       this arrangement, the petitioner had only shipped out
       parts for warranty purposes. Bankhead produces two
       trailers per week for the petitioner's customers located
       in Florida, Georgia, Tennessee, and North and South
       Carolina. The informal agreement also provides that
       Bankhead will not compete with the petitioner by
       producing trailers on its own. Profits are apportioned
       60 percent to the petitioners and 40 percent to
       Bankhead. It is undisputed that the petitioner entered
       into this agreement and effectuated the agreement
       without prior notice to the Union and without
       bargaining with the Union at any time.

On August 9, 1993, the Union filed a "Charge Against
Employer" with the Board alleging that Dorsey, in violation
_________________________________________________________________

3. While Dorsey office's clerical and professional employees, salespeople,
guards, watchmen and supervisors were not represented by Local 1868,
the record is not clear as to what union, if any, represented this group
of employees.

4. We find that the ALJ's factual findings are supported by the record as
a whole and we adopt them accordingly. See N.L.R.B. v. Alan Motor Lines,
937 F.2d 887, 890 (3d Cir. 1991) and "Standard of Review" infra.

                               4
of sections 8(a)(1) and (5), engaged in unfair labor practices
when it:

       1) Unilaterally implemented revised "regular hours for
       shifts," specified in the parties collective bargaining
       agreement, and unilaterally revised contractual wages
       for three employees working Sunday 11PM to Monday
       7AM shift. Employer negotiated changes directly with
       affected bargaining unit employees. The Employer also
       has denied and/or failed to provide within a reasonable
       time, relevant information which was requested in
       connection with such changes.

       2) Unilaterally implemented new job duties and the
       wages for such for bargaining unit employees working
       on what is referred to as light duty jobs. Employer
       negotiated changes directly with affected bargaining
       unit employees. The Employer has also denied and/or
       failed to provide within a reasonable time, relevant
       information which was requested in connection with
       such changes.

       3) Refused to bargain collectively with the undersigned
       labor organization concerning bargaining unit work
       being subcontracted and/or moved to Florida. The
       Employer has also denied and/or failed to provide
       within a reasonable time, relevant information which
       was requested in connection with the movement
       and/or subcontracting of such work.

On April 29, 1994, the General Counsel for the Board
filed a Complaint and Notice of Hearing against Dorsey.

On February 15, 1995, the ALJ concluded that Dorsey's
light duty transfer assignments, as well as its refusal to
inform the Union of this practice, violated sections 8(a)(1)
and (5). The ALJ dismissed the subcontracting element of
the complaint premised upon his finding that the
subcontracting agreement was not a subject of mandatory
Union bargaining; however, he did find that Dorsey had
violated sections 8(a)(1) and (5) based upon its refusal to
provide the Union with requested information relevant to
the subcontracting agreement.

The General Counsel and Dorsey filed exceptions to the
ALJ decision and appealed to the Board. On July 5, 1996,

                               5
the Board issued a Decision and Order adopting, with
modification, the findings of the ALJ. In major part, the
modification found that the subcontracting agreement was
a subject of mandatory Union bargaining. In so finding, the
Board wrote:

       that the Respondent's decision to subcontract work
       was not a change in the "scope and direction" of its
       business going to a core entrepreneurial concern, but
       rather a direct replacement of the Northumberland unit
       employees by the Bankhead employees to perform unit
       work.

Dorsey Trailers, Inc., Northumberland, Pa. Plant, 321 NLRB
87, 88 (1996). The Board required Dorsey to rescind its
subcontracting agreement.

On July 16, 1996, Dorsey petitioned this Court to review
and set aside the Board's Decision and Order; the Board
filed a cross-application for enforcement of its Order. On
August 29, 1996, this Court granted the Union leave to
intervene. On September 6, 1996, the Board granted the
General Counsel's Motion to Modify Board Order, thereby
requiring Dorsey to:

        Make whole its employees, with interest, for any loss
       of earnings they may have suffered as a result of the
       Respondent's unlawful subcontracting of bargaining
       unit work, in the manner prescribed in Ogle Protection
       Service, 183 NLRB 682 (1970), enfd. 444 F.2d 502 (6th
       Cir. 1971), and New Horizons for the Retarded, 283
       NLRB 1173 (1987).

