Electronic Data Systems Corp. v. National Labor Relations Board , 985 F.2d 801 ( 1993 )

United States Court of Appeals,
Fifth Circuit.
No. 92-4391.
ELECTRONIC DATA SYSTEMS CORPORATION, and its Wholly Owned Subsidiary, Security
Couriers, Inc., Petitioners-Cross-Respondents,
v.
NATIONAL LABOR RELATIONS BOARD, Respondent-Cross-Petitioner.
March 12, 1993.
Petitions for Review of Order of National Labor Relations Board.
Before REAVLEY, SMITH and DeMOSS, Circuit Judges.
REAVLEY, Circuit Judge:
An Administrative Law Judge (ALJ) found that Electronic Data Systems (EDS) violated
sections 8(a)(1) and 8(a)(3) of the National Labor Relations Act (NLRA), 29 U.S.C. §§ 158(a)(1)
and 158(a)(3) by: threatening to discharge employees, disciplining an employee, revoking employee
privileges, and ultimately discharging several employees for union organizing activities. The ALJ
recommended, inter alia, that EDS reinstate the employees to their jobs as courier drivers for the
same corporate division of EDS for which the drivers worked at the time EDS discharged them. A
three-member panel of the National Labor Relations Board (NLRB) adopted the ALJ's findings and
recommendation in all relevant respects. In its petition for review, EDS argues that NLRB erred in
its factual determinations and that NLRB ordered an illegal remedy. NLRB cross-petitions for
enforcement of its order. We refuse to disturb NLRB's factual determinations, but we only enforce
part of NLRB's order. NLRA § 10(e), 29 U.S.C. § 160(e). Because the record does not yet support
the exact remedial relief ordered by NLRB, we remand this case to NLRB for reconsideration of the
reinstatement aspect of its order. NLRA § 10(f), 29 U.S.C. § 160(f).
I. BACKGROUND
A. THE CORPORATE ACTORS: EDS, MTECH, AND SCI
Until April 1988, MTech Corporation was a large data-processing company with one of many
branches in Jacksonville, Texas (MTJ). MTech's business was to collect documents from banks in
the evening, process them, and return them to the banks in the morning, thus performing both
data-processing and courier services. MTech provided these services according to long-term,
lump-sum contracts that it executed with several banks. Neither MTech nor MTJ was licensed as a
common carrier by the Texas Railroad Commission (TRC). Consequently, the transportation part
of the bank customer charges was significantly less than courier service alone at the tariff rate set by
TRC.1
In February 1988, MTech bought Security Couriers, Inc. (SCI), which has a branch in Tyler,
Texas. Tyler is approximately 30 miles from Jacksonville. MTech purchased SCI from Martin
Coben, who remained Chief Executive Officer of SCI as a wholly-owned subsidiary of MTech. SCI
performs the same courier service for bank documents as MTJ, but SCI performs no data processing
services. SCI holds a TRC common-carrier license and charges its customers TRC rates. SCI had
begun doing some courier work for MTJ by 1987. Coben continuously showed an interest in doing
all of MTJ's courier work. But both before and after MTech purchased SCI, MTJ's management was
unwilling to pay SCI the higher tariff rates that TRC required SCI to charge.
In April 1988, EDS bought MTech and placed D. Benjamin Sims in charge of integrating
MTech into EDS. Thus, decisions as to how SCI should be integrated into EDS also fell to Sims.
SCI retained its separate name and identity after becoming a wholly-owned subsidiary of EDS. MTJ
did not retain a name and identity separate from EDS, so for clarity we refer to the Jacksonville
data-processing business that EDS bought from MTech as MTJ-EDS.
B. THE ADVENT OF UNION ORGANIZING AND ITS SUPPRESSION
In late August 1988, Paul Stanwood, an MTJ-EDS driver, contacted a United Auto Workers
(UAW) representative named John Colliflower and inquired about joining UAW. As word spread
of driver unionization, MTJ-EDS's low-level supervisors questioned drivers about union activity,
threatened their jobs if they unionized, and eliminated a 15-minute paid car-inspection allowance
because of the drivers' contacts with UAW. MTJ-EDS's management received a lett er fro m
1
If MTJ charged a bank for courier service, MTJ levied a flat rate of $10.00 per stop. A
record exhibit shows that TRC rates vary with weight and distance, but are always greater than
$10.00 per stop for the distances and weights encountered by MTJ.
