Sterling Drug, Inc.

THE HILTON-DAVIS CHEMICAL COMPANY The Hilton-Davis Chemical Company, Division of Sterling Drug, Inc. and Local 342, International Chemical Workers Union. Case 9-CA-4436 August 27, 1970 DECISION AND ORDER BY CHAIRMAN MILLER AND MEMBERS MCCULLOCH, BROWN , AND JENKINS On July 23, 1968, Trial Examiner Owsley Vose issued his Decision in the above-entitled proceeding finding that the Respondent had engaged in and was engaging in certain unfair labor practices, and recommending that it cease and desist therefrom and take certain affirmative action, as set forth in the attached Trial Examiner's Decision. Thereafter the Respondent filed exceptions to the Trial Examiner's Decision and a supporting brief. 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, the brief, and the entire record in the case and finds merit in the Respondent's exceptions. Accordingly, the Board adopts the findings only to the extent they are consist- ent with the following. The Trial Examiner found that the Respondent refused to bargain in violation of Section 8(a)(5) and (1) of the Act by its action in unilaterally discon- tinuing the grievance procedure (including arbitration) of the expired collective-bargaining agreement, by its action several days later in unilaterally reinstating the former grievance procedure but omitting the arbi- tration stage, and by its refusal thereafter to submit to arbitration unresolved grievances which arose dur- ing the hiatus when no agreement was in effect. As the Trial Examiner found, the parties had a collective-bargaining agreement which by its terms expired on April 15, 1967.1 The agreement contained a four-step grievance procedure with arbitration as the final binding step. On Friday, April 14, the last day under the agreement, the Union rejected the Respondent's offer to extend the contract during nego- tiations, subject to termination on 48 hours' notice. Thereupon, the Respondent circulated to its superviso- ry personnel a memorandum stating, in pertinent part, that the grievance and arbitration procedures of the expired contract would not be in force, and ' All dates refer to 1967, unless noted otherwise 241 that supervisors were to handle grievances on an informal basis during the postcontract period. The Union quickly received notice of the Respond- ent's action from employees who saw the directive on the desks of their supervisors , and on the following Monday , April 17, the Union's local representatives contacted Thomas Boyle , a vice president of the Inter- national and coordinator for the Sterling Drug Council of the International . Boyle immediately telephoned John Ward , Sterling Drug's vice president in charge of employee relations and Repondent's bargaining representative, and informed him that the Respond- ent's refusal to entertain "grievances" could precipitate a strike. Ward replied that he would call Boyle back after consulting with counsel. Ward returned Boyle's call on April 20. During the intervening 3 days, Respondent had resolved to adhere to the grievance procedure, but not to the arbitration provisions, during the contractual hiatus. The testimony of Ward and Boyle is conflicting with respect to whether Boyle was explicitly informed of Respondent's decision to suspend arbitration. At the very least, however, the record shows and the Trial Examiner found that Boyle "made some response to the effect that the [Respondent] would go ahead and process grievances ." Later that same day, the Respondent issued a revised memorandum to its super- visory personnel stating that the first three steps in the grievance procedure of the expired contract would be utilized in resolving disputes , but that the arbitration clause would not be in effect. Negotiations between the parties continued and on June 16 agreement was reached on a new contract which was to take effect the following week.2 At the very close of the last bargaining session on June 16 as the parties were preparing to adjourn, Boyle asked Ward what action would be taken on postcon- tract grievances. The Trial Examiner resolved conflict- ing testimony by finding that Ward made a general reply which gave Boyle the impression that the Respondent would submit to arbitration unresolved grievances arising in the no-contract period. The record further reveals that during the 2 months when no agreement was in effect a total of 28 griev- ances were filed and processed by the parties. Twenty were settled short of the third step of the grievance procedure but the remaining eight were still unresolved after the third step, and the Union requested that each of those eight be submitted to arbitration. The first such request was made on August 3 , after the new contract was in effect. The Respondent, by reply letter dated August 23, refused to submit this grievance This agreement contained the same grievance procedure (including arbitration) as the expired contract 185 NLRB No. 58 242 DECISIONS OF NATIONAL LABOR RELATIONS BOARD to arbitration, stating that it would abide