                                       No. DA 06-0171

               IN THE SUPREME COURT OF THE STATE OF MONTANA

                                        2006 MT 337

                                                  _____________________________________

EKALAKA UNIFIED BOARD OF TRUSTEES
and WADE NORTHROP, SUPERINTENDENT
(Elementary District and High School District),

              Petitioners and Appellants,

         v.

EKALAKA TEACHERS’ ASSOCIATION,
MEA-MFT, NEA,

              Respondents and Respondents.

                                                  _____________________________________

APPEAL FROM:         District Court of the First Judicial District,
                     In and for the County of Lewis and Clark, Cause No. ADV 05-457,
                     The Honorable Dorothy McCarter, Presiding Judge.


COUNSEL OF RECORD:

              For Appellants:

                      Debra A. Silk and Tony Koenig, Montana School Boards Association,
                      Helena, Montana

              For Respondents:

                      Richard Larson, Harlen, Chronister, Parish & Larson, P.C., Helena,
                      Montana

                                                  _____________________________________
                                                       Submitted on Briefs: October 10, 2006
                                                               Decided: December 19, 2006

Filed:

                    ____________________________________________
                                        Clerk
Justice Brian Morris delivered the Opinion of the Court.

¶1    Ekalaka Unified Board of Trustees and Superintendent of Ekalaka Public Schools

Wade Northrop (collectively the School District) appeal from the judgment and order of

the First Judicial District Court, Lewis and Clark County, affirming the Final Order of the

Board of Personnel Appeals (BOPA), determining that the School District had committed

unfair labor practices. We affirm.

¶2    We review the following issue on appeal:

¶3    Was the District Court correct in affirming the Board of Personnel Appeals Final

Order?

                       FACTUAL AND PROCEDURAL HISTORY

¶4    Jeff Savage (Savage) interviewed for a teaching position with the Ekalaka School

District in 2003. Superintendent Wade Northrop (Northrop) contacted Savage sometime

after the interview to gauge Savage’s interest in the teaching position. Savage informed

Northrop that he would need $2,000.00 for moving expenses if he were to relocate to

Ekalaka for the teaching position. Northrop agreed to deliver a $2,000.00 check to

Savage when Savage visited Ekalaka to look at the school and the community. Northrop

directed the School District clerk to issue the check and Northrop then personally

delivered the check to Savage on June 29, 2003. The next day Northrop recommended to

the Board of Trustees that the School District formally offer Savage the teaching position.

The Board of Trustees adopted the recommendation and issued a teaching contract.

Savage signed the contract on July 1, 2003.



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¶5     Northrop made another offer of employment to Sherry Roberts (Roberts) on or

about July 15, 2003.     Roberts also requested moving expenses from Northrop, but

Northrop denied her request on the grounds that he could not pay her more than the salary

provided in the Collective Bargaining Agreement (CBA). The Board of Trustees later

voted to hire Roberts.

¶6     The Ekalaka Teacher’s Association (ETA) filed a charge with BOPA alleging that

the School District had failed to bargain in good faith with ETA when the school district

agreed to pay Savage $2,000.00.      Hearing Officer Anne L. MacIntyre conducted a

hearing in the case on August 12, 2004, and entered Findings of Fact, Conclusions of

Law, and Recommended Order in favor of ETA. The School District filed a Notice of

Exception to the Recommended Order. BOPA affirmed the Recommended Order with

only minor revisions and issued a Final Order.

¶7     BOPA determined that “[t]he pre-employment incentive paid to Jeff Savage was

additional compensation to him and a condition of employment,” and, therefore, was a

subject of mandatory bargaining. BOPA continued that “[b]y agreeing to pay the pre-

employment incentive to Savage without bargaining with the Ekalaka Teachers’

Association, the Ekalaka Unified Board of Trustees and Wade Northrop unilaterally

changed Savage’s compensation under the collective bargaining agreement, engaging in

direct dealing with Savage.” BOPA concluded that the School District had committed an

unfair labor practice in violation of § 39-31-401(5), MCA.

