                                                                                                                           Opinions of the United
1994 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-27-1994

Furniture Renters of Amer. v. NLRB
Precedential or Non-Precedential:

Docket 93-3336




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Recommended Citation
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                   UNITED STATES COURT OF APPEALS
                       FOR THE THIRD CIRCUIT




                       Nos. 93-3336, 93-3395



               FURNITURE RENTORS OF AMERICA, INC.
                         Petitioner/Cross-Respondent
                                v.
                 NATIONAL LABOR RELATIONS BOARD,
                   Respondent/Cross-Petitioner



        ON APPEAL FROM THE NATIONAL LABOR RELATIONS BOARD
                   (5--CA--20933, 21021, 21038)


                     Argued: February 28, 1994
         Before:   STAPLETON, and SCIRICA, Circuit Judges
                     and SMITH, District Judge*

               (Opinion Filed: September 27, 1994)


Larry J. Rappoport, Esquire                          (Argued)
Stevens & Lee
Four Glenhardie Corporate Center
P. O. Box 236
Wayne, Pennsylvania l9087-0236



               Attorney for Petitioner/Cross-Respondent


David A. Fleischer, Senior Attorney                 (Argued)
Charles P. Donnelly, Esquire
Jerry M. Hunter, Esquire
Yvonne T. Dixon, Esquire
Nicholas E. Karatino, Esquire
Aileen A. Armstrong, Esquire
National Labor Relations Board
Washington, D. C. 20570

               Attorneys for Respondent/Cross-Petitioner
*   Honorable D. Brooks Smith, United States District Judge for
the Western District of Pennsylvania, sitting by designation.




                             OPINION OF THE COURT




SMITH, District J.


            Petitioner Furniture Rentors of America, Inc. ("FRA")

appeals from a National Labor Relations Board ("NLRB" or "the

Board") order holding that it violated Sections 8(a)(1) and (5)

of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(1) and

(5) ("NLRA" or "the Act") by withdrawing recognition from its

union without having reasonable grounds for doubting its majority

status, and by failing to notify and bargain with the union

before subcontracting out delivery services.                Cross-petitioner

NLRB seeks enforcement of its order.           We will enforce the Board's

order only in part.

                                I.    Background

            Withdrawal of Recognition

            Furniture Rentors of America, Inc. ("FRA"), a Delaware

corporation,      is   a   regional   renter   of   residential    and    office

furniture    in   Virginia,    Maryland,    and     Delaware.     The    company

negotiated its initial collective bargaining agreement ("CBA")

with International Brotherhood of Teamsters Union Local Nos. 639

and 730     ("Union") on November 1, 1986.          As drafted, the CBA was
to expire on October 31, 1989; however, on October 21, 1987, a

side-letter      agreement       was     reached      which    increased       wages     and

extended the CBA until December 31, 1989, and provided that the

contract could be reopened "only to discuss wages."

               In October 1988, FRA leased a warehouse in Jessup,

Maryland,       implementing       its    decision       to    move     its    center     of

operations       from     Alexandria,          Virginia       to    a   point     between

Baltimore, Maryland and Washington, D.C., more centrally located

within its market.            FRA continued to operate from its Alexandria

warehouse until late 1989 because its lease there did not expire

until   the     summer    of    1990     and    its   Jessup       facility     was   being

renovated.       Due to the longer commute from northern Virginia to

Jessup, Maryland, FRA lost several Washington area employees and

hired new ones from Baltimore, including Calvin Wilson, who was

hired as a new warehouse manager.

               FRA and the Union began negotiating their next CBA in

the autumn of 1989.            Petitioner contends that by that time, fewer

of    FRA's    employees       than    ever     before    were     Union      members,    as

evidenced by dues check-off records.                       On October 6, 1989, a

decertification petition was filed by Frederick Brown, one of the

new employees who had been hired by warehouse manager Wilson.

