Lead Opinion
Opinion for the Court filed by Chief Judge EDWARDS.
Dissenting opinion filed by Circuit Judge HENDERSON.
Between 1986, when the Daily News (“Company”) purchased its daily newspaper operation, and 1989, when the National Labor Relations Board (“NLRB” or “Board”) certified the Los Angeles Newspaper Guild, Local 69, AFL-CIO (“Guild” or “Union”), as the collective bargaining representative of the Company’s editorial employees in Washington, D.C. and eight locations in California, the Company followed its predecessor’s policy of giving annual merit increases to employees in the editorial department. However, following the Union’s certification, the Company unilaterally decided to terminate its practice of granting merit increases. In response, the Guild filed a complaint with the NLRB.
The Board determined that the Daily News had unlawfully refused to bargain, in violation of section 8(a)(5) of the National Labor Relations Act (“NLRA” or “Act”),
On appeal, the Company contends that the Board’s decision should be reversed because a discretionary program can never become a fixed term or condition of employment. However, the Company’s argument is misguided in suggesting that a term or condition of employment can never be a mandatory subject of bargaining so long as it carries the appellation “discretionary.” Indeed, the proper analysis in a case such as this one does not begin with the label assigned to a particular employee benefit, but, rather, with the character of the program at issue. Here, the Board found that the Company had an established practice of annually evaluating the merit of each employee based upon standard performance evaluations, and then determining an appropriate increase based only on the merit criterion. The program was in no sense whimsical, for each employee was assured an annual evaluation and a merit increase if his or her evaluation warranted it. The only discretion retained by the Company was with respect to the amount of the increases to be given to employees who earned good evaluations. Thus, the Board properly determined that the Company could not discontinue the entire program based on non-merit considerations, at least not without first negotiating with the Guild. Because there is substantial evidence in the record as a whole to support the Board’s findings, and because we find no infirmity in the legal analysis underlying the Board’s judgment, the Company’s petition for review is denied, and the Board’s cross-application for enforcement is granted.
I. BackgRound
A. The Dispute
On January 1, 1986, the Daily News took over the operation of a daily newspaper it had purchased from another company, the Valley News. At that time, the Company adopted its predecessor’s policy of annually evaluating the performance of each editorial department employee on or about the anniversary of the employee’s date of hire or last promotion, and using the performance review as the basis for increasing salaries. These merit increases could range from no increase to a substantial raise, depending upon the employee’s evaluation.
Although the amount of the increase was discretionary, the timing of the reviews was fixed, and the sole criterion for determining the amount of the increase was merit (except for those employees who had already reached the top pay for their job classification). Moreover, a vast majority of all eligible employees received some kind of raise each year. For example, in 1986, 81.5% of the employees who received performance evaluations received merit raises; in 1987, 82.7% received merit raises; and in 1988 and the first five months of 1989, 89% received merit raises.
On May 8, 1989, the Board certified the Guild as the collective bargaining representative for all of the Company’s full-time and regular part-time editorial department employees in Washington, D.C. and at eight locations in California. Bargaining negotiations between the Guild and the Company commenced on June 14, 1989. The parties agreed to defer bargaining on economic issues until all non-economic issues had been negotiated. Company negotiator Tom Burke
Sometime after the June 14 bargaining session, the Daily News decided that it would not give any raises to employees who were part of the collective bargaining unit (“unit employees”). The Company concedes that this decision was not based on any merit determinations regarding the individual employees. Indeed, at least two unit employees were informed at their annual performance appraisal that, based on their performance, they would have received increases, but that the Company would not give raises because of the Union negotiations. Tr. of Hearing (Dec. 12, 1989) 27, 33-34, reprinted in P.A. 148,154-55.
At the second bargaining session, held on July 5,1989, Burke announced that the Company had decided to discontinue granting merit raises to unit employees. The Company did, however, continue to issue annual performance appraisals to all employees, and also continued to grant merit increases to those employees outside of the collective bargaining unit.
B. The Board’s Initial Conclusions
The Guild filed a complaint with the NLRB, which issued a Decision and Order on August 27, 1991. Daily News of Los Angeles,
Further, the Board rejected the Company’s argument that the Guild had waived any possible objections to changes in the increase program by agreeing to the employer’s exercise of discretion in granting the increases. The Board ruled that the Guild had only agreed to the exercise of discretion concerning the amount of the raises, but did not waive an objection to the discontinuance of the entire program. Id.
Accordingly, the Board determined that the Company had violated section 8(a)(5) of the NLRA by unilaterally withholding the annual merit increases from employees. The Board ordered the Company to cease and desist from this unfair labor practice and to make the unit employees whole for any monetary losses sustained because of the Company’s unlawful conduct. Id. at 516.