by its earlier announced position that it was not required to process through arbitration grievances that arose when no agreement was in effect. On September 20, the Union filed this charge. The heart of the issue we face is this: may a party required by our Act to bargain in good faith with respect to the wages, hours, and other terms and conditions of employment be held to have breached that requirement by a refusal to adhere to the arbitration procedure of an expired contract in the absence of (a) consent by the other party to termination of that procedure or (b) bargaining to impasse on the issue? We conclude that the duty to bargain in good faith does not extend so far, and we reverse the Trial Examiner and dismiss this complaint. Our conclusion rests upon elemental con- siderations of the nature of the duty to bargain. Section 8(d) of our statute is explicit: the duty to bargain does not include the obligation to agree to a proposal or make a concession. Congress has left no doubt that each party to the bargaining relation- ship is and must remain the final arbiter of its own best interest. It is our delegated task to require the parties to meet and confer, to seek agreement in good faith and to commit their agreement to writing. We enjoy substantial latitude in selecting the means to those ends, but ultimately we are powerless to compel agreement where none exists. The mutual commitment of contract parties to consider interstitial disputes through a grievance pro- cedure and, failing agreement, to submit them to binding arbitration is a voluntary surrender of the right of final decision which Congress has reserved to these parties. Indeed, each such agreement is a vindication of Congress' judgment: the parties have not only bargained to agreement, they have undertaken to continue to "bargain" (in the sense of meeting at reasonable times and seeking agreement in good faith) about the application of their agreement to the facts of their particular relationship. They have further agreed, where arbitration has been accepted, voluntarily and mutually to surrender the use of their respective economic weapons in favor of third party determination of unresolved issues. The conse- quent reduction of industrial strife is widely celebrated and has led to a declared national policy encouraging arbitration, Section 203(d), Labor Management Rela- tions Act, 29 U.S.C., Section 173(d); United Steelwork- ers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960). But we must not be induced by that policy or its benefits to overlook that arbitra- tion is, at bottom, a consensual surrender of the economic power which the parties are otherwise free to utilize. Absent mutual consent, the parties revert to the statutory scheme of "free" collective bargaining, wherein each party must attempt in good faith to reach agreement, but is under no statutory mandate to reach agreement or to forfeit its right to utilize its economic power if no agreement can be achieved. The courts have repeatedly recognized this concept. The Supreme Court in United Steelworkers ofAmerica v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960), said: For arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit. Similarly, the Court of Appeals for the Second Circuit stated in Proctor & Gamble Independent Union of Port Ivory, N. Y. v. Proctor & Gamble Manufacturing Company, 312 F.2d 181, 184: The duty to arbitrate is wholly contractual and the courts have the obligation to determine whether there is a contract imposing such a duty. And the Sixth Circuit, in Kingsport Publishing Corp., 399 F.2d 660, 661, said: While Congressional policy favors the settle- ment of labor disputes by the arbitral process rather than by economic warfare (See Section 203 (d) of the Labor Management Relations Act ); [Steelworkers v. American Mfg. Co., 363 U.S. 564 (1960); Steelworkers v. Warrior & Gulf Co., 363 U.S. 574 (1960)] arbitration nevertheless rests upon a contractual basis. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964). . . . Applying these principles to the hiatus which some- times exists-and existed here-between the expiration of one agreement and the reaching of a new one, it follows that employers and unions must continue to meet and confer and to seek agreement in good faith, not only over the terms and conditions of a proposed new agreement, but also over employee grievances which may arise during such hiatus. But it does not follow that during such period the law requires the parties to submit to arbitration any griev- ance which they are unable to resolve. Our previous decisions in Bethlehem Steel Co.' and Kingsport Press' do not, in our opinion, compel that result, and here we disagree with the Trial Examiner. In Bethlehem Steel the employer unilaterally attempted to impose a new and different grievance procedure. It seems clear to us that an employer may not unilaterally ' 133 NLRB 1347, supplemental decision 136 NLRB 1500 enforcement denied and case remanded sub nom. Industrial Union