        Preserve and, within 14 days of a request, make
       available to the Board or its agents for examination
       and copying, all payroll records, social security
       payment records, time cards, personnel records and
       reports, and all other records necessary to analyze the
       amount of backpay due under the terms of this Order.

Dorsey moves before this Court for a determination of
whether there is substantial evidence to support the
Board's findings that: (1) the agreement between Dorsey
and Bankhead was a mandatory subject for bargaining
under sections 8(a)(1) and (5); and (2) Dorsey must provide

                                6
lost overtime payments to employees affected by the
Dorsey/Bankhead agreement. Dorsey raises no other issues
and no other issues are before this Court.5

II. STANDARD OF REVIEW

This Court shall employ plenary review as to matters of
law. N.L.R.B. v. Greensburg Coca-Cola, 40 F.3d 669, 673 (3d
Cir. 1995). We will, however, afford the Board's
construction of a statute some deference. Id. Therefore, this
Court will "enforce a Board order that rests on a
construction of the [Act] that is not `an unreasonable or
unprincipled construction of the statute.' " Id. (citations
omitted); N.L.R.B. v. Alan Motor Lines, Inc., 937 F.2d 887,
890 (3d Cir. 1991). Factual findings will be sustained if
supported by the record as a whole. Alan Motor Lines, Inc.,
937 F.2d at 890. This includes evidence supportive of the
Board's decision, as well as evidence critical of it.
Greensburg, 40 F.3d at 672.

III. PRELIMINARY MATTERS

As a preliminary matter, we must first discuss the nature
of the agreement entered into by Dorsey and Bankhead.
The respondent defines the agreement as an agreement to
subcontract. On the other hand, petitioner, during the
November 14, 1994 trial, described the agreement as a joint
venture. The resolution of this distinction may have certain
consequences since the case law in this Court requires
that, under specific circumstances, a company must
bargain with a union before making a decision to
subcontract.6 We agree with the ALJ's finding that the
agreement is one to subcontract.
_________________________________________________________________

5. Dorsey does not contest the ALJ's and Board'sfindings that Dorsey's
light duty transfer assignments, and its refusal to inform the union of
this practice violate sections 8(a)(1) and (5).

6. See Equitable Gas Co. v. N.L.R.B., 637 F.2d 980, 987 (3d Cir. 1981)
("Thus, it is now settled in the jurisprudence of this Circuit that when
issues of subcontracting and partial closings are confronted in the
context of the National Labor Relations Act, an initial presumption arises
that they are mandatory subjects of bargaining. . . . [T]his presumption

                               7
Subcontracts occur "[w]here a person has contracted for
the performance of certain work and he in turn engages a
third party to perform the whole or a part of that which is
included in the original contract." Black's Law Dictionary
324 (6th ed. 1990). A joint venture is a legal entity in the
nature of a partnership. Ringier America, Inc. v. Land
O'Lakes, Inc., 106 F.3d 825, 828 (8th Cir. 1997). It engages
in the joint undertaking of a particular transaction for
mutual profit, mutual control, mutual contribution and is
memorialized in contract. Ringier, 106 F.3d at 828;
Schiavone Const. Co. v. City of New York, 99 F.3d 546, 548-
49 (2d Cir. 1996).

Dorsey and Bankhead had a verbal agreement; there is
no enforceable written contract. They did not form a
separate legal entity and total control remained vested with
Dorsey. Therefore, petitioner's insistence on defining the
agreement as a joint venture is inappropriate.

IV. DISCUSSION

We now turn to the issue at hand - whether this
particular subcontract is subject to mandatory union
bargaining.

One of the Act's fundamental purposes is the
"establishment and maintenance of industrial peace to
preserve the flow of interstate commerce." First National
Maintenance Corp. v. N.L.R.B., 452 U.S. 666, 674 (1981).
This purpose is accomplished by requiring management
and labor to enter into peaceful settlement negotiations
when disputes arise, in some instances. Fibreboard Paper
Prod. Corp. v. N.L.R.B., 379 U.S. 203, 211 (1964).

