United Electrical, Radio and M v. NLRB ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-2724
U NITED E LECTRICAL, R ADIO AND
M ACHINE W ORKERS OF A MERICA (UE),
Petitioner,
v.
N ATIONAL L ABOR R ELATIONS B OARD ,
Respondent,
and
A LUMINUM C ASTING & E NGINEERING
C OMPANY, INCORPORATED ,
Intervening Respondent.
Petition for Review of an Order of the
National Labor Relations Board.
Nos. 30-CA-12855, 30-CA-12902, 30-CA-12943,
30-CA-12944 and 30-CA-12949
A RGUED JANUARY 15, 2009—D ECIDED S EPTEMBER 2, 2009
Before R IPPLE, M ANION and E VANS, Circuit Judges.
R IPPLE , Circuit Judge. This case has been here once
before. In our earlier decision, we enforced an order of the
2 No. 08-2724
National Labor Relations Board (“the Board”), which
had found that Aluminum Casting & Engineering Com-
pany, Inc. (“ACE/CO” or “the Company”) violated the
National Labor Relations Act (“NLRA”) when, in 1995, it
deviated from its established practice of awarding
annual, across-the-board wage increases to all employees
because of their attempts to unionize. See NLRB v. Alumi-
num Casting & Eng’g Co., Inc., 230 F.3d 286, 293 (7th Cir.
2000) (UEW I). In UEW I, we enforced the Board’s
order requiring ACE/CO to “[m]ake whole all employees
who were not granted annual wage increases in 1995 to
date.” Id. at 295 (emphasis omitted). We noted, however,
that ACE/CO should be given the opportunity to prove
that it would not have awarded an across-the-board
wage increase in 1996 and the following years. Id. at 296-97.
After a substantial-compliance investigation, the Ad-
ministrative Law Judge (“ALJ”) determined that a twenty-
five-cent-per-hour wage increase had been withheld
unlawfully from the employees in 1995. The ALJ further
determined that ACE/CO’s liability for this across-the-
board wage increase was limited to 1995, and, conse-
quently, ACE/CO was not required to build this addi-
tional twenty-five cents per hour into its employees’
wages for 1996 and the following years. A majority of a
three-member panel of the Board agreed.1 It reasoned
that carrying forward the 1995 wage increase into 1996
1
See Aluminum Casting & Eng’g Co., Inc. & United Elec., Radio &
Mach. Workers of Am., 349 NLRB No. 18, slip op. at 2 (Jan. 31,
2007) (Second Supplemental Decision and Order).
No. 08-2724 3
and the following years would result in a windfall for
the employees and would be inconsistent with the reme-
dial purposes of the National Labor Relations Act, 49
Stat. 449, as amended, 29 U.S.C. § 151 et seq. Second
Supplemental Decision and Order, 349 NLRB No. 18, slip
op. at 2. ACE/CO therefore was ordered only to award
back pay to 381 employees for the hours they worked in
1995.2 The Board did not, however, require ACE/CO to
build this wage increase into each employee’s base wage.
In this petition for review, United Electrical, Radio &
Machine Workers of America (“UEW”) maintains that
the Board’s 1995 back pay award should have been in-
corporated into the employees’ “base wage” for that year,
so that all subsequent pay raises would be added to a
base wage that included this 1995 pay increase. In short,
they submit that, beginning in 1996, the employees’ “base
wage” should have been equal to the wage rate they
actually received in 1995 plus an additional twenty-five
cents per hour; any additional wage increases they re-
ceived in 1996 and beyond should have been added to
that adjusted “base wage.” For the reasons set forth in
this opinion, we believe that the UEW is correct. Accord-
ingly, we grant the petition for review, set aside the
decision of the Board and remand this case for
further proceedings consistent with this opinion.
2
See Aluminum Casting & Eng’g Co., Inc. & United Elec., Radio &
Mach. Workers of Am., 325 NLRB No. 1, slip op. at 1-2 (Jan. 18,
2008) (Third Supplemental Decision and Order).
4 No. 08-2724
I
BACKGROUND
A detailed discussion of the factual background of this
case may be found in our prior opinion, UEW I, 230 F.3d
at 288-93. For the convenience of the reader, we shall
repeat here the key details of ACE/CO’s compensation
practices that are necessary for an understanding of
this phase of the litigation.
In 1989, ACE/CO announced that its hourly employees
would receive a ten-cent-per-hour wage increase,
effective February 13, 1989, and would later receive an
additional five-cent-per-hour wage increase, effective
August 14, 1989. These wage increases, which were
based on rises in the cost of living in the Milwaukee
area, the Company’s performance and the wages offered
by comparable companies, became a permanent addi-
tion to the employees’ wages. Consequently, these wage
increases were added to the employees’ existing wage
rates and resulted in a new “base wage.” Raises in sub-
sequent years were added to this base wage.
