Cаravelle Wood Products, Inc. refused to bargain with the Union
1
in order to challenge the Board’s certification of the Union as exclusive bargaining representative of the Company’s employees. The Board seeks enforcement of its decision and order, reported at
The Company manufactures wood products in South Chicago Heights, Illinois. It is a corporation whose stock is owned in equal portions by ten shareholders : Joseph Paradiso (рresident); his cousins Louis Paradiso (vice president), John Paradiso (head of receiving and mill room), Donald Paradiso (head of assembly), Nick Paradiso (head of shipping and packaging) and Rose Lecoure; the husband of another cousin, Richard Valentino; George Grutzius (head of mill room); Donald Kloss (head of finish room); and Charles Gaines. Thus 70 percent of the shares are owned by members of the Paradiso family; seven of the ten stockholders are active in the management of the Company.
Among the persons employed by the Company are eight relatives of shareholders: Gina and Paul Paradiso, the wife and son of Louis Paradiso; Deborah Paradiso, the daughter of John Paradiso; Inеz Paradiso, the wife of Donald Paradiso; Irene, Raymond and Dennis Paradiso, the wife and sons of Nick Paradiso; and Donald W. Kloss, the son of Donald Kloss.
After directing a secret election among the Company’s production and maintеnance workers, the regional director excluded as “employees” the eight relatives because their parents or spouses were “substantial” shareholders in a closed corporation. The results of the election were 35 votes for the Union and 32 against. The six challenged ballots cast by excluded relatives might affect the result; enforcement of the order to bargain is therefore improper if those relatives should not have been еxcluded.
The regional director, whose decision was affirmed by the trial examiner and the Board, excluded the eight relatives under the definition of “employee” in section 2(3) of the National Labor Relations Act (29 U.S.C. § 152(3) (1965)):
The term “emplоyee” shall include any employee, . . . unless this subchapter explicitly states otherwise, . but shall not include any individual employed as an agricultural laborer, or in the domestic service of any family or person at his home, or any individuаl employed by his parent or spouse. .
He based his exclusion on the Board’s decision in Foam Rubber City #2,
*677
Before
Foam Rubber City
the Board had interpreted section 2(3) to exclude the spouse of a
sole
shareholder, though technically the corporation, not the related shareholder, was the employer. P. A. Mueller and Sons, Inc.,
In
Foam Rubber City
the challenged employee was the son of one 50 percent stockholder and the nephew of the other. The Board reasoned that, if the father and uncle had organized their business as a partnership, the son would not be an employee under section 2(3). NLRB v. Hofmann,
In so interpreting section 2(3), the Board specifically disagreed with the Sixth Circuit Court of Appeals decision in Cherrin Corp. v. NLRB,
The Board’s decision in
Foam Rubber City
was not reviewed by a court of appeals; in fact, this is the first time a federal court has been faced squarely with a challenge to its validity. But this circuit has previously indicated its view of
Foam Rubber City
in Lake City Foundry Co. v. NLRB,
The Board has not been consistent in its application of
Foam Rubber City.
In Buckeye Village Market, Inc.,
The Board argues it has almost unlimited discretion to expand the exclusionary category of section 2(3). This court, disagreeing in
Lake City Foundry,
was not the first court to limit the Board’s discretion in interpreting statutory language. The United States Supreme Court in Office Employees International Union, Local No. 11 v. NLRB,
The Foam Rubber City formulation, which excludes children and spouses of “substantial” shareholders of closely held corporations, has proved so elastic that it virtually repeals the statutory language. We must refuse to enforce the order to bargain because it was based on exclusion of the seven Paradisos and Donald W. KIoss as “employees” under section 2(3).
In its application for enforcement, the Board urges us to allow exclusion of KIoss and the Paradisos from the appropriate bargaining unit under section 9(b) of the act (29 U.S.C. § 159(b) (1965)):
Thе Board shall decide in each case whether, in order to assure to employees the fullest freedom in exercising the rights guaranteed by this sub-chapter, the unit appropriate for the purposes of collective bаrgaining shall be the employer unit, craft unit, plant unit, or subdivision thereof. .
The problem with its position is that the Board wants to make exclusion of family members from a unit as automatic under section 9(b) as their exclusion as employees would hаve been under section 2(3). In
Foam Rubber City
the Board said all individuals it excluded under section 2(3) would also be excluded under section 9(b), because such persons “have interests more closely identified with management than with their fellow employees.”
We see no reason to give the Board total discretion under one section to accomplish what it cannot under another section. As the court said in NLRB v. Sexton,
[W]e find no justification for the exercise of discretion on thе part of the Board, by virtue of Section 9 of the Act, to exclude from the appropriate bargaining unit and from participation in the election for the selection of a bargaining agent any persons on the basis of family relationship other than those specifically excluded under Section 2(3).
Considering the broad definition of “employee” used by Congress in section 2(3) and the critical interests of all employees in selecting their economiс representatives, 2 we believe section 9(b) is neither specific enough nor strong enough to support a grant of total authority to the Board to exclude relatives from a unit.
While we will not allow the Board to apply an аutomatic or per se rule to exclude spouses and children under section 9(b), there are many precedents for the Board’s exclusion on a case-by-ease basis of relatives who enjoy a “special status,” such аs privileges or favorable working conditions not granted other employees.
E. g.,
Cherrin Corp. v. NLRB,
In the present case, however, the regional director made a specific finding that nоne of the challenged employees enjoys a “special status.” He discussed no other factors which might guide the *679 Board’s exercise of discretion under section 9(b); instead he relied entirely on the fact of family relationshiр. There are a number of factors the Board might consider under section 9(b): how high a percentage of stock the parent or spouse owns, how many of the shareholders are related to one another, whether the shаreholder is actively engaged in management or holds a supervisory position, how many relatives are employed as compared with the total number of employees, whether the relative lives in the same household оr is partially dependent on the shareholder.
Because the Board is entitled to make a case-by-case analysis under section 9(b), we will remand this case to the Board for a factual determination of whether the relаted employees’ ballots should be counted. If the Board decides to exclude the family members under section 9(b), or if their ballots do not affect the outcome of the election, the Union’s certification will be valid and the Company will have to bargain with the Union.
The Company raises two further obstacles to the validity of the certification. The first is the Board’s failure to hold an evidentiary hearing on one of the Company’s objections to the electiоn. The objection involved the entrance of a Union organizer into the polling area during the election. He spoke only with a Board agent and not with any employees. The Company relies on Mil-chem, Inc.,
The second obstacle is the Company’s assertion that a new election should be held because of the rapid rate of employee turnover and the length of time since the original election, which was held in June, 1969. The Company cites Clark’s Gamble Corp. v. NLRB,
Enforcement is denied and the case is remanded to the Board for further proceedings consistent with this opinion.