of Marine and Shipbuilding Workers of America, AFL-CIO v NL R B, 320 F 2d 615 (C A 3), cert denied 375 U S 984 , second supplemental decision 147 NLRB 977 ' 165 NLRB 694, enforcement denied 399 F 2d 660 (C A 6) THE HILTON-DAVIS CHEMICAL COMPANY attempt to impose new channels for resolution of disputes without undercutting the union's representa- tive status. That was the basis of our holding there. Kingsport did not involve a failure to arbitrate, but rather a failure to follow established channels for discussion (really bargaining) over employee griev- ances. The Trial Examiner in that case was clearly of the view that arbitration survived the expiration of a collective agreement, but upon deliberation, we are less confident of the rationale in Kingsport, insofar as it applied Section 8(d) of the Act to the facts there at issue. We would, however, reach the same result upon another interpretation of the Act-i.e., that an employer cannot abandon established channels for bargaining over employee grievances and thus effectively avoid his bargaining obligation and under- cut the union's status as exclusive representative. Such a view is not inconsistent with our recognition of the consensual nature of the arbitral process. For the above reasons, we find no violation here with regard to the Respondent's refusal to arbitrate. The Trial Examiner also found that the Respondent unilaterally abandoned and then unilaterally reinstated the grievance procedure without proper notice to the Union and without affording the latter an opportu- nity to bargain over these changes. Contrary to the Trial Examiner, we find insufficient evidence to sup- port these charges. The record reveals that the Respondent did effect the first of these changes on April 14, without formal notice to the Union: Howev- er, the Union quickly became aware of the Respond- ent's abandonment of the grievance procedure, promptly protested, and succeeded in having Respond- ent agree to process grievances. Although the Trial Examiner characterized as "considerable" the lapse of time between the Respondent's initial action and the Union's notice thereof, the record shows that at most the Union was unaware of the abandonment of the grievance procedure for a period of 2 days, the weekend of April 15-16. Furthermore, we find insufficient evidence to support the inference that the Respondent reinstated the nonarbitration provi- sions of the expired contract without notice to the Union. There is nothing in the record to indicate that the Union by its subsequent action was not indeed fully cognizant of this latter change. The record discloses no mention of the Respondent's failure to notify the Union's local representatives of that which admittedly had been communicated to its chief negoti- ator, Boyle, on April 20. Finally, the record is barren of any evidence that the Respondent refused to enter- tain any grievances during the brief interval when its alleged unilateral actions took place. On the contra- ry, the parties stipulated that all 28 grievances which 243 arose during the no-contract period were processed through the grievance procedure. In view of the foregoing findings and conclusions we shall dismiss the complaint in its entirety. ORDER It is hereby ordered that the complaint herein be, and it hereby is, dismissed in its entirety. MEMBER BROWN, concurring: I have stated, time and again, my strong belief in the desirability of arbitration in the field of labor relations.' It is with some reluctance, therefore, that I join in dismissing this proceeding, but I feel impelled to this conclusion by consideration of the consensual nature of arbitral undertakings under the Act. The obligation of arbitration, while a mandatory subject of bargaining, arises solely out of contract- it is encouraged, but not required, by statutory policy. The source and nature of this obligation thus differs, for example, from the obligation to bargain concerning grievances and wages; the Act itself requires that grievances be negotiated and the obligation to pay wages is a very predicate of an employment relation- ship. The quid pro quo for an Employer's commitment to arbitrate is a Union's agreement not to strike over matters subject to contractual arbitration. Recent- ly speaking of the "implications for the enforceability of arbitration agreements and their accompanying no-strike obligations," the Supreme Court reempha- sized that "a no-strike obligation, express or implied, is the quid pro quo for an undertaking by the employer to submit grievance disputes to the process of arbitra- tion." Boys Markets, Inc. v. Retail Clerks Union, Local 770, 398 U.S. 235, 248. The last effective contract antedating the events under consideration in the present case did have an arbitration clause and a no-strike clause. When the contract approached its expiration date upon notice of termination given by the Union, the Respond- ent suggested to the Union that, while negotiating a new contract they continue their expiring contract obligations