Prior to the filing of the petition, Brown had posted a notice in

the Alexandria warehouse which asked employees to sign "for the

Union" or "not for the Union."                   Only six employees signed "for

the    Union."         There    were     also    discussions        between     warehouse

manager       Wilson    and    other     employees       regarding      their    lack     of

interest in Union representation and discontent over having to
pay Union dues and initiation fees.                        At a December 7, 1989

bargaining session, FRA Vice-President James Senker ("Senker")

questioned       the     Union's        majority         status.             The      Union

representatives responded that they did enjoy majority support.

On   January     17,    1990,    Senker      sent    a     letter       to    the    Union

withdrawing      recognition     based       on   his     doubt     that      the     Union

represented a majority of FRA employees.                     The Union failed to

respond.     A January 20, 1990 bargaining session was cancelled,

and the parties did not meet again.

            Decision to Subcontract Delivery Services

            Senker knew first-hand that FRA had experienced serious

problems with employee theft and carelessness.                      In May and June

of 1989, FRA investigated the theft of furniture by Union members

at a loss to the company of $10,000.                    The investigation led to

arrests and resignations of employees.                  Delivery service also was

the cause of numerous customer complaints, and FRA experienced

problems with furniture packing, delivery of damaged furniture,

insurance    claims      and    late    deliveries.          FRA     delivery         teams

averaged    three      deliveries      per   day,   compared       to    the       industry

standard of four or five deliveries per day.                    In August 1989, FRA

fired three employees who raided a customer's refrigerator while

relaxing    in   his    apartment      during     what    was   supposed       to     be   a

routine delivery.

            In mid-February 1990, Senker accepted a proposal by

Sullivan Services, a contractor who provides trucking services,

to share delivery services on a trial basis.                       For approximately

one week, Sullivan Services made deliveries using a single crew
and its own truck.             Senker gave the Sullivan Services crew the

hardest    jobs,    monitored          their     performance,       spoke    daily     with

Sullivan    Services'      President,          Kent   Sullivan,      and    visited    job

sites in order to talk with customers about the Sullivan Services

crew's work.       Senker did not retain Sullivan Services beyond that

trial period.

            On     February      27,     1990,     Senker    received       a   tip   that

several FRA employees planned to steal furniture early the next

morning.        With the assistance of the Howard County (Maryland)

Police, Senker apprehended a driver, a helper and a supervisor

attempting to load furniture onto a delivery truck.                             The next

day,    without     notifying         the   Union,     Senker      retained     Sullivan

Services to perform FRA's delivery work on an exclusive basis.

FRA then terminated four drivers and three helpers, but continued

to     employ    its     warehousemen,           several     of     whom    were      Union

supporters.        By    using        Sullivan    Services    to    perform      delivery

services, FRA's delivery costs increased from $160 to $210 per

day.

            Union       member    Alvin     Jones,     Jr.   and     the    Union     filed

charges    against       FRA     on    March     2,   1990    and    March      12,   1990

respectively.          On March 28, 1991, the NLRB issued Complaints

against FRA in 5--CA--20933 and 5--CA--21038.                       These Complaints,

which were subsequently consolidated for hearing, alleged that

FRA committed unfair labor practices when it posted a petition

requesting that its employees indicate their union sympathies,

unlawfully withdrew recognition from the Union, and subcontracted
its delivery work to Sullivan Services without first notifying

and bargaining with the Union.

            An Administrative Law Judge ("ALJ") held a hearing from

October 1-3, 1991.           On May 13, 1992, the ALJ issued a decision

that FRA had committed unfair labor practices in violation of

Section    8(a)(1)     and        (5)       of    the    NLRA     when        it    interrogated

employees about their union sympathies and withdrew recognition

of the Union on January 17, 1990.                    The ALJ, however, relying upon

the NLRB's decision in Dubuque Packing Company, Inc., 303 NLRB

386 (1991), concluded that FRA's decision to subcontract its

delivery     work     was     not       a        mandatory      subject        of    collective

bargaining and that therefore FRA did not violate Section 8(a)(5)

of   the    Act     when     it    decided          to     subcontract         without      first

bargaining with the Union.                   The ALJ's decision with respect to

mandatory bargaining particularly hinged upon his finding that

FRA's decision to subcontract delivery services "did not turn on

labor costs in any way."            App. 684

            On May 28, 1993, the Board issued a Decision and Order

reversing the third part of the ALJ's decision, holding that FRA

violated    Sections        8(a)(1)         and    (5)     of   the     Act    by    failing   to

provide    notice     and    to    bargain          with    the    Union       concerning its

decisions    to     subcontract         delivery         work     and    to    lay    off   seven

employees as a result of that decision.                         The Board also held that

FRA violated Section 8(a)(1) through statements made by warehouse

manager Wilson to new employee Alvin Jones, Jr. threatening to

fire Wilson because of his association with the Union.                                         FRA
petitioned for review of the Board's order and the Board cross-

petitioned for enforcement of its order.

