NEW ENGLAND HEALTH CARE EMPLOYEES UNION, District 1199, SEIU, AFL-CIO, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, CHURCH HOMES, INC., d/b/a AVERY HEIGHTS, Intervenor.
Docket No. 05-0181-AG.
United States Court of Appeals, Second Circuit.
Argued: December 21, 2005. Decided: April 19, 2006.
448 F.3d 189
Aileen A. Armstrong, Deputy Associate General Counsel (Robert J. Englehart, Supervisory Attorney, Steven B. Goldstein, Attorney, Arthur F. Rosenfeld, Acting General Counsel, John E. Higgins, Jr., Deputy General Counsel, Margery E. Lieber, Acting Associate General Counsel, on the brief), National Labor Relations Board, Washington, DC, for Respondent.
Michael C. Harrington, Murtha Cullina LLP, Hartford, CT, for Intervenor.
Before: JACOBS, LEVAL, STRAUB, Circuit Judges.
JACOBS, Circuit Judge.
The New England Health Care Employees Union (“Union“) petitions for review of so much of the decision of the National Labor Relations Board (“Board“) as dismissed the complaint alleging that Church Homes, Inc., d/b/a Avery Heights (“Avery“), violated
Background
Avery is a combined nursing home/assisted living facility for approximately 500 adults. The Union has been the certified bargaining representative for all service and maintenance employees at Avery since the early 1970s. Approximately 180 to 185 of the Union‘s members began an economic strike on November 17, 1999, after Avery and the Union were unable to agree on a new contract. Initially, Avery carried on operations by relying on nonstriking employees, managers, temporary employees, and volunteers. The evidence shows that Avery officials were satisfied at first with the continuity and quality of patient care and with worker morale, but became concerned about their ability to sustain patient care as long hours and stressful conditions continued. On December 2, the Union President warned Avery‘s chief negotiator that, unless compromises were made, the strike was going to be a long one.
Avery made a conscious decision to tell the Union nothing about the hiring of permanent replacements, and took active measures to keep the replacement campaign a secret while hiring as many permanent workers as it could before the Union caught on. By the end of December, however, the Union received reports from workers and discovered other clues, and arranged for a meeting with Avery and a federal mediator on January 3, 2000; at that meeting, Avery disclosed that “over 100” permanent replacements had been hired.
On January 5, 2000, the Union offered on behalf of the strikers to return to work immediately. Avery noted that the offer was not unconditional. On January 20, 2000, the Union renewed the offer to return, this time unconditionally. Avery began recalling strikers to positions that had not been occupied by permanent replacements, ultimately reinstating 78 or 79.
The Board Decision
The Board ruled that Avery “properly exercised its right to hire permanent replacements for its striking employees and that it did not violate Section 8(a)(3) [of the Act] when it refused to reinstate the strikers upon their January 20, 2000 unconditional offer to return to work.” Bd. Decision at 8. The Board cited the rule that an employer has a right to hire permanent replacement workers — a valuable tool for “fight[ing] back” in an economic battle — absent a showing that the employer had an independent unlawful motive for the hiring, id. at 6, and found that no such unlawful motive was shown here. Effectively, the Board ruled that no inference of unlawful motive could be drawn from Avery‘s secrecy because an employer is not “under a duty to disclose to a union its intention to hire permanent replacements.” Id. at 6.
The Board reasoned that an employer has no duty to notify a union that replacement workers are being hired, and may legitimately hire in secret, because at least one valid objective of such hiring — an enhanced ability to withstand the strike — does not depend on making the striking workers aware that they are being replaced. Even assuming that Avery was required to inform the Union, the Board concluded that Avery complied with that requirement at the January 3 meeting. See id. at 6. The Board emphasized the “sharp distinction between seeking to prevail over the Union,” which is a lawful goal, “and seeking to oust the Union as a bargaining representative,” which is not. Id. at 7. According to the Board, there was no evidence that Avery was seeking to oust the Union and ample evidence that Avery‘s goal was to exert economic pressure on the Union to induce it to reach an agreement on terms favorable to Avery. Id. We refer to the goal of exerting economic pressure on the Union as the “bargaining leverage rationale” for Avery‘s conduct.
