Midwest Manufacturing Co.

130 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Midwest Manufacturing Company and Lodge No. 2063, International Association of Machinists and Aerospace Workers, AFL-CIO. Case 38-CA-576 TRIAL EXAMINER'S DECISION STATEMENT OF THE CASE August 25, 1970 DECISION AND ORDER BY MEMBERS MCCULLOCH, BROWN , AND JENKINS On January 9, 1970, Trial Examiner Henry L. Jalette issued his Decision in the above-entitled pro- ceeding, recommending that the National Labor Rela- tions Board decline to render an interpretation of the parties' contract in this case or, in the alternative, find that General Counsel has not proven a violation of Section 8(a)(5) and (1), for the reasons set forth in the attached Trial Examiner's Decision. Thereafter, the General Counsel and the Charging Party filed exceptions to the Trial Examiner's Decision and sup- porting briefs, and the Respondent filed limited excep- tions and a supporting brief. Pursuant to the provisions of Section 3(b) of the National Labor Relations Act, as amended, the National Labor Relations Board has delegated its powers in connection with this case to a three-member panel. The Board has reviewed the rulings of the Trial Examiner made at the hearing and finds that no prejudicial error was committed. The rulings are here- by affirmed. The Board has considered the Trial Examiner's Decision, the exceptions and briefs, and the entire record in the case, and hereby adopts the findings, conclusions, and recommendations of the Trial Examiner as modified herein. Although Members McCulloch and Jenkins do not adopt the Trial Examiner's recommendation that the Board decline to interpret the parties' contract in this case, they agree with his conclusion that the General Counsel has failed to establish by a preponder- ance of the evidence that the Respondent unilaterally modified its collective-bargaining agreement in mid- term. Accordingly, they agree with his conclusion that the Respondent has not been shown to have violated Section 8(a)(5) and (1) of the Act. Member Brown would adopt the findings and recommendations of the Trial Examiner. Accordingly, the complaint will be dismissed in its entirety. ORDER It is hereby ordered that the complaint herein be, and it hereby is, dismissed. HENRY L. JALETTE, Trial Examiner The charge in this proceeding was filed by the above-captioned Union on November 12, 1968,1 and complaint was issued on December 31 The complaint alleges that the above-cap- tioned employer, herein called the Respondent, violated Section 8(a)(5) and (1) of the Act by modifying the terms of its agreement with the Union without the Union's consent and by refusing to bargain with the Union concerning the modification. A trial was held on February 26, 1969, and at the end of General Counsel's case Respondent made a motion to dismiss which I granted, stating on the record my reasons for so doing. General Counsel filed a timely request for review which the Board granted on August 25, 1969. In its order granting review and remanding the proceeding for further hearing the Board stated that in its opinion "The issues herein are such that a full and complete heanng on the facts and circumstances, as well as findings, conclusions, and recommendations by the Trial Examiner, are warranted." Pursuant to such order further heanng was held on October 8 and 9, 1969.2 Upon the entire record, including my observation of the witnesses, and after due consideration of the briefs filed by General Counsel and the Respondent, I make the following:' FINDINGS OF FACT 1. THE BUSINESS OF RESPONDENT Respondent is an Illinois corporation with an office and place of business located at Galesburg, Illinois, where it is engaged in the manufacture of home applicances. During the 12 months preceding issuance of the complaint, Respond- ent purchased and received at its Galesburg plant directly from points outside the State of Illinois goods and materials valued in excess of $50,000 and sold and shipped directly from its Galesburg plant to points outside the State of Unless otherwise indicated, all dates appearing herein refer to the year 1968 More precisely, testimony was heard on October 9, 1969 When I opened the hearing on October 8, Respondent renewed a motion for a continuance which had previously been filed both with me and with the Board and which had been denied After hearing argument, I denied the motion and directed Respondent to proceed with his defense Respondent declared himself unable to proceed and requested time to appeal my ruling The hearing was recessed to 10 a in the following morning with notice to Respondent that he would be expected to proceed with his defense at that time unless my ruling was reversed by the Board The following morning, notice having been received of the Board's denial of Respondent's appeal, Respondent proceeded to put on its defense under protest After putting on two witnesses and making an offer of proof which showed that a third witness' testimony would have been cumulative, Respondent renewed its request for a continuance because of the unavailability of other witnesses This request was denied, and as neither the Charging Party nor the General Counsel had further evidence to offer the hearing was closed Respondent renewed its motion to dismiss at the close of trial and I reserved ruling The motion is disposed of in accordance with the findings and conclusions herein 185 NLRB No. 19 MIDWEST MANUFACTURING COMPANY 131 