Colliflower on September 15, 1988, which advised MTJ-EDS that its drivers were in the process of
unionization and that UAW would respond to any managerial restraint of the unionization process
with legal action.
Some time before September 23, 1988, Sims decided to merge MTJ-EDS's courier operations
into SCI. He did this by subcontracting all of MTJ-EDS's courier work to SCI. On October 11,
1988, EDS terminated all of MTJ-EDS's 23 drivers, and 20 SCI drivers from various SCI locations
outside Jacksonville temporarily took over the MTJ-EDS's routes. SCI subsequently hired 23 drivers
to cover MTJ-EDS's former routes and combined four or five of MTJ-EDS's 22 or 23 routes into
extant SCI routes. SCI hired seven of the former MTJ-EDS drivers into its expanded Tyler
operation. This operation requires trips to and from MTJ-EDS in Jacksonville where MTJ-EDS
continues data-processing work for its customers.
C. NLRB'S DECISION AND ORDER
On October 13, 1988, UAW filed unfair labor practice charges against EDS. EDS now
admits that it violated the NLRA by threats, disciplinary action, and pay reduction, but it continues
to deny that it consolidated MTJ-EDS into SCI to prevent MTJ-EDS's drivers from unionizing.
Coben and Sims both testified that they decided to consolidate MTJ-EDS's courier operations with
those of SCI in July 1988, before the advent of any union activity. They say that they opted for
consolidation to 1) eliminate duplication in employees and equipment, and 2) remedy the illegality of
having MTJ-EDS's courier services performed by an unlicensed entity.
NLRB disbelieved the testimony of EDS executives as to why they merged MTJ-EDS's
courier operations into SCI. NLRB found that Coben continuously wanted to take MTJ-EDS's
business and made plans for doing so once EDS bought MTech in April 1988, but that Sims did not
accept Coben's plan until after Sims recognized that consolidation would rid EDS of the unionizing
activities at MTJ-EDS. NLRB ordered, inter alia, EDS to revoke the subcontracting arrangement
between MTJ-EDS and SCI, restore the courier operation at Jacksonville with all of the courier work
associated with MTJ-EDS's data-processing business, and offer the terminated MTJ-EDS drivers their
jobs and back pay.2
EDS filed a petition for review in this court and NLRB filed a cross-application for
enforcement of its order.
II. DISCUSSION
EDS argues that NLRB erred in determining that union animus was a motivating factor in
EDS' decision to consolidate the courier operations of MTJ-EDS and SCI. EDS also argues that
even if union animus was a motivating factor in its consolidation decision, NLRB's remedy for this
NLRA violation is illegal. Given our review standard, we refuse to disturb NLRB's fact findings. But
because the record does not support all aspects of NLRB's remedy, we remand this case for further
consideration.
A. VIOLATION
When union animus represents a "substantial or motivating factor" in an employer's decision
to discharge an employee, the employer violates NLRA §§ 8(a)(1) and 8(a)(3). NLRB v.
Transportation Management Corp., 462 U.S. 393, 401, 103 S. Ct. 2469, 2474, 76 L. Ed. 2d 667
(1983).3 "Since an employer rarely admits that it discharged an employee for engaging in protected
concerted activities, the NLRB may rely on circumstantial evidence in determining an employer's
2
The ALJ recommended that NLRB order EDS to take all steps necessary to make the MTJ-
EDS courier operation comply with the Texas Motor Carrier Act (TMCA),
TEX.REV.CIV.STAT.ANN. art. 911b (Vernon 1964 and 1993 Supp.). NLRB decided that the
evidence of MTJ-EDS's illegality under the TMCA was inconclusive, so NLRB adopted the ALJ's
recommended order after deleting its provision that EDS make MTJ-EDS comply with the
TMCA.
3
NLRA section 8(a)(1) prohibits employer interference, restraint, and coercion in the exercise
of employees' rights to form, join, or assist labor organizations. 29 U.S.C. § 158(a)(1). NLRA
section 8(a)(3) prohibits discrimination in hiring and tenure based on membership in a labor
organization. 29 U.S.C. § 158(a)(3).