C. Previous Proceedings Before This Court
On appeal, this court questioned whether the Board’s core holding might be inconsistent with prior Board precedent. The court noted that, in other eases where there has been “an established pattern of increases that [was] fixed as to timing but discretionary as to amount,” the Board has appeared to treat such programs as lacking the character of an established practice. Daily News of Los Angeles v. NLRB,
The court, sua sponte, also invited the Board to address two additional issues on remand. First, the court asked how the Board could justify a back pay remedy for failure to grant discretionary wage increases when the amount of the increase each employee would have received was “by hypothesis ... unascertainable.” Id. at 1577. Second, the court questioned whether the prohibition on wage and benefit decreases during negotiations was consistent with the Supreme Court’s decisions in NLRB v. Insurance Agents’ International Union,
D. The Board’s Decision on Remand
The Board held on remand that, under Katz, any unilateral change covering a mandatory subject of bargaining is unlawful regardless of the nature of the change or the particular term or condition affected. Daily News of Los Angeles,
The Board also pointed out that a back pay award need only be based on an approximation of the amount lost, not an exact determination. The Board concluded that, in this case, an approximation could be reached, using such information as the past annual reviews of the unit employees, the merit increases given to unrepresented employees with similar reviews, and the amounts of the increases for unit employees in previous years. Thus, the Board concluded, its remedial order would make possible the calculation of a proper back pay award for each affected employee. Id.
Finally, the Board rejected the Company’s argument that discontinuing the merit-increase program was a legitimate economic weapop protected under Insurance Agents’ and American Ship. According to the Board, those cases only apply to parties that are engaged in lawful, good-faith bargaining. Therefore, because a unilateral change in a term or condition of employment is itself a violation of the duty to bargain, the Board reasoned that the Company’s change could not be a lawful economic weapon. Accordingly, the Board reaffirmed its finding of a violation and its prior remedial Order. Id. at 1242^3.
II. Analysis
Sections 8(a)(5) and 8(d) of the NLRA require parties in a collective bargaining relationship to negotiate in good faith over “wages, hours, and other terms and conditions of employment.” 29 U.S.C. § 158(d) (1988). However, this duty applies only to those areas that are considered to be mandatory subjects of bargaining. See NLRB v. Borg-Warner Corp.,
Given that the merit-increase program was a mandatory subject of bargaining, we next turn to the question of whether the program was impermissibly changed. The Supreme Court, in Katz, held that an employer violates the duty to bargain by unilaterally changing a term of employment with respect to a mandatory subject of bargaining
As the Board correctly explained in its supplemental decision, it makes absolutely no difference under Katz whether the change at issue adds to or subtracts from employees’ wages, or whether it institutes a new employment policy or withdraws one that already exists. Thus, “in some circumstances it will be an unfair labor practice to grant unilaterally a wage increase, and ... in other circumstances it will be an unfair labor practice to deny unilaterally a wage increase. The Act is violated by a unilateral change in the existing wage structure whether that change be an increase or the denial of a scheduled increase.” NLRB v. Allied Prods. Corp.,
In conducting this inquiry, we must sustain the factual findings of the Board so long as substantial evidence exists in the record to support them. Universal Camera Corp. v. NLRB,
A. The Company Changed a Fixed Term or Condition of Employment
The Daily News argues that the merit-increase program was fully discretionary, leaving the Company free to discontinue the program at will without violating Katz. The Board’s findings do not support the Company’s contentions.
The decision of the Administrative Law Judge (“ALJ”), incorporated by the Board, states that, under the merit-pay program, the “salary increase, if any, is based on merit, and may range from no increase to a substantial increase depending on the perceived efforts and ability of the employee, and his or her value to the newspaper. The amount of the increase, if any, is totally discretionary.” DNLA I,
The crucial question, therefore, is what Katz requires of an employer if an established merit-increase program is fixed as to timing and criteria, but discretionary as to amount.
Both this court and the NLRB have long applied this analytical framework to determine whether employers violate Katz when they unilaterally discontinue merit pay plans. As far back as 1971, this court held that an employer who had granted discretionary increases based on annual merit reviews was required to continue evaluating employees according to the plan. UAW v. NLRB (Udylite Corp.),
While the Board’s precedent in this area has not always been a model of clarity, its decisions similarly indicate that, when an employer has established a regular wage-increase program with fixed criteria, even though discretionary in amount, that program cannot be discontinued unilaterally. See, e.g., Rochester Inst. of Technology,
The Company points to two recent cases that found an employer’s denial of wage increases to be lawful. However, in both instances, the employer did not suspend the program, but rather applied its usual evaluation criteria before deciding that no increases were justified. Thus, in American Packaging Corp.,
The Daily News was, therefore, required to continue its prior practice of making individualized determinations based on merit. Although the Company remained free to evaluate the merit of each employee and to deny increases if no one was deserving, it could not make an across-the-board policy determination based on non-merit criteria. It is undisputed, however, that the Company did not, in fact, base its decision to deny increases on particularized merit considerations. Rather, the Company made a broad policy determination that, regardless of merit, no unit employees should receive increases. By ignoring the established criteria for making its wage-increase decisions, the Company changed a fixed aspect of the policy.