Illinois finished products valued in excess of $50,000. I find that Respondent is an employer engaged in commerce within the meaning of Section 2(6) and (7) of the Act. The following are examples of the employee calssifications and rates of pay for the two classes: A Group B Group Ii. THE LABOR ORGANIZATION INVOLVED Over 9 Mos 6 to 9 Mos hinists f M l A t I 63 I III I III ion o ac ssocia nternationa Lodge No. 20 , and Aerospace Workers, AFL-CIO, is a labor organization Assembler $ 1.81 1.71 1.78 1 68 within the meaning of Section 2(5) of the Act. Leak Tester 1.86 1.76 1.82 1.72 IiI. THE ALLEGED REFUSAL TO BARGAIN Paint Mixer 2.01 1.91 1.96 1 86 The Union has been the exclusive bargaining representa- tive of Respondent's employees in a unit of production and maintenance employees since the early 50's, and the parties have been parties to a series of contracts from that date to this.' The most recent contract, and the one out of which litigation grew provided, inter aha, as follows: ARTICLE XX Wages Section 1 The regular hourly base rates for all classifications of work are set forth in Factory Labor Rates attached herein as Annex "A" Page 47 An increase of ten cents (10t) per hour will be granted, effective 23rd November, 1966 An increase of ten cents (l0Q) per hour will be effective November 1, 1967 and an increase of eleven cents (I le) per hour will be granted November 1, 1968. Such increases are not to be incorporated in the base rates for the purpose of computing incentive earnings, but will be handled as an adder for each year of the contract. FACTORY LABOR RATES Effective: November 23, 1966 to November 1, 1967 In addition to the base rates set forth below all employees will receive an add-on of ten cents (10^) per hour worked. Effective. November 1, 1967 to November 1, 1968 In addition to the base rates set forth below all employees will receive an add-on of twenty-cents (20it) per hour worked Effective: November 1, 1968 to November 1, 1969 In addition to the base rates set forth below all employees will receive an add-on of thirty-one cents (310) per hour worked. The factory labor rates provided for two employee classes as follows: Class I-Employees who can do heavy work as required and also skilled and efficient in the classifica- tion they are qualified for. Class III-Employees who cannot do heavy work as required but are efficient in the classification they are qualified for. All female employees. There are 93 such classifications, each with employees in classes I and III, divided into five groups , each group reflecting a different period of service. The employees in the foregoing classifications participate in incentive earnings; in addition, there are employees in specified plant sections and a department who do not participate in incentive earnings. With certain exceptions not material to decision, all classifications provided for both class I and class III employees and the labor rate for class III employees in all cases was 10 cents per hour less than that for class I employees. The contract had effective dates of January 13, 1967, to November 1, 1969 While it was being negotiated, there was pending before the U S. District Court a suit brought by the Secretary of Labor alleging a violation by Respondent of the "Equal Pay" provisions of the Fair Labor Standard Act (29 U.S.C. §201 , et seq.).' On October 29, 1966, during negotiations on a new contract , the parties entered into a letter of understanding providing, in relevant part. The parties acknowledge that the issues in the pending lawsuit can be the subject matter for negotiations at this time However, the parties agree to waive such negotiations at this time and to abide by the final adjudication of this matter.6 In February 1967, Respondent advised the Union that it was going to undertake a study of its labor grades I and III to make certain that it was in compliance with the Equal Pay Act. Such a study was conducted and on December 15, 1967, having first notified the Union, Respondent posted the following: NOTICE TO EMPLOYEES Job Categories-Class I and Class III A. Effective December 18, 1967, all jobs in all classifi- cations have been defined as Class I or Class III in accordance with the contract language as follows: Class I-Employees who can do heavy work as required and also skilled and efficient in the classifi- cation they are qualified for. 'The complaint had been filed on December 7, 1965 ' A separate and essentially identical letter of understanding was also At the time of the hearing on remand , the parties were in negotiations entered into with regard to the charge before the Equal Opportunity for a new contract Commission of which the district court complaint was an outgrowth 132 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Class III-Employees who cannot do heavy work as required but are efficient in the classification they are qualified for B. The language "All female employees" previously used in connection with the Class III category is deleted. C. The jobs have been placed into a Class I or Class III category based on the following standards: (a) Physical excertion or other conditions which, over a full shift, are calculated to produce fatigue substantially in excess of that normally experienced by a person of ordinary strangth; (b) Skill not otherwise compensated for by an over-based rate of pay; (c) Effort called for by careful attention on a job of higher responsibility New jobs and changes in existing