NLRB's General Counsel bears the initial burden of establishing violations of §§
8(a)(1) and 8(a)(3). Under Transportation Management and NLRA § 10(c), 29 U.S.C. §
160(c), NLRB's General Counsel must prove by a preponderance of the evidence that
union animus was a substantial or motivating factor in adverse actions taken by the
employer. NLRB's General Counsel establishes a violation by meeting this burden unless
the employer proves by a preponderance of the evidence that it would have taken the same
adverse action even if, hypothetically, the employer had not been motivated by union
animus. Id. 462 U.S. at 400-403, 103 S. Ct. at 2474-75.
actual motive." NLRB v. Delta Gas, Inc., 840 F.2d 309, 313 (5th Cir.1988). Here, NLRB inferred
violative motivation in EDS' discharge decision from evidence of 1) collateral acts that were
admittedly motivated by union animus and 2) the timing of Sims' decision to consolidate MTJ-EDS
and SCI. EDS asserts that NLRB erred in finding that EDS harbored a violative motivation in
discharging MTJ-EDS's couriers.
Congress commands us to uphold NLRB's fact findings if they are "supported by substantial
evidence on the record considered as a whole." 29 U.S.C. § 160(e). This standard is not
intended to negative the function of [NLRB] as one of those agencies presumably equipped
or informed by experience to deal with a specialized field of knowledge, whose findings
within that field carry the authority of an expertness which courts do not possess and
therefore must respect. Nor does it mean that even as to matters not requiring expertise a
court may displace [NLRB's] choice between two fairly conflicting views, even though the
court would justifiably have made a different choice had the matter been before it de novo.
Congress has merely made it clear that a reviewing court is not barred from setting aside [an
NLRB] decision when it cannot conscientiously find that the evidence supporting that
decision is substantial, when viewed in the light that the record in its entirety furnishes,
including the body of evidence opposed to [NLRB's] view.
Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S. Ct. 456, 465, 95 L. Ed. 456 (1951). We
find substantial evidence in the record to support NLRB's decision that union animus was a
motivating factor in EDS' decision to discharge MTJ-EDS's couriers.
EDS does not dispute the fact that its low-level supervisors used threats, discipline, and
privilege removal to discourage MTJ-EDS's drivers from voting for UAW affiliation. And EDS does
not dispute the fact that it discharged MTJ-EDS's couriers within one month after learning of the
couriers' organizing efforts. We have previously held that "[w]hile the record does permit a
competing, perhaps even equal, inference of a legitimate basis for discipline, [NLRB] could
reasonably infer an improper motivation given the timing of the discipline and the circumstances of
the employer's antiunion campaign." NLRB v. Brookwood Furniture, Div. of U.S. Industr., 701 F.2d
452, 467 (5th Cir.1983) (emphasis added).
EDS argues that timing and collateral union activity cannot control in this case because the
record overwhelmingly demonstrates that EDS decided to consolidate MTJ-EDS's courier operations
with SCI in July 1988, well before the advent of union activity at MTJ-EDS. We disagree with EDS'
assessment of what the record demonstrates. Sims testified that he decided to consolidate MTJ-
EDS's courier operation into SCI in July 1988 and that he communicated this decision to Coben.
However, NLRB discredited Sims' testimony. EDS also relies on an August 3, 1988 memorandum
from Coben to Sims in which Coben reports that he "assigned Tom Harenchar the duties of
converting [the MTJ-EDS] operat ion to [SCI's] format...." But nothing else in the August 3
memorandum unambiguously establishes the meaning of a "format conversion." Also, this language
does not necessarily represent evidence of a prior consolidation decision by Sims, who testified that
he was ultimately responsible for making any consolidation decision.
Moreover, Harenchar himself testified that the financial details of any consolidation had not
been resolved between SCI and MTJ-EDS by September 15, 1988. And Al Albritton, the SCI
subordinate to whom Harenchar delegated the responsibility of investigating MTJ-EDS's courier
operations, did not even provide Harenchar with the most basic information about MTJ-EDS's courier
operations (number of couriers and cars) until August 18, 1988. Albritton's August 18 memorandum
unequivocally states that Albritton believed that a final decision to consolidate was yet to be made.
Thus, the record contains ample evidence that contravenes Sims' testimony that he finally decided to
consolidate MTJ-EDS and SCI in July 1988.
Besides containing this contradicting evidence, the record does not bear out the two reasons
that EDS gives for having finally decided to consolidate in July 1988. First, EDS explains that it
wanted to consolidate to save the costs of duplicitous courier operations. But the record does not
contain any reference to an analysis of the most economically efficient way for EDS to provide
courier service to the customers of both SCI and MTJ-EDS. Indeed, the record does not show that
the executives in charge of any consolidation efforts even knew rudimentary details about MTJ-EDS's
courier operation until Albritton submitted his memorandum on August 18. NLRB may legitimately
question EDS' economic explanation for consolidation when there is scant evidence that EDS studied
the economic impact of consolidation before purportedly deciding to consolidate.