¶8     The School District petitioned the District Court for judicial review on July 8,



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2005. The District Court affirmed the Final Order, and this appeal followed.

                              STANDARD OF REVIEW

¶9    We review an agency’s conclusions of law to determine if they are correct. Hofer

v. Montana DPHHS, 2005 MT 302, ¶ 14, 329 Mont. 368, ¶ 14, 124 P.3d 1098, ¶ 14. We

review agency findings to determine whether they are clearly erroneous. Section 2-4-

704(2), MCA. The same standard of review applies to “both the District Court’s review

of the administrative decision and our subsequent review of the District Court’s

decision.” Hofer, ¶ 14.

                                    DISCUSSION

¶10   The Public Employees Collective Bargaining Act, §§ 39-31-101 through 505,

MCA, imposes a duty on Montana public employers to bargain collectively, and in good

faith, with their employees on the subjects of “wages, hours, fringe benefits, and other

conditions of employment . . . .” Section 39-31-305, MCA. An employer who “refuse[s]

to bargain collectively in good faith” commits an “unfair labor practice.” Section 39-31-

401(5), MCA.

¶11   The obligation to bargain collectively extends only to the terms and conditions of

employment of current employees, and does not extend to the terms and conditions of

employment conferred on non-employees. Allied Chem. & Alkali Workers v. Pittsburgh

Plate Glass Co., 404 U.S. 157, 164 (1971); see also Star Tribune, 295 N.L.R.B. 543, 547,

131 L.R.R.M. 1404, 1408 (1989) (holding that the terms and conditions placed on

applicants are not subjects of mandatory bargaining). The terms and conditions offered



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by an employer to non-employees still may be subject to mandatory bargaining, however,

if they “vitally affect” the terms and conditions of employment for those employees

currently working for the employer.      Pittsburgh Plate Glass Co., 404 U.S. at 179;

Monterey Newspapers, Inc., 334 N.L.R.B. 1019, 1020, 168 L.R.R.M. 1001, 1002 (2001)

(noting that wage rates offered to job applicants “vitally affected” current employees and

are mandatory subjects of bargaining).

¶12   It is undisputed that Savage was not an “employee” at the time the School District

made the $2,000.00 payment to Savage. Thus, we must decide whether the $2,000.00

payment “vitally affected” the terms and conditions of employment of ETA’s members.

A condition or benefit conferred on a non-employee “vitally affects” the active

employees if it “materially or significantly affects unit employees’ terms and conditions

of employment.” Star Tribune, 295 N.L.R.B. at 547, 131 L.R.R.M. at 1409. An indirect

or incidental impact on unit employees, to the contrary, is not sufficient to establish a

condition or benefit as a subject of mandatory bargaining. Star Tribune, 295 N.L.R.B. at

547, 131 L.R.R.M. at 1409.

¶13   BOPA held that the reasoning in St. Vincent Hospital, 2004 WL 1804091

(N.L.R.B. Div. of Judges) (2004), controls the outcome of this case. In St. Vincent

Hospital the employer unilaterally instituted a bonus program intended to attract nurses to

apply for hard to fill nursing positions. St. Vincent Hospital. The employer structured

the bonus program so that the bonus payments would be paid in increments over the first

three years of the applicant’s employment. St. Vincent Hospital.



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¶14    The National Labor Relations Board (NLRB) determined that “[a]lthough

applicants are not ‘employees’ . . . the sign-on . . . bonuses paid to the applicants, when

they become employees, are wages.” St. Vincent Hospital. The NLRB continued that the

employer was “required to bargain regarding the . . . bonuses” because “the subject of

new hire wages ‘materially or significantly affects unit ‘employees’ terms and conditions

of employment.’” St. Vincent Hospital.

¶15    We agree with BOPA that the payment to Savage should have been a subject of

mandatory bargaining because the payment represents wages that “‘materially or

significantly affect[] unit ‘employees’ terms and conditions of employment’” See St.