ones will be defined in accordance with the above standards D. Employees now performing Class I jobs who are receiving Class III rates shall be increased effective on December 18, 1967. Employees now performing Class III jobs who are qualified to perform Class I work shall be assigned to Class I work as soon as practicable. No employee shall suffer any loss of pay by reason of reassignment. E. Any employee may bid into a Class I job from Class III, and vice-versa, in accordance with present practice, and shall receive the rate applicable to the job performed Temporary assignments into a Class I job from Class III, and vice versa, shall be governed by the present practice. F. Disputes over the placement of jobs in Class I or Class III category shall be handled under the applicable grievance procedures of the labor agreement. As a result of this action, certain positions were reclassified from class III to class I, and about 100 female employees were upgraded.' On August 8, 1968, Respondent and the Deparment of Labor entered into a settlement of the equal pay suit. The settlement provided for payment of $165,000 in unpaid minimum wages to Respondent's female production employ- ees for the period from June 11, 1964, through May 31, 1968, and contained the following provision: 3. a The defendant represents to the Court that effective June 1, 1968, the wage rates for all women factory production employees were raised to the Class I factory labor rates of their male counterparts. On the basis of that provision, on June 1, all female production employees received a 10-cent per hour increase. However, the parties submitted the settlement to the court with a covering letter containing the following relevant paragraphs: Defendant wishes to advise the Court that the collective bargaining agreement currently in effect between defendant and Midwest Lodge No. 2063, International Association of Machinists and Aerospace Workers, AFL-CIO, the collective bargaining representative of ' At the time, Respondent employed about 800 female employees the defendant's employees, provides for an eleven cent (I i c) per hour increase for all factory production employees on November 1, 1968, and that defendant intends that the ten cents (10i) an hour increase in rates referred to in paragraph 3a of Stipulation (III), shall, as to those employees receiving such increase who on November 1, 1968 are classified as Class III, be in lieu of, to the extent of ten cents (10t) per hour, the November 1, 1968 increase called for by said collective bargaining agreement. The plaintiff's position is that no questions as to defend- ant's obligations or intent under the collective bargain- ing agreement are properly a part of this case and, hence, that any representations as to what the defendant may or may not do in the future pursuant to the collective bargaining agreement have no place in the settlement between the parties. On August 15, the Respondent issued a notice to all class III employees advising them of the settlement of the equal pay suit. The notice included the following para- graphs I The Company has agreed to pay a total of $165,000 in back pay This money will be divided up (less legal deductions for Social Security and Withholding Taxes) among all female employees in the plant who worked in Class III jobs for the Company from June 11, 1964, through May 31, 1968 The amount each Class III employee will receive depends on the number of hours the employees worked during that period. Employees whose jobs have been reclassified from Class III to Class I have already received an increase of 10d per hour so they will not participate in the back- pay distribution as much as those who have continued to hold Class III jobs. The Government has the respon- sibility for determining how much each employee will receive, but it will probably be some time before the checks are actually mailed. 2. In addition to the back pay of $165,000, the Company agreed to advance to June 1, 1968, the rate increase which the Class III employees are entitled to receive under the labor agreement on November 1,1968, to the extent of i O tper hour Thus, all employees in the plant who, on June 1, 1968, were holding Class III jobs will receive an immediate increase of 100 per hour The Company agreed to make this retroac- tive to June 1, 1968, so that the employees entitled to the increase will receive a check in the amount of 100 multiplied by the number of hours they have worked from June 1 to August 9, 1968. From August 9 on, their pay checks will reflect the rate increase of 10 per hour. 3. As you know, the labor agreement calls for an increase on November 1, 1968, to all employees of i 10 per hour The Class I employees will get their increase of 1 It per hour on November 1, 1968. The Class III employees will get 10@ of their I I it as of June 1, 1968, (retroactive), and the remaining I k per hour on November 1, 1968. This early increase of rates was put in at the insistance of the Department of Labor. Its purpose, aside from the bonus it gives MIDWEST MANUFACTURING COMPANY 133 the employees as part of the settlement , permits equality of rates for a certain penod during which the Company can examine all the jobs in the plant to make sure that the existing division between Class I and Class III jobs is based on real differences in skill , effort and responsibility. 