In 1990, across-the-board wage increases again were
implemented. These increases, like the 1989 increases,
became a permanent addition to the employees’ wages.
Although no wage increase was given in 1991, the
pattern of awarding across-the-board wage increases
continued in 1992, 1993 and 1994; each of these across-the-
board wage increases became a permanent part of the
employees’ wages, resulting in a new base wage.
No wage increase was awarded in 1995. ACE/CO claimed
that, in that year, it had abandoned across-the-board
No. 08-2724 5
wage increases in favor of a new, merit- and training-
based compensation system. The Board found, however,
that, at least in 1995, ACE/CO’s merit- and training-based
wage increases were ancillary to, and not substitutes
for, the across-the-board wage increases. The Board also
determined that ACE/CO’s failure to award across-the-
board wage increases in 1995 was in retaliation for the
employees’ organizational activities and that ACE/CO
therefore had violated sections 8(a)(1) and 8(a)(3) of the
NLRA. Id. at 292-93. We sustained these determina-
tions. See id. at 291-93.
After a subsequent substantial-compliance proceeding,
the Board determined that, in 1996, ACE/CO had aban-
doned the use of across-the-board wage increases and
had adopted a program that awarded wage increases
based on merit and the completion of training programs.
Therefore, reasoned the Board, the Company was not
obligated to award additional across-the-board wage
increases in 1996 or in subsequent years. Moreover,
ruled the majority of the Board panel, the new merit-
and training-based wage increases that were added in
1996 and the following years should be added to the
employees’ actual 1995 wage rates, which were not ad-
justed to include the twenty-five-cent-per-hour wage
increase wrongfully denied to the workers in that year.
The dissenting member of the Board took the view
that, although the Company was permitted to change
prospectively the manner in which it awarded wage
increases after 1995, it must build those later increases
on the adjusted base wage of the worker as of the end of
1995, a methodology that would incorporate the wrong-
fully denied wage increase into the employees’ wages.
6 No. 08-2724
II
DISCUSSION
In reviewing the Board’s order, we must respect its
“broad discretion to devise [a] remed[y] that effectuate[s]
the policies of the [NLRA].” NLRB v. Intersweet, Inc., 125
F.3d 1064, 1067 (7th Cir. 1997) (citation and quotation
marks omitted); see 29 U.S.C. § 160(c) (permitting the
Board, upon finding that a party has engaged in an
unfair labor practice, “to take such affirmative action
including reinstatement of employees with or without
back pay, as will effectuate the policies of [the NLRA]”).
The Board’s exercise of this discretion “is subject to
only limited judicial review.” NLRB v. Midw. Pers. Servs.,
Inc., 508 F.3d 418, 422-23 (7th Cir. 2007). Therefore, we
shall “enforce the Board’s order if its factual findings
are supported by substantial evidence in the record as a
whole and its legal conclusions have a reasonable basis
in law.” NLRB v. Midw. Pers. Servs., Inc., 322 F.3d 969, 976
(7th Cir. 2003) (citing 29 U.S.C. § 160(e) and Universal
Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951)).
A.
Given this standard of review, we must begin our
analysis with a careful, respectful study of the Board’s
opinion and the position that it takes in the brief that it
has filed before us. In the Board’s view, the Company
must award compensatory back pay for its violation of
the Act only for the hours actually worked by its em-
ployees in 1995. The evidence shows, the Board continues,
No. 08-2724 7
that the Company switched from a policy of across-the-
board increases to a policy of merit- and training-based
increases in 1996. Therefore, it reasons, the 1995 wage
increase need not be included in the base wage to
which the 1996 merit increases are added. It relies
heavily on our statement in UEW I that ACE/CO should
be permitted to demonstrate that “it had abjured across-
the-board raises . . . [which would] suffice to excuse
ACE/CO from making any adjustments for 1996, [and] it
would also establish this new baseline for future years
as well.” UEW I, 230 F.3d at 296.
In reaching this conclusion, the Board undertook a
detailed factual analysis and determined that ACE/CO
lawfully had created a new compensation system in
1996. It assumed that, in 1996, the Company allocated all
of the funds available for wage increases to merit- and
training-based wage increases under the new compensa-
tion system. In the Board’s view, the decision to
award only merit-based increases constituted a new
compensation system that “was not based on a ‘base-
line’ for bargaining unit labor costs that incorporated a 25-
cent increase in 1995.” Second Supplemental Decision
and Order, 349 NLRB No. 18, slip op. at 2. In essence,
the Board assumed that the 1996 compensation system
would have been altered if the Company had made
across-the-board increases in 1995. To support this
view, the Board reasoned that, if ACE/CO had issued an
across-the-board wage increase in 1995, it necessarily
would have had less money available for merit- and
training-based wage increases in 1996, and the amounts
of those new wage increases necessarily would have
8 No. 08-2724
been decreased as a result. See Respondent’s Br. 22. After
the 1996 merit increases, therefore, each employee had
been restored, as closely as possible, to the economic
position in which he would have been absent ACE/CO’s
misconduct.