                                 II.    Discussion

            Withdrawal of Recognition

            FRA argues that its proper withdrawal of recognition

from the Union ended any duty to bargain over its decision to

subcontract      delivery   services.          Whether    petitioner      properly

withdrew recognition from the Union turns on the factual question

whether    FRA    had   reasonable     grounds    for    doubting   the   Union's

continued majority status.1

            FRA avers that its move from Alexandria, Virginia to

Jessup, Maryland caused considerable employee turnover, and by

January 17, 1990, the date Senker withdrew recognition, only six

of 17 employees, all transferees, were members of the Union.                   No

newly hired employee had executed a dues checkoff or expressed an

interest in union representation.                Therefore, FRA argues, the

composition and attitude of its workforce had changed, supporting

Senker's    good    faith   doubt      about   continued     majority     status.

Employee turnover alone, however, is not sufficient to establish

good-faith doubt, NLRB v. Oil Capital Elec., Inc., 5 F.3d 459,

462   (10th      Cir.   1993),    for    without     objective      evidence    of


1
   After one year beyond the date the NLRB certifies a union as
the collective-bargaining representative of employees, the
presumption of the union's continued majority status becomes
rebuttable; the employer may withdraw recognition if it can show
that the union has lost majority support or that it has a good
faith, reasonable doubt of the union's continued majority status.
NLRB v. Wallkill Valley Gen. Hosp., 866 F.2d 632, 636 (3d
Cir.l989).
dissatisfaction, "there is nothing to rebut the presumption that

the [company's] newly hired employees supported the Union in the

same ratio as the employees they replaced."                     Spillman Co. and

Sheet Metal Workers' Int'l Assoc., Local Union No. 24, AFL-CIO,

311 NLRB 18.     See also NLRB v. W.A.D. Rentals Ltd., 919 F.2d 839,

841-42    (2d   Cir.   1990)(500       percent     employee    turnover     did   not

overcome presumption of majority employee support for union where

employer was found to be "stalling" to avoid bargaining with the

union).         Therefore,     petitioner          must    adduce     evidence     of

dissatisfaction with Union representation among its employees.

            Petitioner's evidence of FRA employees' dissatisfaction

with Union representation consists of the low number of employees

who executed the dues checkoff and the petition signed by a

majority of employees stating that they were "not for the Union."

Instantly, only six of 17 or 20-262 employees had executed dues

checkoffs at the time petitioner withdrew recognition.                       A high

number    of    resignations      or    a    low    number    of    dues   checkoff

authorizations     will     not   without        more     justify   withdrawal     of

recognition,     although    they      may   be    considered       when   assessing

majority support for a union.                Bickerstaff Clay Prods. Co. v.

NLRB, 871 F.2d 980, 989 (11th Cir. 1989), cert. denied 493 U.S.

924 (1989).      As this court has said, "the issue is 'not how many

employees belong to the union or paid dues but rather whether the


2
    Petitioner's brief is not consistent with respect to the
number of employees working for FRA on January l7, l990. Compare
Petitioner's Brief at 7 (20-26 employees) with Petitioner's Brief
at 36 (l7 employees).
majority desired union representation for purposes of collective

bargaining.'"    NLRB v. Walkill Valley General Hosp., 866 F.2d at

637 (quoting Retired Persons Pharmacy v. NLRB, 519 F.2d 486, 491

(2d Cir. 1975)).      As the ALJ noted, the fact that less than a

majority of employees have dues checked off does not ipso facto

indicate   opposition      to   union    representation.        See    Colonna's

Shipyard, 293 NLRB 136, 139 (1989).              In order to overcome the

presumption of majority union support, the employer must produce

affirmative evidence of dissatisfaction sufficient to ground a

good faith doubt of continued majority status.

