NLRB Cases Archive 1960 - 1995, LABOR-RELATIONS 1993-94 CCH-NLRB ¶15,508, COMMERCIAL FORGINGS COMPANY and LODGE 1086, INTERNATIONAL BROTHERHOOD OF BOILERMAKERS, IRON SHIPBUILDERS, BLACKSMITHS, FORGERS, AND HELPERS, AFL-CIO., (Sep. 30, 1994), National Labor Relations Board, (Sep 30, 1994)

COMMERCIAL FORGINGS COMPANY and LODGE 1086, INTERNATIONAL BROTHERHOOD OF BOILERMAKERS, IRON SHIPBUILDERS, BLACKSMITHS, FORGERS, AND HELPERS, AFL-CIO.

315 NLRB No. 23.Case Nos. 8-CA-24748 and -24904. September 30, 1994

Before Stephens, Devaney and Cohen.

Shutdown of Plant--Bargaining Duty--Lack of Notice.--By failing and refusing to bargain with a union concerning the effects of its decision to terminate its operations, an employer violated its bargaining duty. The employer sent a letter to the union on the same day that it announced to employees that it was going to immediately cease operations. However, the employer was obligated to give the union notice and an opportunity to bargain “in a meaningful manner and at a meaningful time.” Since the employer failed to provide the union with advance notice, it presented the union with a fait accompli, depriving it of an opportunity to bargain at a time when the union had any measure of economic strength. Section 8(a)(5).

Back reference: ¶3145.897.

Unilateral Changes by Employer--Work Conditions--Termination and Vacation Pay.--By unilaterally modifying the terms of its collective bargaining agreement by failing to pay termination pay and vacation benefit pay to unit employees, an employer violated its bargaining duty. The employer notified the employees’ representative of the changes only after they were accomplished and did not afford the union an opportunity to bargain over them. Section 8(a)(5).

Back reference: ¶3145.438.

Successor Employers--Adoption of Predecessor’s Contract--Refusal to Bargain.--By failing and refusing to recognize and bargain with a union as the collective bargaining representative of its bargaining unit employees, an employer violated its bargaining duty. Since the employer acquired substantially all of the assets of its predecessor, continued the same type of business with the same employees and used the same facilities to produce the same product, it was a successor employer. As a successor, the employer was under an obligation to bargaining with the union that represented its predecessor’s employees. Section 8(a)(5).

Back reference: ¶3145.25 and .86.

From Text of Board’s Decision

For many years, and at all material times, the Union was the designated exclusive collective-bargaining representative of a unit of all Commercial employees with the exception of guards, professional employees, office employees, and supervisory personnel with authority to hire and fire (the Commercial unit), and was recognized as the representative by Commercial. This recognition was embodied in successive collective-bargaining agreements, the most recent of which was effective from April 4, 1992 to April 3, 1993.

Commercial incurred a significant debt to Ameritrust Company National Association (ACNA). The loans were secured by various security interests and mortgages in the property of Commercial. In 1990, when Commercial was unable to meet its repayment obligations, ACNA directed Commercial to sell its assets or face foreclosure. Commercial’s debt to ACNA at that time was far in excess of the market value of its assets. Commercial also had other creditors whose claims were in excess of $500,000.

Sometime in January or February 1992, [1] negotiations began among Commercial, ACNA, and the principals who later formed Forgings, for the sale of all or part of the assets of Commercial to Forgings, which was incorporated on March 23. John Mencini, the chief executive officer and treasurer of Commercial and later president and treasurer of Forgings, was included in these negotiations. During the first week of May, the final provisions of a transaction were agreed upon, providing for the transfer of Commercial’s assets, except for the real estate, to ACNA and their subsequent sale to Forgings. [2] The transaction was reduced to writing in a “Collateral Realization Agreement,” and executed on May 15.

On Friday, May 15, Mencini called a meeting of all employees during the work day. He announced that Commercial was immediately ceasing its business operations and that the employees were to gather their belongings and leave the premises. On the same day Mencini, on behalf of Commercial, wrote to the Union indicating that Commercial had ceased its business operations. This letter was the first notice given by Commercial to the Union of its business closing. At the time of its closing, Commercial employed 18 individuals, including 9 bargaining unit employees.

On Monday, May 18, Forgings began its business operations at the Commercial facility. Forgings continued the same type of business operation as that conducted by Commercial, uses the same physical facilities and the same equipment, and produces the same product. During the first 4 months of operations 90 percent of Forging’s customers were the same as Commercial’s.