4 It should be understood that the increase of Class III rates as of June 1 does not mean that the Class I and Class III jobs are equal . As noted, the June through November equality of rates was agreed upon to increase the benefits the employees were to receive from the settlement. If a Class III job is raised to Class I, the employee holding that job will immediate- ly receive the Class I rate. Prior to the issuance of this notice, Respondent notified the union president and union grievance committee. The extent of the Union 's objection was a remark by the union president that the notice was going to make a lot of people in the plant unhappy and Respondent should not do it On September 23, the Union sent a letter to Respondent advising Respondent that it did not agree with the August 15 notice, that it did not agree with the job evaluation performed by Respondent , that it did not agree Respondent was in compliance with the provisions of the Equal Pay Act, and reminding Respondent of the necessity for union approval of any contract changes On October 3, Respondent received a letter from a group of employees protesting the Respondent's plan, and on October 10, in reply, Respondent wrote a letter to the Union, stating, inter aka: As you know, last August Federal Judge Robert T. Morgan approved a settlement reached by the Gov- ernment and the Company in the equal pay lawsuit As part of that settlement the Company agreed to pay $165,000 in back pay (this will come through shortly) and also agreed to raise the rates of girls who were working in Class III jobs by 100 an hour. This was with the understanding that after November 1, 1968, any difference in the rate between Class I and Class III would have to depend on a difference in skill, effort and responsibility of the jobs in the two classifications . As you know , back in December of 1967, the Company spent a great deal of time and money examining every production job in the plant to determine whether a job was properly slotted as Class I or Class III. As a result of that work, the Company reclassified about 125 jobs from Class III to Class I and raised the rates of the girls doing those jobs accordingly . You will remember the notice we posted on December 15, 1967, which set forth the standards underlying the differences in skill, effort and responsibility between Class I and Class III jobs In our settlement negotiations with the Government, they insisted on raising Class III rates by 100 an hour before November 1, 1968, because they wanted the rates for men and women to be equal for at least some period of time. We opposed this because it didn't make sense to us to have rates equal for a few months and, then , when the November increases were called for, to have them unequal again . And, of course, we couldn't have Class I and Class III equal forever because this would be unfair to the employees doing the harder, or more skilled, or more responsible Class I jobs. But we finally agreed on the understanding that on November 1 only the Class I employees would get the contract increase of 11 d The Class III employees would get 100 of their increase in June and the remaining 1 in November. The letter signed by the girls states that if the Company does not raise the Class III rates on Novem- ber 1, 1968, the Company would be breaking the contract. We can't agree with that The contract calls for an increase of 11 It per hour on November 1, 1968 for everybody The Class III employees will have received 10t of that amount as of June 1, 1968, and will get another It per hour on November 1. So not only will Class III employees get the I It called for by the contract, but will have received 10^ of that 5 months earlier than the contract calls for The other thing is that on October 29, 1966, and again on March 29, 1967, the Company and the Union agreed to abide by a final adjudication of this matter in Court and, as I mentioned , Judge Morgan approved the settlement which was submitted to him on August 6, 1968 I can understand why the girls would ask for another increase in November but if we did so, it would mean that the Class I and Class III employees would be receiving the same rate of pay even though , as everyone knows, there is a big difference between Class I and Class III jobs We think this would be unfair to Class I employees. On October 21, the Union notified Respondent by letter of its intention to file a grievance in the event the Respondent did not increase all employees 11 cents an hour on November 1 in accordance with the contract. On November 1, all class I employees received an 11- cent-an-hour increase, but class III employees received an increase of only 1 cent an hour. On November 4, the Union filed a grievance . On Novem- ber 6, Respondent denied the grievance on the grounds it did not present an arbitrable issue and that an adjudication had been made and an order issued thereon by the court and that the Union had agreed to be bound by such adjudication. On November 7, the Union requested the grievance be submitted to an arbitrator to determine if there was an arbitrable issue, and on November 8, Respondent denied the request on the ground an arbitrator would have no jurisdiction to decide any issue concerning the grievance and its arbitrability. ANALYSIS AND CONCLUSIONS The facts are not in dispute and the principal issue is simple: did Respondent modify the contract when it granted class III employees a 1-cent-per-hour increase on November 1, 1968, and not an 11-cent -per-hour increase. General Counsel contends that it did: article