The dissenting board member concluded that the General Counsel had discharged his burden of showing that Avery had an independent unlawful motive — “to undermine the Union by engendering striker dissatisfaction with the Union” — for the decision to hire permanent replacements, Bd. Decision at 13, 15 (Walsh, M., dissenting in part), that the burden therefore shifted to Avery to demonstrate that it would have hired the permanent replacements even in the absence of that unlawful motive, id. at 14, and that the rationales proffered by Avery had been “exposed as shams,” id. at 15.
Discussion
A. Applicable Law
Under Supreme Court precedent, an employer that refuses to reinstate economic strikers violates
At the same time (as the Board recognized), the Act is violated if “an independent unlawful purpose” motivated the hiring of permanent replacements.1 Bd. Decision at 5; see also Hot Shoppes Inc., 146 NLRB 802, 805 (1964). As with other elements of an unfair labor practice, the General Counsel cannot prevail without a finding that the employer had an independent unlawful purpose. See NLRB v. Transp. Mgmt. Corp., 462 U.S. 393, 401 (1983).
B. Business Necessity
On appeal, the Union argues that an employer that permanently replaces striking workers bears the burden of establishing that the hiring of replacements was itself motivated by a legitimate and substantial business necessity.2 We decline to consider this argument.
The General Counsel declined to assert the business necessity argument. The General Counsel has complete “discretion to decide whether or not to issue a complaint, and to determine which issues to include in that complaint,” Williams v. NLRB, 105 F.3d 787, 791 n. 3 (2d Cir. 1996) (internal citations omitted); see
When the Union itself tried to make the business necessity argument, the ALJ refused to hear it on the ground that the argument “enlarged upon or change[d]” the allegations of the complaint.3 Bd. Decision at 26 (citing Kimtruss Corp., 305 NLRB 710, 711 (1991) (“It is settled that a charging party cannot enlarge upon or change the General Counsel‘s theory.“)); see also IBEW, Local No. 903, 230 NLRB 1017, 1019-20 (1977) (“[T]o permit the Charging Party to introduce . . . evidence to support theories of violations [other] than the theory relied upon by the General Counsel, is tantamount to granting to the Charging Party authority to amend the complaint in derogation of the authority of the General Counsel who has exclusive authority as to the issuance and conduct of the complaint.“). On appeal to the Board, the Union initially filed — but then withdrew — an exception to the ALJ‘s refusal to consider the business necessity argument. It thus transpired that the parties (i.e., the General Counsel and the Union) never actually presented the business necessity argument to the Board. Since we are bound by a Board determination absent “extraordinary circumstances” or Board action “patently in excess” of its authority, and since the Union has brought to our attention evidence of neither condition,4 we decline to consider the business necessity argument.
The Union challenges the Board‘s finding that Avery was not motivated by “an independent unlawful purpose” in hiring permanent replacements, and argues that this finding is unsupported by substantial evidence. We do not reach that question because we conclude that the Board made a central and unwarranted inference that renders its conclusion arbitrary and capricious.
Because Congress has delegated administration of the Act to the Board — whose members we presume to have “broad experience and expertise in labor-management relations” — we accord great deference to the Board‘s findings of fact, Penasquitos Village, Inc. v. NLRB, 565 F.2d 1074, 1079 (9th Cir. 1977); we are particularly deferential when the Board draws inferences based on its expertise, see Radio Officers’ Union v. NLRB, 347 U.S. 17, 48-49 (1954); see also NLRB v. Iron Workers, 434 U.S. 335, 341 (1978) (“[The Board‘s] resolution of . . . mixed factual and legal questions normally survives judicial review.“).
Deference has its limits: we are not bound to abide by the Board‘s derivative inferences to the extent that they are “irrational,” “tenuous,” or “unwarranted.” Penasquitos Village, 565 F.2d at 1079 (internal quotation marks omitted); see also Universal Camera, 190 F.2d at 432 (“[W]e must abide by [the Board‘s derivative inferences] unless they are irrational.“) (Frank, J., concurring). If such an irrational derivative inference is sufficiently central to the Board‘s conclusion, the drawing of the inference may be arbitrary and capricious pursuant to
The scope of review under the arbitrary and capricious standard is narrow and a court is not to substitute its judgment for that of the agency. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made. In reviewing that explanation, we must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.
State Farm, 463 U.S. 29, 43 (1983) (internal quotation marks and citations omitted); see also Allentown Mack Sales and Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998) (“[A]djudication is subject to the [State Farm] requirement of reasoned decisionmaking . . . .“). However, “[w]hile we may not supply a reasoned basis for the agency‘s action that the agency itself has not given, SEC v. Chenery Corp., 332 U.S. 194, 196 (1947), we will uphold a decision of less than ideal clarity if the agency‘s path may reasonably be discerned.” Bowman, 419 U.S. at 285-86.