UEW, agreeing with the dissenting Board member,
submits that the Board misconstrued our language in
UEW I and also failed to resolve any ambiguities against
the wrongdoer, ACE/CO. According to UEW, our state-
ment in the underlying case—“if . . . ACE/CO intro-
duced evidence that it had abjured across-the-board
raises forever . . . not only would that suffice to excuse
ACE/CO from making any adjustments for 1996, but it
would establish this new baseline for future years as
well”—was intended to relieve ACE/CO from making
additional across-the-board wage increases in 1996 and
the following years, if the Board determined that the
Company had, in fact, abandoned that compensation
structure. It did not, however, excuse ACE/CO from the
obligation of permanently incorporating the 1995 across-
the-board wage increase into its employees’ base wages
and adding any increases in 1996 and the following
years, however determined, to that base. To support
this view, UEW notes that, based on ACE/CO’s past
practice, it is clear that any across-the-board increase
awarded in 1995 would have been permanently incorpo-
rated into the employees’ wages in subsequent years.
Furthermore, UEW submits, to the extent that there is
any ambiguity as to whether the back pay award should
be permanently incorporated into the employees’ wages,
that ambiguity is attributable solely to ACE/CO’s
No. 08-2724 9
unlawful conduct and not the implementation of a new
compensation program.3 Thus, it concludes, the Board
should have resolved any ambiguities in favor of
the employees and permanently incorporated the
twenty-five-cent increase into the employees’ wage
rates. See Campbell Elec. Co., 340 N.L.R.B. 825, 826 (NLRB
2003) (noting that remedies should restore employees
to the position they would have obtained absent the
unfair labor practice, and indicating that “any . . . am-
biguity regarding the status that would have [been]
obtained without the unlawful conduct must be resolved
against the . . . wrongdoer”).
B.
Central to the Board’s determination was its reading
of a passage of our opinion. The Board focused on our
statement that, if ACE/CO could show that it had aban-
doned across-the-board increases, it would be excused
from “making any adjustments for 1996, [and] it would
also establish this new baseline for future years as well.”
UEW I, 230 F.3d at 296. The Board read this statement to
mean that, if ACE/CO could demonstrate that it had
abandoned the use of across-the-board increases in 1996,
3
UEW disputes ACE/CO’s claim that a new compensation
system was implemented in 1996. It claims that ACE/CO
did not implement a new system, but, rather, expanded its
existing training- and merit-based compensation programs
and eliminated one component of its compensation system, the
across-the-board wage increase.
10 No. 08-2724
it could add any wage increases in 1996 and the fol-
lowing years to a 1995 baseline that reflected what actually
was paid to the employees, exclusive of the wrongfully
withheld twenty-five-cent-per-hour wage increase.
Second Supplemental Decision and Order, 349 NLRB No. 18,
slip op. at 3.
We cannot accept the Board’s reading of our earlier
opinion. In UEW I, we addressed the Company’s claim
that the Board’s original order was so broad that the
Company would be obliged to award across-the-
board annual wage increases in 1995 and in each of the
following years. In reply to that argument, we simply
held that, once the workers were made whole for the violation of
the Act in 1995, the Board’s original order should not
be construed as requiring the Company to continue to
grant additional across-the-board increases in subse-
quent years if, in any of those years, it had decided to
institute another, lawful wage-increase system. In short,
it was our understanding that the Board’s order
required the Company to make the employees whole
for the violation that had occurred. Once the company
had done so, it was free to implement any wage-
increase system that it chose, so long as that new wage
system complied with the Act. Our point was that the
Board did not have before it the question of any wage
increases for the years following 1995. The Board’s order
“expressly did not bind ACE/CO to a perpetual practice
of granting [across-the-board wage increases].” Id. at 296.
Therefore, we determined, if ACE/CO could demonstrate
“that general wage increases are passé and it has found a
better way to maintain competitive wage levels . . . [the]
No. 08-2724 11
order does no more than require payment of the 1995
increase.” Id.