XX, section 1, clearly and unambiguously provides for an 11-cent increase for all employees effective November 1, 1968; Respondent did not grant an 11-cent increase to all employ- 134 DECISIONS OF NATIONAL LABOR RELATIONS BOARD ees on November 1, 1968; ergo, Respondent modified the contract. As such modification was made without the con- sent of the Union and without the notices required by Section 8(d) of the Act, General Counsel contends Respond- ent violated Section 8(a)(5) of the Act Respondent contends that in view of the fact that on June 1, 1968, it had granted a 10-cent increase to class III employees, when it granted the same employees an additional 1-cent increase on November 1, 1968, and to all other employees an 11-cent increase, the result was an i1-cent-per-hour increase to all as of November 1, 1968 Moreover, the result was a total increase of 31 cents per hour for all employees for the 3-year contract term According to Respondent, this was all that the Union had bargained for.' There are two ways to resolve the refusal-to-bargain allegation which has arisen out of the foregoing conflicting contentions. One way is to interpret the contract in favor of one party or the other; the second way is to decline to assert the Board's jurisdiction on the ground that all that is presented is a question of contract interpretation. At the time of the initial hearing, when General Counsel rested, I granted Respondent's motion to dismiss because I was of the view that this was a dispute about contract interpretation and the Board had long held that it was not the proper forum for parties seeking an interpretation of their collective-bargaining agreement. Vickers, Incorporat- ed, 153 NLRB 561; United Telephone Company of the West, 112 NLRB 779. I was aware of the fact that the Board was empowered to interpret contracts where necessary to adjudicate an unfair labor practice N.L.R.B. v. C & C Plywood Corp., 385 U.S. 421. Nevertheless, I was of the opinion that Vickers and United Telephone were still correct statements of Board policy. It is not always an easy matter to distinguish between those cases where the only issue is one of contract interpreta- tion and those in which the issue of contract interpretation is ancillary to the adjudication of the unfair labor practice. Yet, it is important to do so, because the Supreme Court has consistently adhered to the view that "the Board has no plenary authority to administer and enforce collective- bargaining contracts." N.L.R.B. v. Strong, 393 US 357. As the court indicated in C & C Plywood, supra at 427, 428 "To have conferred upon the National Labor Relations Board generalized power to determine the rights of parties under all collective agreements would have been a step toward governmental regulation of the terms of those agreements We view Congress' decision not to give the Board that broad power as a refusal to take this step. [Footnote omitted.] But in this case the Board has not construed a labor agreement to determine the extent of the An additional defense is Respondent's contention that the Union is estopped from asserting its claim because it failed to protest until October 21 Respondent's plan to increase class III employees only I cent on November 1, although the Union had known definitely of the plan since about August 15, and had known since May that Respondent was proposing such a plan to the Department of Labor The contention is without merit The Union was fully justified to rely on its contract and cannot be estopped because it chose not to act on an alleged anticipatory breach of contract but instead waited to assert its contractual rights immediately after the alleged modification of the contract contractual rights which were given the union by the employer " In my view, that is precisely what General Counsel is asking the Board to do in this case. "The substantive controversy itself is unaggravated on either side and emerges only if the Union's interpretation of the contract is fully accepted." Jos. Schlitz Brewing Company, 175 NLRB No. 23. Here, the Respondent contends it has fulfilled its contrac- tual obligations; in C & C Plywood, the employer concededly acted unilaterally with respect to rates of pay of certain employees, but defended on the ground that he had the right to do so under a management rights clause In Standard Oil Company (Ohio), 174 NLRB No. 33; the employer claimed the right to act unilaterally because of an impasse in negotiations; in St. Louis Cordage Mills, 170 NLRB No. 7, and W P. Ihrie & Sons, 165 NLRB No. 2, the employers admittedly repudiated a clear contractual obliga- tion; in the Scam Instrument Corporation, 163 NLRB 284, the employer concededly unilaterally modified insurance provisions of the contract; in C & S. Industries, Inc., 158 NLRB 454, the employer unilaterally imposed an incen- tive wage plan; and in Huttig Sash and Door Company, Incorporated, 154 NLRB 811, the employer unilaterally reduced the wage rates of a group of employees. In none of these cases, all of which are cited by General Counsel, can it be said that there was any real dispute that the contract provisions had been modified In this case, that is the very issue, and, as I have once stated, the contract has been modified only if you accept the Union's interpreta- tion. Since the "employer has a sound arguable basis for ascribing a particular meaning to his contract and his action is in accordance with the terms of the contract as