            Substantial evidence supports the Board's determination

that FRA's petition was tainted because it was posted by FRA,

albeit indirectly, rather than spontaneously by the employees

themselves.      An employer may only conduct polls to determine

whether a union's majority status still exists if it "possesses

substantial, objective evidence to establish that it reasonably

doubts the union's majority status before conducting the poll."

Hajoca Corp. v. NLRB, 872 F.2d 1169, 1173 (3d Cir. 1989)(emphasis

added).    An employer may not use its petition/poll as evidence of

its good faith doubt, because in order not to engage in unfair

labor   practices,    it   must   have     had   such   doubt   supported      by

independent evidence before posting the petition.                 Cf. NLRB v.
Laverdiere's     Enterprises,      933    F.2d    1045,    1051       (1st    Cir.

1991)(employee       contact      with      employer      regarding          union

representation lessens finding of taint).

           Management Rights Clause
              The employer argues that the original CBA contained a

broad management rights clause giving FRA the absolute right to

subcontract work at any time until December 31, 1989, the date of

contract expiration.            Furthermore, FRA avers, when the CBA was

reopened in October 1987, the parties to the contract agreed that

renegotiations        on    December      31,   1989    would       be   limited   to the

discussion of wages only, and that all other contract terms were

to continue beyond the expiration date.                       Therefore, petitioner

concludes,      FRA's       contractual      right      to    subcontract      continued

beyond December 31, 1989, the Union having waived its right to

bargain over subcontracting.

              We conclude that when the CBA was reopened in October

1987, the Union did not waive its right to bargain after December

3l,    l989    over    every    contract        term    except      wages.      The   1987

reopener language states in pertinent part that, "The contract

shall ... remain in effect through December 31, 1989, but the

parties will agree to meet to reopen the contract to discuss only

wages."       This language can most sensibly be read to mean that

prior to the expiration of the contract on December 31, 1989,

only wages could be changed, but when the contract expired, all

terms were subject to bargaining.                      Although it is possible to

derive FRA's construction from the reopener langugage, we decline

to    make    the    inference,      for   waivers      of    statutorily      protected

rights        must     be      clearly      and        unmistakably          articulated.

Metropolitan         Edison    Co.   v.    NLRB,   460       U.S.    693,    708   (1983).

Without such a clear waiver, the management rights clause does
not survive the expiration of the CBA.                  Control Services, Inc.,

303 NLRB 481, 484 (1991), enforced 961 F.2d 1568 (1992).

            Statutory Duty to Bargain

            Finally, FRA argues that the Board employed the wrong

legal   standard      and   thus   erred   when    it    determined    that    FRA's

decision to subcontract its delivery work was a mandatory subject

of bargaining.        Sections 8(a)(5) and 8(d) of the Act, 29 U.S.C.

§§ 158(a)(5) and 158(d), require employers to bargain in good

faith with employee representatives about, inter alia, "wages,

hours, and other terms and conditions of employement."                    Relying

on its recent decision in Torrington Industries, 307 NLRB No. 129

(1992),    the    Board     held   that    FRA's    decision     to    subcontract

delivery work fell within the range of decisions that require

bargaining.

            Subcontracting may be a mandatory subject of collective

bargaining under the Act, but it is not necessarily so.                           In

Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203 (1964), the

Court determined that an employer violated Section 8(a)(5) of the

Act when it contracted out maintenance work in order to reduce

labor     costs   without     first    bargaining        with   its    maintenance

workers' union.        The Court noted that the employer subcontracted

its maintenance work in order to reduce costs by "reducing the

work force, decreasing fringe benefits, and eliminating overtime

payments,"    and     stressed     that    these   factors      were   customarily

regarded     within     the   industry      as     "peculiarly     suitable      for

resolution within the collective bargaining framework."                       Id. at
213-14.
            The Supreme Court further defined the requirements for