Vincent Hospital. The $2,000.00 payment to Savage is analogous to the bonuses paid in

St. Vincent Hospital. In both cases the employer offered the payments to the applicants

because the bargained-for salaries likely would have been insufficient to insure that the

applicants would accept the job. St. Vincent Hospital.

¶16    The School District seeks to distinguish the payment to Savage from the bonuses

in St. Vincent Hospital. The School District argues that the $2,000.00 that Northrop paid

to Savage cannot be considered “wages” because Northrop gave the check to Savage

before Savage had signed his employment contract. By contrast, the hospital paid the

bonuses in St. Vincent Hospital after the applicants became employees. This distinction,

contends the school district, makes it easier to characterize the nurses bonuses as

“wages.”




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¶17    The School District misplaces its focus on the timing and labeling of the payment.

ETA’s bargaining interest in the $2,000.00 payment to Savage derives from its larger

interest in establishing a stable wage structure through the process of collective

bargaining. See Pittsburgh Plate Glass Co., 404 U.S. at 178. The School District

circumvented the collective bargaining process when it bargained directly with Savage

and agreed to pay him compensation beyond that agreed by ETA. The unfair labor

practice occurred the moment the School District agreed to pay Savage the $2,000.00

without bargaining with ETA. The School District’s subsequent decision to issue a check

to Savage before, at the time of, or after, Savage had signed his employment contract is

irrelevant to our determination of whether the School District committed an unfair labor

practice.

¶18    The School District asserts next that BOPA erred in concluding the $2,000.00

materially or significantly affected current employees because “[t]he record is completely

devoid of any evidence establishing that the payment to Savage was made in connection

with a tentative offer of employment.” The School District appears to argue that it gifted

the $2,000.00 to Savage in order to encourage his good will toward the School District,

thereby making him more amenable to any future offers the School District might make.

¶19    We agree with BOPA’s conclusion that “it is inherently incredible that Northrop

agreed to give $2,000.00 . . . to an applicant for employment without some understanding

. . . that he would actually come to work for the districts.” The School District admits

that Northrop paid Savage $2,000.00 after Savage had interviewed for the position, after



                                            7
the School District had decided that “Savage was the best candidate for the position,” and

after Northrop had informed Savage of the salary and benefits associated with the

position. These facts are sufficient to support BOPA’s conclusion that the $2,000.00

related to an offer of employment.

¶20   Roberts’s testimony also supports BOPA’s conclusion that the School District

provided the $2,000.00 to Savage in connection with a tentative offer of employment.

Roberts testified that Northrop made her a tentative offer of employment before the

Board of Trustees gave any official approval.   Roberts also testified that she asked for a

reimbursement of moving expenses from Northrop, but he declined her request on the

ground that he could not pay her more than the salary provided for in the collective

bargaining agreement. BOPA reasonably inferred from this testimony that Northrop

made a similar tentative offer of employment to Savage and that Northrop had included

compensation that went beyond the salary provided in the CBA.

¶21   Finally, the School District points out that, in affirming BOPA’s legal conclusions,

the District Court appears to hold that the School District violated the CBA between ETA

and the School District. In light of this holding, the School District argues that the

District Court should have dismissed this case because ETA had failed to “pursue the

mandatory grievance procedure set forth in the CBA.”

¶22   We agree with ETA that the School District bases its argument on a single “inapt

phrase” near the end of the District Court’s Decision and Order. The District Court

correctly affirmed BOPA’s conclusions of law, noting that the $2,000.00 payment to



                                            8
Savage “vitally affected” the terms and conditions of ETA members’ employment. Any

conclusion that the District Court may have made regarding the CBA agreement

constitutes harmless error. Hall v. State, 2006 MT 37, ¶ 21, 331 Mont. 171, ¶ 21, 130

P.3d 601, ¶ 21.

¶23   Affirmed.

                                                    /S/ BRIAN MORRIS


We Concur:

/S/ KARLA M. GRAY
/S/ JOHN WARNER
/S/ JAMES C. NELSON
/S/ JIM RICE




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