When Forgings began operations, it employed nine individuals, all of whom except the chief financial officer previously had worked for Commercial. Three of these individuals worked for Forgings in managerial positions, two were office clerical employees, and four were primarily assigned to production work. One of the production workers, Walter Illingworth, was a 17 percent shareholder of Commercial and owns 20 percent of the shares of Forgings. Another, Walter Harris, had been a production supervisor at Commercial. Although Harris acts as a work coordinator at Forgings, he does not exercise supervisory authority. The other two production employees at Forgings, Earl Holland and Mike Sczesniak, were members of the bargaining unit at Commercial and perform similar duties at Forgings. Forgings did not hire another production employee unti mid-July, when it hired Chris Langmo, who had previously worked for Commercial but was not on its payroll when Commercial ceased operations. Langmo subsequently left the employ of Forgings and was not replaced.

About May 21, Union International Representative Steven Jewell and a number of former employees of Commercial visited the Forgings facility. Jewell submitted a written grievance to Mencini signed by the former employees alleging breaches of the collective-bargaining agreement in connection with Commercial’s closing and requesting documents establishing proof of the sale of assets. Commercial responded on May 22, asserting that it had discontinued doing business and denying any contract violations. Representatives of the Union met on June 5 with Mencini and Albert Fowerbaugh, Commercial’s attorney, concerning the grievance. Commercial’s representatives stated that there was no money to pay the liabilities asserted in the grievance, and that certain obligations, such as health insurance premiums until the end of May and pension contributions, had been paid. The union representatives stated that Commercial was also liable to the employees for vacation benefits accrued during the month of May as well as for severance pay. Commercial’s representatives acknowledged the contractual obligation to pay severance benefits and stated that a possible liability existed regarding vacation pay. They also furnished the Union with a copy of the Collateral Realization Agreement as proof of the sale of assets.

During the course of the June 5 meeting, the union representatives inquired of Mencini and Fowerbaugh, in their capacity as officers and shareholders of Forgings, about the identity of the production employees employed by Forgings. Mencini stated that two former bargaining unit employees, Holland and Sczesniak, were working for Forgings. International Representative Ron Lyon then requested that Forgings recognize the Union as the representative of its production and maintenance employees. The request was denied by Fowerbaugh, who stated that the successorship clause of the collective-bargaining agreement did not apply because the assets had been purchased by Forgings from ACNA and not directly from Commercial.

Article 9.8 of the collective-bargaining agreement sets the requirement for termination pay in the event Commercial ceases doing business. Under the terms of this provision, the following employees of commercial were entitled to termination pay after Commercial ceased doing business and laid them off: Robert J. Black, Reinhard Lee, Charles Ernest Lewis, Albert Omahan, James Rusnek, Richard Schultz, and Fred Sparks. Article 10 of the collective-bargaining agreement sets forth the provisions for employee vacation benefits. Article 10.9 states that 1 month’s vacation credit is due to any employee who works at least 15 days in a calendar month. All nine employees in the Commercial unit worked between May 1 and May 15, and were therefore entitled to 1 month’s vacation credit for that period of time.

Since June 5, the Union has neither requested nor engaged in any grievance or negotiation meetings with Commercial. Commercial has paid no moneys to the Union or the affected employees in satisfaction of the Union’s claims regarding vacation and termination pay benefits. Since June 5, Forgings has refused to recognize the Union as the bargaining representative of its production and maintenance employees. Commercial has engaged in no business operations since May 15, except to respond to inquiries from its creditors.

B. Contentions of the Parties

The General Counsel contends that Commercial unlawfully modified the termination pay and vacation pay provisions of the collective-bargaining agreement without the consent of the Union, in violation of Section 8(a)(1) and (5), by failing to pay these benefits to its employees. The General Counsel further asserts that Commercial violated Section 8(a)(a) and (5) by failing to give notice to the Union and an opportunity to bargain over the effects of its closing. The General Counsel argues that although Commercial was engaged in negotiations concerning the transfer of its assets for a period of months, it presented the Union with a fait accompli on the day of closing, thus precluding meaningful bargaining at a time when the Union had some measure of bargaining strength. The General Counsel further asserts that Forgings, as a successor under the principles of both Golden State Bottling Co. v. NLRB, [72 LC ¶14,124] 414 U.S. 168 (1973), and NLRB v. Burns International Security Services, [68 LC ¶12,660] 406 U.S. 272 (1972), respectively, is liable for Commercial’s unfair labor practices and is obligated to recognize and bargain with the Union. The General Counsel contends that Forgings violated Section 8(a)(1) and (5) by failing and refusing to engage in such bargaining. The General Counsel urges the Board to remedy these alleged violations with a cease-and-desist order and by ordering that Commercial bargain with the Union over the effects of its closing, that Commercial and Forgings be held jointly and severally liable for the termination pay and vacation pay due to the former Commercial employees as well as for limited back pay under Transmarine Navigation Corp., [1968-1 CCH NLRB ¶22,250] 170 NLRB 389 (1968), and that Forgings recognize and bargain with the Union as the bargaining representative of its employees.