mandatory bargaining over subcontracting when it held, in First

National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981), that an

employer    is    not    obligated     to    bargain    with   the    union      before

closing a part of its business and discharging the employees who

worked in that part of the operation.                   In First National, the

Court identified three types of management decisions:                      (1) those

with "only an indirect and attenuated impact on the employment

relationship"; (2) those that "are almost exclusively 'an aspect

of the relationship' between employer and employee," such as "the

order of succession of layoffs and recalls ... [and] work rules";

and (3) those "that [have] a direct impact on employment ... but

have as [their] focus only the economic profitability of" non-

employment-related concerns.                Id. at 677.        Because the First

National    employer's         decision     to   terminate     one    part       of   its

business affected employment but was motivated by considerations

unrelated to the employment relationship, it fell into the third

category of management decisions.                Whether decisions within that

category    require       mandatory     collective      bargaining,        the     Court

reasoned, depends upon the extent to which "the subject proposed

for discussion is amenable to resolution through the bargaining

process."    Id. at 678.           Accordingly, 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."      Id. at 679.
              The First National balancing test was not conceptually

novel, and the Court noted that the Fibreboard Court performed

the    same    analysis    "implicitly."         Id.        The   Court      in   First

National, reached the opposite result from Fibreboard because the

employer's decision to close part of its business was not driven

by labor costs.      The Court concluded that because the union had

no control over the factors motivating the company's decision to

subcontract, collective bargaining would have been futile and was

therefore not required.

              In Otis Elevator Co., 269 NLRB 891 (1984), and Dubuque

Packing Co., 303 NLRB 386 (1991), the Board followed the teaching

of Fibreboard and First National by fashioning standards for

mandatory bargaining that focused generally on the amenability of

the    disputed     issue    to     resolution     through          the     collective

bargaining process, and specifically on the role of labor costs

in the employer's decision.          See Dubuque Packing Co., 303 NLRB at

391;    Otis    Elevator     Co.,    269   NLRB        at    892,     897    (Dennis,

concurring).       The Dubuque decision in particular contained a

thoughtful discussion of the bargaining obligation imposed by the

Act    that    accurately    reflected     the    framework         established      by

Fibreboard and First National, see United Food and Commercial
Workers Int'l Union, Local No. 150-A v. NLRB, 1 F.3d 24, 32 (D.C.

Cir. 1993)(NLRB's finding that the Dubuque test "accords with

precedent is fully defensible"), but its holding was expressly

limited to decisions to relocate unit work.                 Dubuque Packing Co.,

303 NLRB at 390 n.2.
             In the matter sub judice, the ALJ applied the Dubuque

burden-shifting test,3 concluding that because labor costs did

not prompt FRA to subcontract, its decision was not a subject of

mandatory bargaining.           App. 684-86.            Within days after the ALJ

issued his opinion, however, the Board issued its decision in

Torrington Industries, 307 NLRB 809 (1992), which abandoned the

flexible     approach    of    Dubuque       for    a    more       rigid      standard     in

subcontracting cases.           When the ALJ's decision was appealed to

the     Board,    therefore,        the     panel   applied             the    more    recent

Torrington standard.

             In Torrington, the employer unilaterally replaced two

union     truck     drivers     with      non-bargaining            unit       drivers     and

independent       contractor         haulers.           The    Board          rejected     the

employer's       argument     that    its    decision         to    replace      the     union

truckers was entrepreneurial and did not turn on labor costs,

holding that Dubuque's burden-shifting analysis is limited to

relocation       decisions    and     does    not   apply          to   "other     types    of

management decisions that affect employees."                             Torrington, 307

NLRB    at   810.      Finding       that    "all   that       is       involved      is   the

3
   Under the test announced by the Board in Dubuque, the General
Counsel must initially establish a prima facie case for mandatory
bargaining by showing that the employer's decision involved a
transfer of unit work unaccompanied by a basic change in the
nature of its operation. Then, the burden of production shifts
to the employer, who can rebut the prima facie case by showing
that its decision involved a change in the direction of the
business, or by showing "(l) that labor costs (direct and/or
indirect) were not a factor in the decision or (2) that even if
labor costs were a factor in the decision, the union could not
have offered labor cost concessions that could have changed the
employer's decision... ." Dubuque, 303 NLRB at 39l.
substitution of one group of workers for another to perform the

same work at the same plant under the ultimate control of the

same employer," id. (quoting Fibreboard), the Board held that the

employer had an obligation to bargain.            In so doing, the Board

established the following test for subcontracting cases:
          [W]hen the record shows that essentially
          [Fibreboard]   subcontracting  is   involved,
          there is no need to apply any further tests
          in order to determine whether the decision is
          subject to the statutory duty to bargain.
          The Supreme Court has already determined that
          it is....