on a day-to-day basis. The Union refused, as it had a right to do, but in doing so it expressly ' See, for example, my separate opinions in Cloverleaf Division of Adams Dairy Co, 147 NLRB 1410, 1420-25, Raytheon Company, 140 NLRB 883, 888-891, Thor Power Tool Co, 148 NLRB 1379, 1381- 83, Eastern Illinois Gas & Securities Co, 175 NLRB No 108, LeRoy Machine Co, 147 NLRB 1431, 1434-35, Univis, Inc, 169 NLRB No 18, Washington Hardware and Furniture Co, 168 NLRB No 72, Dresser Industrial Valve Instrument Division, 178 NLRB No 51, Iron Workers, Local 229 (Bethlehem Steel Corporation), 183 NLRB No 35, Consolidated Foods Corporation, 183 NLRB No 78, Macy's California, 183 NLRB No 47, Union Carbide Corp, 178 NLRB No 81, Sieves Sash & Door, Inc, 178 NLRB No 27, Dayton Typographic Service, 176 NLRB No 48, McLean Trucking Co, 175 NLRB No 66 244 DECISIONS OF NATIONAL LABOR RELATIONS BOARD withheld from the Respondent the no-strike assurance which was the Union's consideration for the Employ- er's arbitration commitment under the expired con- tract. Lacking the parties' consensual basis for renewed or extended arbitration, I therefore disagree with my dissenting colleague that the Act nevertheless autho- rizes us to extend an obligation on the Respondent to arbitrate grievances "arising after the expiration of the agreement to arbitrate." Proctor & Gamble Independent Union v. Proctor & Gamble Manufactur- ing Company, 312 F.2d 181, 186 (C.A. 2), cert. denied 374 U.S. 830. Furthermore, if a contrary result were reached, one would be unable to specify what the arbitrator would decide without a contract to interpret, or what there would be for a court to enforce if no contractual obligation were shown to exist.6 This does not mean that parties may not agree to arbitrate grievances arising during periods between contracts. As parties make provision for arbitrating grievances during normal contract terms, they can also provide for grievances arising afterward. Or, in negotiating a renewal or even an original agreement, they may also agree to arbitrate preexisting disputes. However, the parties themselves must make their own contractual arrangements, for the Act, in my judgment, does not authorize us to construct one for them. MEMBER MCCULLOCH, dissenting in part: When there is a collective-bargaining representative of the employees in an appropriate unit, an employer cannot change "wages, hours and other terms and conditions of employment"' for the employees in that unit with- out negotiation with the bargaining representative. It matters not whether the changed terms were origi- nally established by collective bargaining with a union or unilaterally by the employer in the absence of a union. In either case, unilateral action by the employ- er in altering established "wages, hours, and other terms and conditions of employment" is violation ' It is to be noted that all of the quotations in the dissenting opinion herein are from various opinions of the Supreme Court which in fact refer to changes in or failure to follow arbitration provisions in existing contracts in fact, the Court in Wiley v Livingston was, as my dissenting colleague points out, discussing the arbitration of grievances which arose during the life of a collective-bargaining contract , and in the portion quoted in the dissenting opinion herein states, "This case cannot readily be assimilated to the category of those in which there was no contract whatsoever There was a contract, and Interscience, Wiley's predeces- sor, was party to it " Although Kingsport Press was denied enforcement on different grounds, the Court observed that arbitration "rests upon a contractual basis" and that "the Board does not refute the Company's contention that neither party to the contract could successfully have brought suit under Section 301 of the Labor Management Relations Act to compel arbitration " ' Sec 8(d) of the Act defines the duty to bargain as "the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours , and other terms and conditions of employment of Section 8(a)(5) of the Act.' The Trial Examiner found, and the majority members have not disturbed this finding, that on the expiration of the 1965- 67 bargaining contract, Respondent determined, with- out notification to the Union, that grievances which were not resolved in the first three steps of the grievance procedure would no longer be subject to the fourth and final step of that procedure-arbitra- tion. Respondent decided on the elimination of arbitra- tion without affording the Union the opportunity of bargaining about the change. The legality of Respondent's conduct therefore turns on whether arbi- tration in a grievance procedure is a "term and condi- tion of employment" concerning which an employer must bargain. It is now settled that a grievance procedure is within the phrase "wages, hours, and other terms and conditions of employment" and hence is a manda- tory bargaining subject of collective bargaining.' Is the final step in the grievance procedure, arbitration, excluded