Second, EDS explains that it decided to remove courier operations from MTJ-EDS almost
immediately upon purchasing MTech because TRC never licensed MTJ-EDS as a common carrier.
EDS' executives testified that they consolidated MTJ-EDS's courier operat ions with SCI in strict
obedience to the TMCA, which forbids unlicensed businesses from transporting goods for hire
without a license. See TEX.REV.CIV.STAT.ANN. art. 911b § 3. Assuming arguendo that MTJ-EDS'
courier operation was illegal under Texas law, this explanation for EDS' consolidation decision is
highly suspicious, and we could not fault NLRB for considering the explanation a pretext.
We understand that SCI is a licensed common carrier and MTJ-EDS is not, and that some of
the policies furthered by t he TMCA are safety promotion and money savings through restrictive
licensure. See id. at § 22b. But if EDS transferred MTJ-EDS' courier responsibilities to SCI out of
respect for the TMCA, it unlikely would have ignored a coequal TMCA policy: "that discrimination
in rates charged may be eliminated." Id. To implement this policy, Texas accords TRC authority to
establish mandatory rates that common carriers must charge their customers. Id. at § 4(a)(1) (Vernon
Supp.1993). EDS' executives acknowledge that both before and after EDS purchased MTech, SCI
charged its customers rates specified by TRC and MTJ-EDS charged its customers significantly less
than TRC-specified rates. MTJ-EDS operated pursuant to several long-term contracts with banks,
under which the banks paid MTJ-EDS a lump sum for both data-processing and courier services.
When EDS transferred MTJ-EDS's courier responsibilities under these contracts to SCI, ostensibly
to comply with the TMCA, it made no effort to comply with the rate requirements of the TMCA by
asking MTJ-EDS's contract banks for the money required to be paid for courier services. Instead,
EDS permitted SCI to show that it had charged the required rates on SCI's books by an accounting
transfer fro m the monies received on MTJ-EDS's contracts with East Texas banks. Thus, EDS
simply earned less on the data-processing part of the MTJ-EDS contracts so that SCI could show that
it charged the required rates on its books. But this accounting maneuver between sister corporations
is obviously not what Texas law contemplates when it requires couriers to charge customers certain
rates.4 See generally id. at § 4(a)(1) (according TRC authority to fix "maximum and minimum rates,
fares and charges" for all regulated motor carriers). If, as EDS claims, it was convinced that
companies which provide courier services in connection with other services are regulated by the
4
Of course, we do not advance an opinion on whether the TMCA governs MTJ-EDS' courier
operations. We only think that if the TMCA governs, EDS does not satisfy the requirements of
the TMCA unless it charges its customers TRC rates.
TMCA, we believe that EDS would have recognized that a simple transfer of MTJ-EDS's courier
responsibilities to SCI would not necessarily eliminate legal problems with MTJ-EDS's courier
contracts.
We therefore disagree with EDS' assessment of what the record demonstrates, and find that
substantial record evidence supports NLRB's findings. The record contains evidence that some EDS
officials considered consolidating MTJ-EDS's courier operation into SCI well before union organizing
began at MTJ-EDS, but the record also supports NLRB's decision that union animus was a
motivating factor when EDS finally decided to consolidate. Substantial record evidence also supports
NLRB's finding that EDS did not establish by a preponderance of the evidence that, even if EDS
hypothetically harbored no union animus, it would still have discharged the Jacksonville couriers on
October 11, 1988.
B. REMEDY
As remedy for EDS' improper consolidation, NLRB ordered EDS to, inter alia, sever the
contractual relationship that permitted SCI to perform the MTJ-EDS courier work, restore the MTJ-
EDS courier operation, and offer to reinstate the MTJ-EDS drivers with back pay. In Sure-Tan, Inc.
v. NLRB, 467 U.S. 883, 104 S. Ct. 2803 (1984), the Court held that, although Congress grants NLRB
broad remedial authority to counter unfair labor practices, NLRB must respect "equally important
Congressional objectiv[es]" in fashioning remedies. Id. at 903, 104 S.Ct. at 2814-15 (citations
omitted). EDS reads Sure-Tan to prohibit NLRB's remedy in this case because, according to EDS,
the order requires the reinstatement of a courier operation that is illegal under Texas law.