The ALJ chiefly relied on three pieces of evidence in concluding that Avery acted with the independent and unlawful purpose of punishing the strikers and breaking the Union‘s solidarity:
- Avery‘s principals conceded that “a decision was made not to inform the Union of [Avery‘s] plans to permanently replace the striking employees,” from which the ALJ concluded that Avery “consciously concealed” what it was doing. Bd. Decision at 28, 33.
On December 31, 1999, Avery CEO Harper sent a memo (“Harper‘s memo“) to Avery‘s Board of Directors, stating that
[a]s a well-executed surprise event the day before Christmas, we began to permanently replace striking workers at Avery. These new employees have some distinct advantages: they are very pleased to have the job for the money we currently pay; they have fine work ethics; they want to learn; they are less expensive than temporary workers; and they bring predictable stability for the future, when the strike is over, because they say they want to work here for a long time. . . . If [the Union] refuses to seriously negotiate in good faith, we plan to add one or more permanent replacements each day. We have [the Union] in a real bind at Avery.
Id. at 30.
- Scott Cohen, the owner of a temp agency used by Avery, testified that Avery‘s director of operations told him that its plans regarding permanent replacements were to be kept “hush-hush” and that it needed to get as many bodies hired as it could before the Union found out. Id. at 5.
The Board disagreed with the ALJ, finding that the General Counsel had in fact failed to demonstrate “an unlawful motive in hiring permanent replacements.” Id. at 6.
We accept the Board‘s premise that an employer has no legal obligation to inform striking workers before hiring permanent replacements. See Armored Transfer Serv., Inc., 287 NLRB 1244, 1251 n. 21 (1988). But it was “unwarranted,” see Penasquitos Village, 565 F.2d at 1079, for the Board to conclude — based on that observation alone — that an employer‘s decision to keep the hiring of permanent replacements secret is not probative of whether the employer had an independent unlawful purpose for the hiring.
As the Board saw it, Avery‘s conduct enhanced its bargaining advantage in the “economic battle” by: (i) prolonging its capacity to withstand the strike and (ii) pressuring the strikers to return once they realized that they were being replaced. Bd. Decision at 6. That is sound as far as it goes; but it does not account for the secrecy. Why would an employer lawfully seeking to enhance its bargaining leverage keep secret the hiring of permanent replacements? There may be many legitimate explanations for secrecy — e.g., a fear of picket-line violence — but the Board made recourse to none.5 Absent such countervailing considerations, and even if one adopts the Board‘s own analytic framework, logic suggests that an employer seeking to enhance its bargaining leverage by hiring permanent replacements would have every incentive to publicize the effort, and that an employer seeking only to prolong its ability to withstand the strike would be indifferent to whether the strikers and the union knew what it was doing.
Conversely, it would appear that employers with an illicit motive to break a union have a strong incentive to keep the ongoing hiring of permanent replacements secret. The replacement of over half of a unionized workforce with nonunion workers would devastate the union‘s power and credibility. An employer seeking to land such a blow cannot simply announce the hiring of large numbers of replacements, because in order to justify a refusal to allow striking workers to return to work under the “permanent replacement” safe harbor, the employer must have achieved an employment relationship with the permanent replacements somewhere between “a mere offer, unaccepted when the striker seeks reinstatement” and “actual arrival on the job.” See H & F Binch Co. v. NLRB, 456 F.2d 357, 362 (2d Cir. 1972). So an employer seeking to punish strikers and break a union therefore needs enough time to establish an employment relationship with a large number of permanent replacements before the union can react by offering to return to work, and will therefore have a strong incentive to keep the replacement program secret for as long as possible.
In sum, the Board erred because it failed to acknowledge the natural and logical implications of the facts it credited and the analytic framework it adopted.
At the same time, this opinion is narrow: Since we do not decide whether substantial evidence supported the Board‘s conclusion that the Union failed to carry its burden of demonstrating an independent unlawful purpose, this opinion does not preclude the Board on remand from reaching that same conclusion through adequate reasoning.7
* * * * * *
The petition is granted, the decision of the Board vacated, and the case is remanded to the Board for further proceedings consistent with this opinion.