Id. (citation omitted).        The Torrington Board did not reject

outright   the    employer's   argument    that    Fibreboard    could    be

distinguished    because   labor   costs   were   not   a   factor   in   its

decision; rather, it chose not to reach that issue, "because the

[employer's] reasons had nothing to do with a change in the

'scope and direction' of its business.       Those reasons, thus, were

not matters of core entrepreneurial concern and outside the scope

of bargaining."     Id. (citation omitted).        Unwilling to consider

the specific facts of the case, the Board simply determined that

FRA had engaged in "Fibreboard subcontracting," triggering the

mandatory duty to bargain.

           Inflexibly applied, the holding in Torrington is at

odds with the principles of Fibreboard and First National.            Those

cases discussed the statutory duty to bargain as a means of

obtaining, when appropriate, the benefits presumed to attend the

collective bargaining process, see Fibreboard, 379 U.S. at 213-14

(bargaining over particular economies potentially derived from
subcontracting deemed "peculiarly suitable for resolution within

the collective bargaining framework"); First National, 452 U.S.

at 681 (relevant question is "whether requiring bargaining over

this sort of decision will advance the neutral purposes of the

Act"), not as an end in itself.

               The Board's decision in Torrington to limit the scope

of Dubuque to relocations of unit work is essentially a policy

choice "subject to limited judicial review."                       NLRB v. Local Union

No. 103, Int'l Ass'n of Bridge, Structural & Ornamental Iron

Workers, 434 U.S. 335, 350 (1978)(citations omitted).                              However,

the Board's virtual per se rule that subcontracting decisions

must     be      the   subject       of   bargaining          is    fundamentally          an

interpretation and application of Supreme Court precedent, and

while it must be upheld if reasonably defensible, we may not give

it     "rubber    stamp"       approval     if    it     is   "inconsistent         with   a

statutory mandate or ... frustrate[s] the congressional policy

underlying [the NLRA]." Bureau of Alcohol, Tobacco & Firearms v.

FLRA, 464 U.S. 89, 97 (1983)(quoting NLRB v. Brown, 380 U.S. 278,

292-92 (1965)).

               Under     the     Torrington        standard,         if     an     employer

subcontracts some work to nonunion workers without changing the

scope and direction of its enterprise, and the nonunion workers

perform essentially the same work as the bargaining unit workers

did,     the     Board     labels     the        employer's        action       "Fibreboard

subcontracting"        and     requires     bargaining.            But    the    Torrington

manner    of     examining     the   decision       to    subcontract       only    to see

whether it is analogous to Fibreboard's general factual framework
is simplistic and, as this case demonstrates, potentially ham-

handed.4      The    focus     in    determining      whether     a   particular

management decision requires bargaining under Section 8(a)(5) is

not   the    employer's      decision     to     subcontract,     but    whether

"requiring bargaining over this sort of decision will advance the

neutral purposes of the Act."            First National, 452 U.S. at 681.

In order to determine that, it is necessary 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,"

Fibreboard, 379 U.S. at 214, then bargaining is mandatory.                    As

the Board recognized in Dubuque, 303 NLRB at 392 n. 14, it is

therefore    imperative   to    "evaluate      the   factors    which   actually

motivated the employer's" decision.