he construes it, and there is'no showing that the employer in interpreting the contract as he did was motivated by union animus or was acting in bad faith"' (footnote omitted) Vickers, Incorporated, supra at 570, I recommend that the Board defer from interpreting the contract and that the complaint be dismissed. In making this recommendation, I also rely on Jos. Schlitz Brewing Company, supra, where the Board stated: Thus, we believe that where, as here, the contract clearly provides for grievance and arbitration machin- ery, where the unilateral action taken is not designed to undermine the Union and is not patently erroneous but rather is based on a substantial claim of contractual privilege, and it appears that the arbitral interpretation of the contract will resolve both the unfair labor practice issue and the contract interpretation issue in a manner compatible with the purposes of the Act, then the Board should defer to the arbitration clause conceived by the parties. While the Respondent has here refused to apply the arbitration machinery and the Board placed heavy reliance in Schlitz Brewing on Respondent's willingness to use the grievance-arbitration procedure, I do not believe that inter- vention by the Board is therefore warranted. Despite Respondent's refusal, this is not a situation such as was presented in C & C Plywood, supra, where, absent Board action, the end result would have been "economic warfare" and not "the therapy of arbitartion." Carey v. Westinghouse Corp., 375 U S. 261, 272. Under Textile Workers v. Lincoln MIDWEST MANUFACTURING COMPANY Mills 353 U S. 448, a grievance arbitration provision in a collective-bargaining agreement can be enforced by a suit under Section 301(a) of the Act Under Supreme Court decisions, "whether or not the Company was bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined by the Court on the basis of the contract entered into by the parties ." Atkinson v Sinclair Refining Co., 370 U.S. 238. However, the rule is that unless the parties expressly exclude a matter, the court will conclude that they intended to submit it to arbitration. Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 In the instant case , th:, contract contains no exclusion- ary clause and the arbitration clause is all-encompassing. Thus article XI, section 1, provides that "should any com- plaint regarding the meaning or application of any provision of this Agreement apse between the Company and the Union, or as to the compliance of either party with any of its obligations hereunder , negotiations shall be carried on in accordance with the following procedure." The con- tract then outlines a three-step procedure followed by final and binding arbitration . In light of these provisions, and the state of the law relating to court enforcement of similar provisions, it would appear that the Union can compel arbitration of the dispute The foregoing analysis is based on the premise that Respondent has a sound arguable basis for its interpretation of its obligations under article XX, section 1 of the contract. I do not believe it is necessary to go further and to decide which interpretation is correct , that of the Union or that of Respondent Nevertheless, it appears that in similar circumstances, the Board has not deferred to the arbitral process, but instead has itself construed the contract. See Cello-Foil Products, Inc., 178 NLRB No 103. In like man- ner, I construe the contract and conclude that Respondent did not modify the contract. As Respondent points out , since the class III employees had received a 10-cent increase on June 1, when November 1 arrived an additional I-cent increase resulted in their having been granted the full 11 cents provided for in the contract . Moreover, the parties had bargained for a 10-cent differential between class I and class III employees. The parties were agreed that this differential was justified because the work of Class III employees was not "heavy work" did not include a "skilled " requirement and that it was justified for "All female employees ." The last factor was an unlawful basis for a wage differential ; however, its elimination from the bargain of the parties by operation of law did not eliminate the other differentiating factors agreed to by them . In effect, the Respondent in this case invoked and applied the other differentiating factors when it conducted an engineering study of the class III jobs and defined the differences as being based on (a) physical exertion, (b) skill, and (c) effort.' Were the Board to accept ' For a complete description of the differences , see Respondent's notice to employees dated December 15, 1967, Res Exh 5 Whether or not Respondent was empowered to define class III work in these terms is not in issue here The matter was the subject of a charge filed by the Union on January 11, 1968 , in Case 38-CA-427, which was dismissed by the Regional Director, whose action was sustained by the General Counsel on appeal 135 the Union's interpretation of the contract, the differential agreed to by the Union would be eliminated. The differential was eliminated on June 1, but only as a result of settlement of the equal pay suit, not by virtue of agreement of the parties, and at the time Respond- ent agreed to the June 1 increase , it expressly reserved the right and declared its intention to apply the 10 cents of its November 1 contract obligation. Admittedly, it was acting unilaterally on June 1, but that