The Respondents contend that Forgings is not the legal successor of Commercial. In this regard, the Respondents assert that this case is factually distinguishable from Fall River Dyeing & Finishing Corp. v. NLRB, [106 LC ¶12,333] 482 U.S. 27 (1987), because the Respondents are small employers, with a smaller proportion of represented employees, and because Forgings made changes in the method of operation at the facility. In addition, relying on Howard Johnson Co. v. Detroit Local Joint Executive Board, 417 U.S. 249 (1974), the Respondents argue that Forgings should not be found a successor to Commercial based on the small proportion of former bargaining unit employees hired, i.e., two of nine employees.

C. Discussion

Considering first the complaint allegation that Commercial violated Section 8(a)(1) and (5) by failing to give the Union notice and an opportunity to bargain concerning the effects of its termination of operations, we note that the parties have stipulated that Commercial announced to its employees on May 15 that it was immediately ceasing operations; that it sent a letter to the Union on the same date informing the Union that Commercial had ceased operations; and that the letter was the first notice provided to the Union of this decision. It is well established that an employer that decides to terminate its operations and go out of business has an obligation to bargain about the effects of that decision with the union representing its employees. First National Maintenance Corp. v. NLRB, [91 LC ¶12,805] 452 U.S. 666 (1981). Inherent in that obligation is a requirement that the union be given notice and an opportunity to bargain “in a meaningful manner and at a meaningful time.” Id. at 681-682. In this case, Commercial provided the Union no advance notice of its decision to cease operations and transfer its assets to Forgings. Instead, Commercial sent a letter to the Union on the same day that it informed the employees directly of the termination. Thus, Commercial presented the Union with a fiat accompli, depriving it of an opportunity to bargain at a time when it had any measure of economic strength with respect to Commercial. In their brief, the Respondents make no argument concerning this allegation. We find that by failing and refusing to bargain with the Union concerning the effects of its decision to terminate its operations, Commercial has violated Section 8(a)(1) and (5) of the Act. John R. Cowley & Bros., Inc., [1989-90 CCH NLRB ¶15,965] 297 NLRB 770 (1990).

We also find that Commercial violated Section 8(a)(1) and (5) by failing to pay unit employees the termination pay and vacation benefit pay due to them. The collective-bargaining agreement between Commercial and the Union provides for vacation pay credit for employees who have worked 15 days in a calendar month, as well as termination pay for employees in the event that Commercial ceases doing business. The parties stipulated that under these provisions, seven former bargaining unit employees are entitled to termination pay and all nine former Commercial unit employees are entitled to vacation pay for the month of May. The parties further stipulated that Commercial has made no payments in satisfaction of these obligations. The Respondents’ brief does not address this allegation. We find that Commercial unilaterally changed the terms of the parties’ collective-bargaining agreement by failing to pay its former employees the contractual benefits due to them without bargaining with the Union. General Split Corp., [1987-88 CCH NLRB ¶19,175] 284 NLRB 418 (1987); St. Louis Gateway Hotel, [1987-88 CCH NLRB ¶19,236] 286 NLRB 863 (1987). [3]

The General Counsel asserts that Forgings is a successor to Commercial under the tests established in Burns and Golden State, supra. In Burns, the Supreme Court held that a new employer is obligated to recognize and bargain with the union representing the predecessor’s bargaining unit employees where the bargaining unit remains unchanged and a majority of the employees hired by the new employer are represented by the union. The Supreme Court further found in Fall River Dyeing, supra, that the first inquiry focuses on the existence of substantial continuity, determined by considering “whether the business of both employers is essentially the same; whether the employees of the new company are doing the same jobs under the same working conditions under the same supervisors; and whether the new entity has the same production process, produces the same products, and basically has the same body of customers.” 482 U.S. at 43. A finding of substantial continuity does not require that the new and old operations be identical, but rather involves an assessment of the tatality of the circumstances to determine whether “those employees who have been retained will understandably view their job situations as essentially unaltered.” Id., quoting Golden State.