In this vein, sections 8(a)(1) and (5) provide that it shall
be an unfair labor practice for an employer to "refuse to
_________________________________________________________________

can be overcome only if it appears that the employer's interests outweigh
the union's interest in a given situation."); Brockway Motor Trucks, Div.
Of Mack Trucks, Inc. v. N.L.R.B., 582 F.2d 720, 727-31 (3d Cir. 1978)
(Providing a Circuit wide history of subcontracting and its relationship
to
mandatory union bargaining concludes that "it seems fair to say that the
NLRB has taken a pro-bargaining stance that is at odds with the results
reached by and the language in the opinions of several courts.")

                               8
bargain collectively with the representatives of his
employees . . . . " 29 U.S.C.A. S 158 (a) (West 1973). The
obligation to bargain collectively is a mutual one. It requires
the "employer and the representative of the employees to
meet at reasonable times and confer in good faith with
respect to wages, hours, and other terms and conditions of
employment . . . . " 29 U.S.C.A. S 158(d) (West 1973). Our
first issue for decision here is the proper interpretation of
the words "other terms and conditions of employment" and
whether the Dorsey/Bankhead subcontract falls within its
confines. The Supreme Court's opinion in Fibreboard is
instructive on this issue.

In Fibreboard, the plaintiff subcontracted with a third
party for maintenance work then being performed by
Fibreboard's union employees. The High Court granted
certiorari to determine:

       Was petitioner [Fibreboard] required by the National
       Labor Relations Act to bargain with a union
       representing some of its employees about whether to
       let to an independent contractor for legitimate business
       reasons the performance of certain operations in which
       those employees had been engaged?

379 U.S. at 209. The Court, focusing in narrowly on the
facts before it, wrote that it was concerned "only with
whether the subject upon which the employer allegedly
refused to bargain -- contracting out of plant maintenance
work previously performed by employees in the bargaining
unit, which the employees were capable of continuing to
perform -- is covered by the phrase `other terms and
conditions of employment' within the meaning of S 8(d)." Id.
at 210. The Court held that management's decision to
subcontract can be a condition of employment and, under
the circumstances before it, the prerequisites which
implicate "other terms and conditions of employment" were
satisfied and that collective bargaining was required. Id. at
209.

In reaching its holding, the Court emphasized that
Fibreboard's decision to subcontract did not affect its basic
operations, nor was there an expenditure of capital
required; rather, Fibreboard merely replaced Union workers

                               9
with those of its subcontractor. 379 U.S. at 213.
Specifically, the Court wrote that it did

       not [expand] the scope of mandatory bargaining to
       hold, as we do now, that the type of `contracting out'
       involved in this case -- the replacement of employees
       in the existing bargaining unit with those of an
       independent contractor to do the same work under
       similar conditions of employment -- is a statutory
       subject of collective bargaining under S 8(d). Our
       decision need not and does not encompass other forms
       of `contracting out' or `subcontracting' which arise daily
       in our complex economy.

379 U.S. at 215. In sum, a decision to subcontract is not
necessarily subject to mandatory collective bargaining;
whether such bargaining is mandatory can only be
answered by looking to the reasons underlying
management's decision to subcontract and the decision's
impact upon the employment relationship. See First
National Maintenance Corp. v. N.L.R.B., 452 U.S. 666, 676-
78 (1981); see also Fibreboard, 379 U.S. at 215 (The Court
refused to hold broadly that all subcontracting agreements
must be submitted to union bargaining; rather, each
situation should be judged on its particular facts.)