            Fibreboard         itself      counsels        against         strict

categorization according to the form of subcontracting.                      The

4
   Although conceptually simple, the Torrington approach is not
well-fitted to the statutory duty to bargain, which, after all,
is not simply a theoretical catchphrase, but implies real give
and take negotiations.      If during a bargaining session an
employer were to broach the subject of contracting work out
(whether or not in a manner similar to what the Board calls
"Fibreboard subcontracting"), the negotiations would necessarily
turn to the employer's reasons for wanting to contract the work
out.   The contracting out decision itself, regardless of what
form it might take, is just a response to some underlying cost or
other challenge that makes doing the work with bargaining unit
employees relatively less attractive. Therefore, focusing on the
form that the employer's decision takes (does it fit into the
Fibreboard   piegonhole?)  is   unhelpful,   for   the  form   of
subcontracting bears little on the bargaining process encouraged
by the Act.
Fibreboard Court expressly noted that the employer's decision to

subcontract turned on its desire to lower "the high cost of its

maintenance      operation,"        which,    independent      contractors      had

promised, could be reduced by eliminating employees and benefits.

Fibreboard,   379    U.S.      at   213-14.       In    determining   whether     a

subcontracting     case   is    legally      similar    to   Fibreboard,   it    is

important   to    consider      not    just     the    employer's   decision     to

contract work out, and how that decision affects its operations,

but whether, as in Fibreboard, the employer's decision was driven

by labor costs or some other difficulty that can be overcome

through collective bargaining.               Those courts that have held an

employer's decision to subcontract unit work was a mandatory

subject of collective bargaining under Fibreboard have invariably

made this finding.        See e.g., Olivetti Office U.S.A., Inc. v.

NLRB, 926 F.2d 181, 186 (2d Cir. 1991), cert. denied 112 S.Ct.

168, 116 L.Ed.2d 132 (1991)(employer transferred work in order to

"reduce manufacturing costs by $2.6 million, $2 million of which

would be directly attributable to cheaper labor....                   Obviously,

labor costs were the driving force behind the Company's action");

NLRB v. Plymouth Stamping Div., Eltec Corp., 870 F.2d 1112, 1116
(6th Cir. 1989), cert. denied 493 U.S. 891 (1989)(decision to

subcontract      motivated     by     failure    to    successfully   negotiate

economic concessions); W.W. Grainger, Inc. v. NLRB, 860 F.2d 244,

248 (7th Cir. 1988)(decision to subcontract delivery services

motivated by the desire to reduce the cost of "branch time," or

time drivers' spent at depots rather than in truck, and thus was

a "direct labor cost"); NLRB v. Westinghouse Broadcasting and
Cable, 849 F.2d 15, 22 (1st Cir. 1988)(decision to subcontract

prompted by a directive from employer's parent company to reduce

its "body count" by eleven persons).

          In this case, the ALJ found that,
             From the time [FRA Vice-President] James
          Senker started with [petitioner] he noted
          that [petitioner] had a serious employee
          theft problem. Indeed two employees, Payton
          Finch and Terry Walls, were arrested in mid-
          1989 for larceny from [petitioner].         In
          addition, service was, in Senker's opinion,
          horrible and Senker demonstrated part of the
          basis for this conclusion by producing
          correspondence    from     three    customers,
          TravCorps, NV Property and North Park Ave,
          complaining about Respondent's services. In
          August 1989 three employees were fired for
          misconduct during a delivery, i.e., they
          "hung out" in the customer's residence and
          ate food which they took from the customer's
          refrigerator.    Senker also observed that
          because of careless handling of furniture and
          improper    padding     of     furniture    by
          [petitioner's] delivery crew employees that
          too much of the furniture [petitioner] rented
          was being damaged.     It was also Senker's
          opinion that [petitioner's] delivery crews
          were unreasonably slow in doing their job
          since they were making an average of three
          and one-half stops per day rather than four
          or five which was the industry standard.

             The straw that broke the camel's back and
          motivated Senker to subcontract all the
          delivery work began in late February 1990
          when Senker received information from a
          confidential informant that some of his
          employees   were  planning  to   steal  some
          furniture....