This interpretation of our prior opinion is logical, given
the limited issue under discussion in UEW I: whether
the Board’s order impermissibly required ACE/CO to
award across-the-board increases for 1996 and each of
the following years. Id. at 295-96. Just as importantly, it
is the only interpretation that is compatible with the
law governing remedial measures under the Act. The
Board must make workers “whole for losses suffered on
account of an unfair labor practice” under the Act. Phelps
Dodge Corp. v. NLRB, 313 U.S. 177, 197 (1941). More specifi-
cally, in awarding back pay, the Board must attempt to
“recreate the . . . relationships that would have been had
there been no unfair labor practice.” Franks v. Bowman
Transp. Co., Inc., 424 U.S. 747, 769 (1976) (citation and
quotation marks omitted).
The Board contends that, in instituting the 1996 merit
increase policy, ACE/CO in effect addressed, albeit indi-
rectly, its remedial obligations because it “lawfully allo-
cated the money actually available to it for wage
increases solely to merit and training raises, without
consideration of an across-the-board increase.” Respon-
dent’s Br. 22. The Board assumes that ACE/CO had only
a limited pool of funds available for wage increases in
1996, and that, had ACE/CO implemented an across-the-
board increase in 1995, the size of that pool—and the
size of the 1996 wage increases—would have decreased
by an amount equal to the amount of funds allocated in
the 1995 across-the-board increase. Therefore, the Board
12 No. 08-2724
concludes, ACE/CO’s employees received the same
wage rate in 1996 as they would have received if
ACE/CO had awarded both the 1995 across-the-board
wage increase and the reduced 1996 wage increases.
Accordingly, the Board maintains that its remedy is
appropriately tailored to fulfilling its remedial obliga-
tion for the 1995 violation.
We cannot accept this argument. At the outset, the
record simply does not support the Board’s conclusion
that, had the Company not violated the Act in 1995
and instead paid the expected across-the-board wage
increase in that year, the pool of funds available for
the 1996 merit- and training-based program necessarily
would have been reduced by the amount paid out as
a result of the 1995 across-the-board increase. The record
is indeed vague on the total amount of funds available
for distribution in 1996, the total amount of raises
actually awarded in 1996, and ACE/CO’s methodology
for awarding the wage increases offered in that year. In
fact, when a compliance officer requested that ACE/CO
provide documentation relating to its decision to
abandon the across-the-board compensation system in
favor of an alternative reward system, ACE/CO was
unable to provide any minutes or documents reflecting
the reasoning behind its decision. See G.C. Ex.12 at 1, 2
(statement of Compliance Officer Gifford).
More importantly, even if the pool of funds available
for the 1996 merit-based increases had included the
amount of money that otherwise would have been distrib-
uted had the Company awarded an across-the-board
No. 08-2724 13
wage increase in 1995, it is not clear that those funds
would have been distributed in a manner that would
have placed each wronged worker in the position he
would have been in had the 1995 wage increase been
awarded. The Board points to no evidence that the Com-
pany’s 1996 wage increases took this consideration into
account. Indeed, the parties seem to agree that, when it
implemented the 1996 wage increases, the Company
simply ascertained the 1995 base wage of the employee,
excluding the wrongfully withheld increase, and added to
that amount whatever merit-based wage increase it
deemed appropriate under its new method.
In the same vein, the Board also submits that, if the
wronged workers had received the twenty-five-cent-per-
hour wage increase wrongfully withheld in 1995, they
well might not have received the merit increases that
were distributed in 1996. This argument is speculative,
and, contrary to the Board’s suggestion, the wronged
workers should not have to bear the burden of any ambi-
guity in this respect. After all, the ambiguity is the result
of the Company’s illegal withholding of the 1995 in-
crease. Therefore the Company, not the individual worker,
must bear any loss from the lack of available evidence.
Because it violated the law, the Company did not compute
correctly the 1995 base wage of each worker; because it
violated the law, the Company is not in a position to show
whether the pool of funds available for the 1996 merit
increases included all of the money that it would have
distributed in 1995 had it acted legally; because it
violated the law, the Company is unable to show
whether, in 1996 and subsequent years, every wronged
14 No. 08-2724
employee received a wage increase equal to the raise
wrongfully denied him in 1995 and the amount that
would have been awarded him under the merit- and
training-based program. The Company, not the workers,
must bear any loss for the Company’s illegal activity.
Conclusion
The Board’s interpretation of our earlier opinion is
erroneous. Its factual conclusions are unsupported by
the evidence in the record. Therefore, because the
Board’s remedial order is based on an error of law and an
unsubstantiated finding of fact, we must grant UEW’s
petition for review and set aside the Board’s order. Accord-
ingly, we grant the petition for review, set aside the
Board’s order and remand the case to the Board for pro-
ceedings consistent with this opinion.
P ETITION G RANTED ;
O RDER SET A SIDE; C ASE R EMANDED
9-2-09