In First National, the Court further examined and defined
the scope of sections 8(a)(5) and 8(d). It concluded that
Congress purposely left ambiguous "other terms and
conditions of employment" in anticipation of specific
industry practices. The Court wrote of three types of
management decisions which impact on the employment
relationship -- (1) those having only an indirect and
attenuated impact on the employment relationship (i.e.,
advertising decisions); (2) those which are exclusively
related to the employment relationship (i.e., layoff
decisions); and (3) those which have a direct impact on
employment, but whose focus is only on the economic
profitability of the company. First National , 452 U.S. at 677
(relying upon Fibreboard, Stewart, J., concurring). The third
category addresses the scope and direction of the company
and not primarily the conditions of employment. Id.

The facts before this Court in the instant case lead us to
conclude that we are confronted with a company's decision

                                10
to subcontract for economic reasons. As such, the third
category, as set forth in First National above, most aptly fits
here.

When the third category is applicable, the courts have
realized that

       [m]anagement must be free from the constraints of the
       bargaining process to the extent essential for the
       running of a profitable business. . . . [I]n view of an
       employer's need for unencumbered decision making,
       bargaining over management decisions that have a
       substantial impact on the continued availability of
       employment should be required only if the benefit, for
       labor-management relations and the collective-
       bargaining process, outweighs the burden placed on
       the conduct of the business.

452 U.S. at 679. Thus, it is

       [n]ecessary to look behind the subcontracting decision
       itself to the reasons motivating the decision. If the
       employer's decision was prompted by factors that are
       within the union's control and therefore suitable for
       resolution within the collective bargaining framework,
       then bargaining is mandatory. . . . [I]t is therefore
       imperative to evaluate the factors which actually
       motivated the employer's decisions.

Furniture Rentors v. N.L.R.B., 36 F.3d 1240, 1248 (3d Cir.
1994).

The development of the case law alluded to above leads
this Court to conclude that the Dorsey/Bankhead
subcontract does not fall within the realm of "other terms
and conditions of employment." We are mindful that certain
subcontracting agreements must be submitted to union
bargaining; however, we believe that the type of
employment relationship involved here does not warrant
union bargaining.

The Board is correct in its finding that the work
performed at Bankhead is the same type of work performed
at the Northumberland plant. In both instances the
relevant work is the building of trucks. But, in light of
management's underlying reasons for subcontracting, i.e.,

                                11
to avoid lost sales, this, without more, does not justify
mandatory bargaining. Our review of the records and
transcripts below convinces us that Dorsey's reasons for
entering into a subcontracting agreement with Bankhead
properly centered around the scope and direction of
Dorsey's future viability.

We have reviewed the transcript of the November 14,
1994 hearing which took place before the ALJ. Of particular
relevance is the testimony of both Michael A. Gordy
("Gordy"), the Northumberland plant manager and Kenny
Sawyer ("Sawyer"), Dorsey's Vice-President of Human
Resources.

On direct examination, Gordy testified that in 1993, the
Northumberland plant, which was responsible for the
production of platform and dump trailers, experienced
difficulty in filling its orders.7 Gordy gave several reasons
for the difficulty.

First, while both trucks require welding in assembly, the
dump truck is more welding intensive. In 1993, Dorsey was
unable to find a qualified pool of experienced welders, i.e.,
mainly due to competition for the welders' talents from
Dorsey's competitors, AC&F, Inc. (a railroad care
manufacturer) and Strict Corp. (a trailer manufacturer).
Competition was so severe that, at a point, no welders were
available. In addition, Dorsey's paint department could not
handle the volume of trucks which required painting prior
to being transported to the buyer. This problem was
particularly acute with dump trucks.

Second, like many other businesses, the business of
truck manufacturing is cyclical. In 1993, Dorsey was
experiencing a high demand for its products. Gordy testified
that from 1990-1992, business was so slow that Dorsey
had to drop the number of its employees to under one
hundred. In this slow market, the backlog for delivery of
orders was approximately fifteen weeks for platform trucks
and five weeks for dump trucks. However, when the market
rose in 1993, the backlog escalated to approximately six
_________________________________________________________________

7. The platform, also called a flatbed, is basically a 48-foot long
trailer;
a dump trailer is basically a box placed atop of the chassis.

                               12
months for dump trucks and a sell-out for the platform
trucks.