             The cost of delivery services by Sullivan
          Services was more expensive than the cost to
          [petitioner] of doing the delivery work with
          its own employees, i.e., $160 per day for one
          of [petitioner's] crews versus $210 per day
          for a Sullivan Services Crew....
                  Labor costs were not a factor in the
               subcontracting decision.    The decision was
               made because of [FRA Vice-President] Senker's
               dissatisfaction with the delivery crews,
               e.g.,   lower  than   expected  productivity,
               unacceptable damage to furniture, complaints
               by customers, and thievery.


App.    685-86.           The   Board      purported     to    leave     these     findings

unchanged,       App.       691,   n.1,     but    stated      that    because      all     of

petitioner's stated reasons for subcontracting delivery services

"involved employee conduct, an issue which would be of concern to

the Union as well as to [petitioner] and an issue over which the

Union    was    in    a     strong    position      to   take    action,"         App.   692,

petitioner's         decision        to    subcontract        delivery      services       was

subject to mandatory bargaining.                               The       ALJ's         phrase

"lower   than        expected      productivity,"        standing      alone,      rings   of

labor costs, a subject suitable for resolution through collective

bargaining.           However,       the    ALJ's    decision        read    as    a     whole

indicates that Senker's principal reason for turning to Sullivan

Services       was    his    exasperation         over   the    irresponsibility           and

dishonesty of some of his delivery employees, not labor costs as

traditionally understood.                  Petitioner argues that labor costs

could not possibly have been the basis of its decision since it

paid fifty dollars per day more to contract out its delivery

services than it paid to employ its own delivery crews.                                    The

Board responds by characterizing even "employee work habits and

conduct" as "labor costs in the broad sense of the term" because

they "affect the employer's costs and thus the profitability of

the business."         NLRB Brief at 38-39.
            Anything employees do, or do not do, that ultimately

bears on their employers' economic condition may be designated a

"labor cost" in some broad sense, but there is no reason to so

expand the term beyond its ordinary meaning as used in Fibreboard

and First National, which contemplates subjects such as wages,

fringe    benefits,     overtime          payments,    size    of   workforce       and

production goals.       As the United States Court of Appeals for the

Fourth Circuit recognized in Arrow Automotive Indus., Inc. v.

NLRB, 853 F.2d 223 (4th Cir. 1988), 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. Id. at 228.

            Similarly,        that   an    employer's     decision     is   based   on

factors "involv[ing] employee conduct" does not necessarily imply

that labor costs or other concerns amenable to resolution through

collective bargaining are central to the decision.                      The factors

that principally motivated FRA Vice-President Senker to contract

out delivery services were, as found by the ALJ and as supported

by the record, FRA's continuing problems with delivery workers'

carelessness, misconduct, untrustworthiness and thievery.                           The

Board suggests that "education," or the implementation of "an

effective anti-theft program" would serve the same purpose as the

wage and benefit concessions discussed in Fibreboard and First
National.     We   do    not       read   Fibreboard     and   First   National     as

requiring    employers        to     automatically      bargain     with    employee
representatives over the inviolability of their own property,

without regard to the benefit likely to be obtained from that

process.    Nor are we able to perceive any likelihood of benefit

to be derived from subjecting the problem of employee thievery to

collective bargaining.

            Our purpose in making these observations is not to

substitute our judgment for that of the Board's on the possible

benefits to be derived from collective bargaining in a situation

like the one in this case.         We intend only to convey our concern

that the Board has not exercised the judgment that Fibreboard and

First National require of it.              We believe the Board needs to

acknowledge that FRA's decision to subcontract its delivery work

was   primarily    based   on    factors    arguably   not   as   amenable   to

collective bargaining as direct labor costs.                 The Board then

needs to make a judgment about the likelihood and degree of

benefit, if any, to be derived from collective bargaining in a

situation of this kind and to weigh that benefit against the

employer's considerable interest in taking prompt action.

                                III.   Conclusion

            We will grant the Board's petition to enforce with

respect to those provisions of its order designed to remedy the

unfair     labor    practices      related    to    FRA's    withdrawal      of

recognition.       We will deny its petition in all other respects.

We will grant FRA's petition for review and remand for further

proceedings on the charge that FRA violated sections 8(a)(1) and

(5) of the Act by failing to provide notice and bargain with the
Union concerning its decisions to subcontract its delivery work

and lay off employees.