The Board’s finding that an individualized merit evaluation was the only established criterion for determining the amount of each increase has sufficient support in the record to require affirmance under Universal Camera. Indeed, the Company’s editor, Robert Burdick, testified that, in general, no factors other than performance were considered by the Company in assessing raises. Tr. of Hearing (Dee. 13, 1989) 175, reprinted in P.A 297. The employer has also made no assertion that the general economic status of the Company was part of the criteria that had previously been considered in determining the amount of the increases. More importantly, the record reflects that the Company was not economically unable to give the increases, and indeed, non-unit employees continued to receive raises as before.
B. The Company’s Action Was Not a Legitimate Economic Bargaining Weapon
The Supreme Court has placed limits on the Board’s power to “sit in judgment upon every economic weapon the parties to a labor contract negotiation employ.” Insurance Agents’,
The Daily News rightly points out that these cases strip the Board of the power to interfere with the Company’s legitimate economic weapons in the guise of enforcing a duty to bargain in good faith. However, the Board is only forbidden to pass judgment on a particular economic weapon if that weapon is “used in support of genuine negotiations.” Katz,
In this case, as in Katz itself, the unilateral action of the employer constitutes a refusal to negotiate to impasse over a mandatory subject of bargaining, which is a violation of section 8(a)(5) precisely because such an action impermissibly interferes with the collective bargaining process. It is clear beyond a doubt that the Company’s action cannot fall within Insurance Agents’ or American Ship because, in refusing to negotiate over a mandatory subject, the employer is evading the duty to bargain. Nothing in Insurance Agents’, American Ship, or Katz allows an employer to refuse to bargain over a mandatory subject by simply declaring the refusal to be an “economic weapon” or tactic to gain leverage in negotiations. To condone such a proposition would make a mockery of the bargaining process.
C. The NLRB’s Remedy is Sufficiently Ad-ministrable
Section 10(c) of the NLRA authorizes the Board, upon finding a violation of the Act, to
In eases involving a violation of section 8(a)(5) based on a company’s unilateral alteration of existing benefits, this court has found it appropriate “ ‘to order restoration of the status quo ante to the extent feasible, and in the absence of evidence showing that to do so would impose an undue or unfair burden upon the [employer].’ ” NLRB v. Cauthorne,
The Company argues that, in this case, because the amount of the wage increases was discretionary, there is no workable procedure for determining how much back pay any given employee might be owed. We disagree. The Daily News continued to give annual merit reviews and performance ratings to both unit and unrepresented employees and to grant merit increases to the latter group based on those reviews and ratings. Thus, in a back pay proceeding, the Board could consider, for each unit employee, the amounts of raises given to unrepresented employees with similar ratings; the amounts of increases given to the same employee in previous years when his or her rating was similar; the increases given to other editorial employees with similar ratings in previous years; and whether the employee was already at or near the top of the salary range for his or her position.
All of these criteria are sufficiently objective to confine the inquiry as to what the raise would have been. In addition, the employer remains free to advance any appropriate arguments regarding how the various factors would have been applied in specific cases. In any event, because the evidence from past years indicates that at least 80% of the eligible employees would have received some increase, the Board will undoubtedly come closer to approximating what would have occurred by attempting to estimate back pay, than by denying a back pay remedy altogether. See NLRB v. Overseas Motors, Inc.,
D. Other Claims
The Company’s remaining claims lack merit. First, the Daily News contends that,
This argument is specious. As discussed supra, Katz only forbids a unilateral change of the employer’s existing practices covering mandatory subjects of bargaining. Nothing prevented the Daily News from continuing its existing merit-increase program, particularly since the Union representative specifically demanded that the Company keep the program in place pending negotiation. Furthermore, simply because employees choose to negotiate over an existing term or condition of employment does not mean the employer is free to change the term unilaterally in the interim. Otherwise, Katz’ proscription against unilateral change would be meaningless.