unilateral action is not the gravamen of the instant complaint . The Union was free to accept the benefits of the June 1 increase, as it did, but in doing so it could only benefit in accordance with the conditions of the grant; namely, that the benefit was to last only until November 1. The foregoing demonstrates very clearly that the General Counsel's position is tenable only if the terms of article XX, section 1 are interpreted to mean that regardless of the intervening circumstances the Respondent had con- tracted to and was bound to grant an 11-cent increase on November 1, 1968. Undoubtedly at the time of the execution of the contract the parties intended that on November 1, 1968, all employees would receive an 11- cent increase . But this intention must be presumed to have been based on an assumption that conditions existing at the time of the execution of the contract had not been altered by unforeseen circumstances . But the June 1 increase was an unforeseen circumstance in the sense that there is no evidence that the parties contemplated what effects, if any, the equal pay suit would have on the Respondent's obligation to grant increases in wage rates. True, the parties knew of the equal pay suit, but the Union expressly agreed to waive any right to bargain about it and agreed to abide by the final adjudication . What was intended by this agreement was not established at the hearing According to General Counsel , the waiver related only to the legality of the existing work classifications of women . However, there is no evidentiary support for such an interpretation of the letter of understanding To the contrary, the letter of understanding contains no limitations and appears to sanction a resolution of the issues in the manner adopted by Respondent. Certainly, nothing contained therein pre- cluded Respondent from disposing of the equal pay suit by a settlement which would constitute a "final adjudica- tion" and in which it reserved the right to apply the 10-cent June 1 increase to its November 1, 11-cent obligation. The fact that the Department of Labor did not agree that Respondent had the right to do so under its contract with the Union is immaterial, The Department of Labor had no standing to agree or disagree with Respondent's interpretation of its contract with the Union (which undoubt- edly accounts for its disclaimer in the letter of August 8 to the court); it could only determine whether Respond- ent's compliance with the equal pay act would be affected by reestablishment of the 10-cent differential on November 1. Apparently the Labor Department was satisfied as no further action has been taken against Respondent since November 1. In short, the language of article XX, section 1, must be interpreted in the light of all the circumstances, and in that light the General Counsel's contention that Respond- 136 DECISIONS OF NATIONAL LABOR RELATIONS BOARD ent failed to grant an 11-cent increase to class III employees on November 1, and thereby modified the contract is not supported by the record . For this alternative reason , there- fore, I recommend dismissal of the complaint. There remains to be resolved the complaint allegation that Respondent refused to bargain with the Union concern- ing the modification. This allegation relates to Respondent's reply to the grievance filed by the Union on November 4 that it did not present an arbitrable issue because an adjudication had been made and the Union had agreed to be bound by the adjudication , and to Respondent's reply to the request for arbitration that no arbitrator had jurisdiction. General Counsel contends that the reply to the grievance was a refusal to consider the grievance on the merits, and that the refusal to go to arbitration was in manifest bad faith because its purpose was to force the Union to file a Section 301 suit which Respondent believed would have been heard by the same Federal District Court judge who approved the settlement of the equal pay suit. The record does not support General Counsel's contention that Respondent refused to consider the grievance on its merits . In denying the grievance on November 6, 1968, Respondent did not merely state the matter was not arbitra- ble, but rejected it on the further ground that the Union had agreed to be bound by a final adjudication . This was a consideration of the meets. Nor, in my judgment, can it be said that Respondent's refusal to arbitrate was violative of Section 8(a)(5) of the Act There is no evidence or contention that Respondent's position respecting this grievance related to any other griev- ance, or that Respondent has repudiated the grievance and arbitration provision of the contract generally. In these circumstances , Respondent's refusal to arbitrate this particu- lar dispute is only a breach of contract , which is not, in itself a refusal to bargain . Textron Puerto Rico, 107 NLRB 583; Central Rujmna, 161 NLRB 696, 700. For all the foregoing reasons, I find that Respondent has not violated the provisions of Section 8(a)(5) and (1) of the Act as alleged in the complaint , and I will therefore recommend that the complaint be dismissed in its entirety. CONCLUSIONS OF LAW Respondent has not engaged in unfair labor practices within the meaning of Section 8(a)(5) and ( 1) of the Act by the conduct alleged in the complaint RECOMMENDED ORDER Upon the basis of the foregoing findings of fact and conclusions of law, I recommend that the complaint be dismissed in its entirety.