as a mandatory subject9 In the Kingsport Publishing case,10 the Board rejected such a contention as illogical. In the words of the Trial Examiner in that case: "It would, of course, seem totally inconsis- tent to hold that a grievance procedure would survive a contract but the arbitration clause, the final and binding part of that procedure, would not."" Grievance arbitration is generally considered part and parcel of the grievance procedure. For example, Professor Wellington has recently stated:" Ninety-six percent of collective bargaining agree- ments today provide for some form of grievance arbitration. It is the usual method of resolving most labor disputes during the term of the con- tract that have not been settled by negotiation in the grievance procedure. Arbitration is often considered, and spoken of, as the final step in the grievance procedure. Grievance arbitration is to be distinguished from the arbitration that sometimes is employed to write afresh one or more of the terms and conditions of employment. Grievance arbitration is a very important institu- NLRB v Katz, 369 U S 736, NLRB v United Nuclear Corp, 381 F 2d 972 (C A 10) ' Marine & Shipbuilding Workers v NLRB, 320 F 2d 615, 617- 622 (C A 3), cert denied 375 US 984 , affg in this respect Bethlehem Steel Company (Shipbuilding Division), 136 NLRB 1500, 1502, 1503, NLRB v United Nuclear Corp, 381 F 2d 972, 977-978 (C A 10), NL R B v Celotex Corp, 364 F 2d 552 (C A 5), cert denied 385 U S 987, NLRB v Century Cement Mfg Co, Inc, 208 F 2d 84, 85-86 (C A 2) 10 Kingsport Publishing Corporation, 165 NLRB 694, enforcement denied on other grounds 399 F 2d 660 (C.A 6) " Id at 696 = Harry H Wellington , Labor and the Legal Process ( 1968), 94- 95 THE HILTON-DAVIS CHEMICAL COMPANY tion in American labor-management relations . . . . In the Marine & Shipbuilding Workers case, supra, the court -referred to the "'alteration in,the grievance and arbitration procedure" as being unlawful. Similar- ly, in the leading Warrior & Gulf Navigation case" the Supreme Court without discussion assumed that the arbitration clause was the culminating point of the grievance procedure and used the two terms inter- changeably. Some quotations from that opinion illus- trating the point are: We held in Textile Workers v. Lincoln Mills, 353 U.S. 448, that a -grievance arbitration provi- sion in a collective agreement could be enforced by reason of 301 (a) of the Labor Management Relations Act." A -major factor in achieving industrial peace is the inclusion of a provision for arbitration of grievances in the collective bargaining agreement.15 But the grievance machinery under a collective bargaining agreement is at the very heart of the system of industrial self-government. Arbitration is the means of solving the unforeseeable by molding a system of private law for all the problems which may arise and to provide for their solution in a way which will generally accord with the variant needs and desires of the parties. The processing of the disputes through the grievance machinery is actually a vehicle by which meaning and content is given to t,he collective bargaining agreement. Apart from matters that the parties specifically ,exclude, all of the questions on which the parties disagree must therefore come within the scope of the grievance and arbitration provisions of' the collective agreement. The grievance procedure is, -in other words, a part of the continuous collective bargaining process.16 The arbitral process "substitutes a regime of peaceful settlement for the older regime of industrial conflict."" It is so highly thought of as a means of effectuating national labor policy that the Supreme Court has said that doubts as to arbitrability under an arbitration clause are to be resolved in favor of 245 arbitrability.18 In accordance with this philosophy, the Supreme Court in the Wiley case19 held that a union is entitled to arbitration of grievances which arose during the life of a collective-bargaining contract containing a ;grievance-arbitration procedure even though the contracting employer had been merged into the respondent employer which had not agreed to be bound by the merged company's contract. The -Court said (376'U.S.-at 550): Central to the peculiar status and functions of a collective bargaining agreement is the fact, dictated both by circumstances, . . . and by -the requirements of.the National Labor Relations Act, that it is not in any real sense the simple product of a consensual relationship. Therefore, although the duty to arbitrate, as we have said ... must be founded on a contract, the impressive policy considerations favoring arbitration are not wholly overborne by the fact that Wiley did not sign the contract being construed. This case cannot readily be assimilated to the category of those in which there is no contract whatever, or ,none which is reasonably related to the party sought to be obligated. There was a contract, and Interscience, Wiley's predecessor, was party to it. We thus find