We reject EDS' contention for several reasons. The record contains insufficient evidence that
MTJ-EDS's courier o peration was illegal. Also, NLRB stated that it would address any legality
problems at compliance proceedings. See id. at 902, 104 S.Ct. at 2814 ("This Court and ... lower
courts have long recognized [NLRB's] normal policy of modifying its general reinstatement and back
pay remedy in subsequent compliance proceedings as a means of tailoring the remedy to suit the
individual circumstances of each discriminatory discharge."). Moreover, this case is distinguishable
from Sure-Tan because, if MTJ-EDS's courier operation was illegal, the illegality in rate-charges
persists even after consolidation with SCI. In Sure-Tan, NLRB ordered an employer to change from
an indisputably legal employer status to a status that violated the Immigration and Nationality Act.
See id. at 903, 104 S. Ct. at 2814-15.
Though we disagree with EDS' specific arguments regarding NLRA violation and remedy,
we believe that the record does not yet support the remedy ordered by NLRB. Throughout this case,
EDS' general position has been that it intended to consolidate MTJ-EDS's courier operations with
those of SCI for reasons having nothing to do with labor organization. While the record supports
NLRB's finding that union animus was a motivating factor in EDS' decision to consolidate on October
11, 1988, it does not yet support an inference that, but for UAW involvement, EDS would never have
consolidated MTJ-EDS's courier operations with those of SCI.
"Under [NLRA] § 10(c), [NLRB's] authority to remedy unfair labor practices is expressly
limited by the requirement that its orders "effectuate the policies of the Act.' " Id. at 900, 104 S.Ct.
at 2813. At a minimum, section 10(c) "encompasses the requirement that a proposed remedy be
tailored to the unfair labor practice it is intended to redress." Id. On the present record, NLRB's
remedy is not tailored to the union animus found at EDS because it does not consider whether, when,
or how EDS would have eventually consolidated its courier business in the Tyler/Jacksonville area.
We also note that NLRB could create a remedy that makes MTJ-EDS's former couriers whole with
back pay and reinstatement and still avoid restricting EDS in its development of its courier business
in Tyler and Jacksonville.5
This case closely resembles Baker Mfg. Co. v. NLRB, 759 F.2d 1219 (5th Cir.1985). The
Baker court found that the record supported NLRB's determination that the employer violated the
NLRA by terminating the employment of several employees for their union activities. Id. at 1223.
The court then turned to the question of whether NLRB exceeded its authority in fashioning a remedy
for the violation when NLRB ordered the reinstatement of two employees to positions that the
employer had discontinued. Id. The court explained:
5
For example, NLRB could order that MTJ-EDS's former couriers be offered jobs in
Jacksonville working for EDS in another capacity or as drivers for SCI.
The basic purpose of a reinstatement order is to restore the economic status quo that would
have existed but for the employer's illegal activities. However, it is not intended to lock the
employer into maintaining that status quo without due consideration of economic realities at
the time the remedy is effectuated. [In Baker, the employer] has alleged that these [two]
positions are not economically justifiable. The record supports the conclusion that these jobs
were abolished as part of the [employer's] scheme to eliminate the union activists. [Although]
there is no substantial evidence that [the employer] ever seriously considered the economic
factors affecting these jobs prior to terminating [the employees,] it might well be true that
these positions are superfluous today. If so, the [employer] should not be compelled to
re-create and maintain unnecessary positions for an indeterminate period if less extreme and
equally effective remedies are available.
Id. at 1223-24 (citations omitted).
"The proper course for a reviewing court that believes an [NLRB] remedy to be inadequate
is to remand the case to [NLRB] for further consideration." Sure-Tan, 467 U.S. at 900 n. 10, 104
S. Ct. at 2813 n. 10; accord Baker, 759 F.2d at 1224. Like the Baker court, we think that, in
fashioning a remedy, NLRB should account for what EDS eventually would have done regarding
consolidation absent its antiunion motivation.
III. CONCLUSION
EDS only petitioned for review of NLRB's findings and order as they pertain to EDS'
discharge of MTJ-EDS's drivers. NLRB cross-petitioned for enforcement of its entire order. We
thus enforce NLRB's order except as that order specifies affirmative actions that EDS must take both
to sever business relationships between EDS and SCI and to reinstate the MTJ-EDS couriers. For
treatment of that excepted part of the order, we remand this case to NLRB for reconsideration of an
appropriate remedy.
ENFORCED IN PART AND REMANDED.