The facts in the present case establish that Forgings acquired all of the assets formerly owned by Commercial, with the exception of the real estate. Moreover, Forgings continued the same type of business operation as Commercial, using the same facilities and equipment to produce the same product. During its first 4 months of operation, 90 percent of the customers served by Forgings were former Commercial customers. Eight of the nine individuals employed by Forgings had been employed by Commercial.

We find no merit in the Respondents’ contention that despite these similarities, Forgings should not be held to be the successor of Commercial based on factual distinctions between Fall River Dyeing and the persent case. The Respondents note that the overall size of the employers here is significantly smaller than those in Fall River Dyeing, and that the bargaining unit constitutes a smaller proportion of the total employment. However, the Respondents cite no precedent suggesting that the size of the employer or the bargaining unit is of any determinative consequence in deciding issues of successorship. The Respondents also argue that the method of operation under Forgings differed from that of Commercial, asserting that seven of the former bargaining unit employees were not hired because their skills were not needed, and that the production employees were supervised by a different individual under Forgings. In Burns, successorship was found despite the new employer’s bringing in its own supervisors, where their duties wre similar to those performed by the supervisors of the predecessor. Burns, at fn. 4. In the present case, the parties’ stipulation shows that the entire initial work force, with the exception of the chief financial officer, consisted of individuals formerly employed by Commercial, indicating a significantly greater continuity of supervision as well as unit employees. [4] The Respondents also concede in their brief that the two production employees carried over from Commercial would not see their jobs as essentially altered. Based on the above considerations, we find that substantial continuity exists between Commercial and Forgings as the employing enterprise.

Turning to the issue of the majority status of the Union in the Forgings bargaining unit, we note that four employees were primarily assigned to perform production work. One of these individuals, Illingworth, was a 17 percent owner of Commercial and owns 20 percent of Forgings, and therefore is excluded from the bargaining unit. A second production employee, Harris, was a supervisor at Commercial. The remaining two production employees were in the bargaining unit at Commercial. Thus, two of the three bargaining unit employees at Forgings were formerly represented by the Union at Commercial. We find that by June 5, when the Union requested bargaining with Forgings, Forgings employed a substantial and representative complement of its work force and that the Union represented a majority of Forgings’ bargaining unit employees. In view of the majority status of the Union and the substantial continuity between Commercial and Forgings discussed above, we conclude that Forgings is a Burns successor and is obligated to recognize and bargain with the Union. We further conclude that Forgings violated Section 8(a)(a) and (5) of the Act by its failure and refusal to bargain with the Union.

In Golden State, the Supreme Court held that an employer that acquires substantial assets of a predecessor and continues without substantial change the predecessor’s business operations may also be required to remedy the unfair labor practices of the predecessor if it was on notice of the unlawful conduct. Having already found the requisite continuity of operations above, we must determine whether Forgings had knowledge of the unfair labor practices committed by Commercial. In its answer to the amended consolidated complaint, Forgings denied knowledge of Commercial’s violations. The Board, however, may conclude that a successor had the necessary knowledge based on reasonable inferences from the record as a whole. Robert G. Andrew, Inc., [1989-90 CCH NLRB ¶16,312] 300 NLRB 444 (1990). We find that the record in this case supports such an inference. Mencini, the president of Forgings, was previously the chief executive officer of Commercial. By at least January or February, Mencini knew that Commercial intended to sell its assets; indeed, he participated in sale negotiations. Mencini also signed the letter to the Union belatedly informing it of Commercial’s closing on the same day that he announced that decision to employees. Moreover, Mencini was present at the June 5 meeting where he or Fowerbaugh, or both, asserted that there was no money available to meet Commercial’s obligations regarding vacation pay and termination pay. Thus Mencini was personally involved in the conduct found to constitute unfair labor practices by Commercial. We impute his knowledge to Forgings, and conclude that Forgings is a Golden State successor jointly and severally liable for remedying Commercial’s unfair labor practices. See Bell Glass Co., [1988-89 CCH NLRB ¶15,481] 293 NLRB 700, 708 (1989).