The Daily News also argues that the Board’s decision should be reversed because it failed to reach a majority rationale and because the decision to overrule Anaconda Ericsson should not be enforced retroactively. We reject both of these claims. First, all four participating Board members did agree on the controlling legal principle that an employer may not unilaterally discontinue an established practice of granting merit increases even though the employer retained discretion as to the amount of the increases. See DNLA II,
Second, the retroactive overruling of Anaconda Ericsson does not constitute “an abrupt break with well-settled policy,” United Food & Commercial Workers Local 150-A v. NLRB (Dubuque Packing Co.),
III. Conclusion
This case presents a more simple series of questions than the arguments of the parties or the long procedural history might lead one to believe. Under Katz, an employer may not unilaterally change a term or condition of employment with respect to a mandatory subject during the collective bargaining process. If an established merit-increase program is fixed as to timing and criteria and discretionary only as to amount, then the employer is obligated to keep the program in place and continue to apply the same criteria. Because the Daily News did not use its fixed criteria, but instead made a decision to discontinue the merit-pay program regardless of individual performance, we find that it changed an established term of employment with respect to a mandatory subject of bargaining, thereby violating Katz. Furthermore, the Board’s proposed remedy is sufficiently administrable to justify enforcement. Therefore the petition for review is denied, and the cross-application for enforcement is granted.
So ordered.
Notes
. 29U.S.C. § 158(a)(5) (1988) states: "It shall be an unfair labor practice for an employer ... to refuse to bargain collectively with the representatives of his employees.... ”
. The Company argues that these percentages are misleading, because some employees (such as those who had not yet worked a full year or who worked part-time) received neither performance evaluations nor increases. This contention, while (rue, is irrelevant to the Board’s findings. The percentages indicate that a very large majority of employees who were eligible to receive increases under the program did, in fact, receive some kind of raise.
. The NLRB’s supplemental decision (and the prior decision of this court) focused solely on the fact that the merit-increase program was fixed as to timing. While we find that the regularized, annual nature of the evaluations at issue is relevant to whether employees had come to view the merit increases as fixed terms or conditions of employment, see, e.g., Guy Gannett Publishing Co.,
. Supervising editor Robert Burdick stated in testimony before the ALJ that "it is our absolute policy to grant an increase when the supervisor feels that someone’s work merits. And when someone’s work doesn't, then that person simply does not get an increase.” Tr. of Hearing (Dec. 13, 1989) at 129, reprinted in P.A. 251. Thus, unequivocal evidence in the record indicates that, prior to the Company’s discontinuance of the merit-increase policy, a positive performance evaluation invariably corresponded to some form of wage increase.
.The Company points to the Second Circuit's decision in J.J. Newberry Co. v. NLRB,
. Even Anaconda Ericsson, which the Board overruled, does not appear to run contrary to this general proposition. In that case, the Board ruled in favor of an employer who refused to grant a discretionary general wage increase during collective bargaining negotiations despite the fact that such an increase had been given in each of the prior five years. However, there was no evidence that the general wage increases were determined through the application of any fixed criteria. Therefore, it is unclear whether any term or condition of employment had been established. See. id. at 834-35.
. The Company's reliance on Winn-Dixie Raleigh, Inc.,
. The Daily News asserts that its decision to stop granting the wage increases was not a permanent policy change because it informed Union representatives that future merit increases would be subject to negotiations with the Guild regarding the economic package as a whole. Thus, according to the Company, this case is similar to Stone Container and American Packaging, where the NLRB found no violation when an employer simply decided not to award a discretionary merit increase in a given year. However, as discussed supra, in those cases, the employers applied their existing formulae for granting wage increases, and then decided that no one was eligible. In contrast, the Daily News suspended the entire policy despite the existence of deserving employees. Such an action constitutes a change in a term or condition of employment regardless of how long the suspension lasts. See, e.g., Udylite Corp.,
Dissenting Opinion
dissenting:
In NLRB v. Katz,
In Katz, the Supreme Court rejected the contention that, because the merit raises awarded “were in line with the company’s long-standing practice of granting quarterly or semiannual merit reviews,” they “in effect, were a mere continuation of the status quo.”
The majority strains mightily, but unconvincingly, to escape the inevitable effect of Katz. Most fundamentally, the majority attempts to portray the annual increases as something other than “discretionary,” dismissing that term as an “appellation” and a “label.” Majority Op. at 408. Yet the Board itself so described the raises based on the administrative law judge’s unassailable factual finding that “the amount of the increase, if any, is totally discretionary.”
The majority also seeks support from Circuit ease law, see Maj.Op. at 412, but its authority is inapposite. In NLRB v. Blevins Popcorn Co.,
Because the Company’s practice of awarding totally discretionary annual merit raises was not a fixed term or condition of employment, I dissent from the majority’s denial of the petition for review.
. That the discretionary raise was not a "fixed" term of employment is clear from the obvious impracticality of the Board's remedy, which the majority has endorsed (“that the employees be paid the ‘difference between their actual wages and the wages they would have otherwise received' if the merit increases had not been unilaterally discontinued”,
. The opinions the majority cites from other circuits, see Maj.Op. at 411, are no more helpful. In NLRB v. Allied Prods. Corp.,