Feeling the pressure of possible lost sales, Dorsey's
management decided to subcontract production to
Bankhead. This decision was reached after management
reviewed the lack of available manpower at the
Northumberland plant and it implications for staffing an
additional shift. Dorsey also considered the feasibility of
building another plant or transferring some of the work to
the Elba plant, located in Georgia. The former was rejected
due to the cyclical nature of the business; the latter was
rejected in light of the fact that Elba was already
backlogged with its own production of vans. Freight costs
were also a factor. Dump trucks must be driven to the
buyer. This is an expensive endeavor and the cost
sometimes outweighs the profit. Dorsey's other
manufacturing plant, the Elba plant, was limited to the
production of vans and reefers (a type of truck). Dorsey was
rapidly losing business. Its competitors were filling orders
in twelve to fifteen weeks, compared to Dorsey's backlog of
approximately twenty-five weeks. It was within this
framework that Dorsey decided to subcontract. Bankhead
was chosen because of its southern location. The location
offered a greatly reduced freight cost since the dump trucks
made by Bankhead could be driven to buyers in the nearby
states of Florida, Tennessee, the Carolinas and within
Georgia, Bankhead's home state. Bankhead's proximity
significantly reduced Dorsey's freight costs. Bankhead also
had the capacity to build dump trucks, as well as prior
experience in building dump trucks and welders.

At first, Bankhead built a prototype for Dorsey; however,
Bankhead and Dorsey later agreed that Bankhead would
build four dump trucks for a Dorsey-specified vendor. The
vendor had granted a contract to Dorsey for the production
of twenty-eight dump trucks. Per Gordy, the
Northumberland plant could not produce all twenty-eight in
the time frame specified by the vendor. So, Dorsey shipped
parts to Bankhead, who then assembled them. By
subcontracting with Bankhead, Dorsey was able to satisfy
the terms of the contract with the vendor, avert a layoff of
Dorsey employees and hire additional workers.

                               13
This Court has also considered whether Dorsey's
motivation behind the decision to subcontract lies solely in
a desire to reduce and/or eliminate overtime. If such were
the case, we would be forced to find that Dorsey's
subcontracting agreement violated the mandatory
bargaining requirement because Dorsey would have been
replacing one set of workers, its union employees, for
another, the Bankhead employees, "to do the same work
under similar conditions of employment". Fibreboard, 379
U.S. at 215. A company's decision to subcontract which is
based solely on a desire to eliminate or reduce overtime is
subject to mandatory union bargaining since to "require the
employer to bargain about the matter would not
significantly abridge his freedom to manage the business."
Fibreboard, 379 U.S. at 213-14.

Once again, based on our review of the record below, this
Court remains unconvinced that Dorsey's sole motivation
was a desire to eliminate overtime at the Northumberland
plant; rather, we believe that Dorsey's motivation lies in a
need to fill orders and maintain a healthy, viable business.
As we have previously recognized

       employers may make business decisions based on
       general "economic reasons," which "are not reasons
       distinct and apart from a desire to decrease labor
       costs," but that does not mean that labor costs are
       somehow implicated by every employer's decision
       intended to improve the business's bottom line.

Furniture Rentors, 36 F.3d at 1249-50 (quoting from Arrow
Automotive Indus., Inc. v. N.L.R.B., 853 F.2d 223 (4th Cir.
1988)).

CONCLUSION

We find that Dorsey's agreement with Bankhead was not
a change in the "scope and direction" of the company, nor
was there an adverse impact on the bargaining unit. We
further find that the subcontract is not a subject of
mandatory bargaining. We will enforce those provisions of
the Board's Decision and Order regarding light duty
assignments.

                               14
The provision of the Board's Decision and Order which
requires Dorsey to rescind its agreement with Bankhead
will not be enforced nor will that provision of the Order
which mandates that Dorsey provide overtime payment for
hours which allegedly could have been performed by
workers at the Northumberland plant. To the extent that we
do not enforce the Order, we will grant the petition for
review. We make no prospective decision as to any other
subcontracting agreement which Dorsey may enter in the
future. The parties will bear their own costs on this appeal.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

                               15