Wiley's obligation to arbitrate this dispute in the Interscience contract, construed in the context of a national labor policy. In light of the national labor policy^setforth above favoring arbitration •as'the terminal point in grievance procedure as a means of settling disputes by quasijudi- cial means instead of strikes, the majority opinion appears anachronistic. The extant collective-bargain- ?ingcontractcontains no-strike and grievance-arbitra- tion clauses. The preceding contract contained similar clauses. The Union is seeking to resolve the grievances which arose during the hiatus period between the two contracts by the past and present arbitration procedure. The Respondent and the Board majority say this cannot be done; if the Union is dissatisfied with the outcome of the negotiations to settle these grievances it must strike.'This hardly seems consistent with the present bargaining agreement or with the present national labor policy of substituting "a regime of peaceful settlement for the older regime of industrial ,conflict." Nor -is it -consistent with the Warrior & Gulf admonition that arbitrability is to be 'favored where doubt exists. It is true, as the majority asserts, that arbitration is a matter of contract.20 But it does " United Steelworkers v Warrior & Guff Navigation Co, 363 US 574 1 ° I d at 583 , see also John W i l e y & Sons v Livingston, 376 U S " Id at 577 543 /d.at 578 "John Wiley & Sonsv Livingston, 376 U S 543 Idat581 30 However, as the Wiley case establishes , in some cases an expired Id at 585 .contract may support arbitrability 246 DECISIONS OF NATIONAL LABOR RELATIONS BOARD not follow that with the expiration of the term of a TRIAL EXAMINER'S DECISION collective-bargaining agreement, either party is free unilaterally to alter the established conditions and practices dealing with "wages, hours, and other terms and conditions of employment."21 This applies not only to the grievance-arbitration procedure, but in my opinion, also to the quid pro quo for the arbitration clause, namely, the Union's no-strike agreement, insofar as it applies to strikes over grievances subject to the grievance-arbitration procedure. We are here dealing not with contract enforcement or "constructing" a contract-to use Member Brown's phrase-for the parties, but with an obligation imposed by statute requiring the employer and the representative of his employees to confer in good faith before making changes in "wages, hours, and other terms and conditions of employment . . . ."22 The problem posed by Member Brown as to what would guide an arbitrator on issues during the hiatus period is of course equally applicable to the earlier steps of the grievance procedure which he apparently recognizes as continuing I suggest the answer would lie in the established practices primarily reflected in the expired contract until those have been modified by agreement or unilaterally after notice, an opportunity to discuss, and an impasse. I am not saying that an employer cannot discontinue an existing practice of grievance-arbitration after the termination of a collective-bargaining agreement. I would hold only that an employer cannot abandon such practice, anymore than he can change the wages or seniority of his employees after the expiration of a bargaining contract, without first notifying the representative of his employees and giving the latter an opportunity to bargain about such change. For the above reasons I would find, in accord with the Trial Examiner, and contrary to the majority, that by unilaterally eliminating the arbitration feature of the grievance-arbitration procedure, Respondent violated Section 8(a)(5) and (1) of the Act.23 " The majority attempts to distinguish the square holding in the Bethlehem Steel case, supra, that a unilateral change in grievance procedure after the expiration of the bargaining agreement is a violation of Sec 8(a)(5), on the ground that in Bethlehem the employer sought "to impose new channels for resolution of disputes" whereas here Respondent simply discontinued arbitration This attempted distinction was specifically reject- ed in the Kingsport Publishing case where the Trial Examiner characterized the argument as a "distincton without a difference " Indeed it is illogical to say that an employer acts lawfully if he unilaterally completely abolishes a preexisting grievance procedure, but acts unlawfully if he only modifies it " For this reason Proctor & Gamble Independent Union of Port Ivory, N Y v Proctor & Gamble Manufacturing Company, 312 F 2d 181 (C A 2), which was a suit in contract is not relevant to the present proceeding Cf NL R B v C& C Plywood Corp, 385 U S 421, NL.R B y Acme Industrial Co, 385 U S 432 " I concur with the majority's finding that Respondent did not violate Sec 8 (a)(5) by its abandonment and reinstatement of the grievance procedure STATEMENT OF THE CASE OWSLEY VOSE, Trial Examiner: This case, heard at Cin- cinnati, Ohio, on May 15, 1968, pursuant to a charge filed September 20, 1967, and a complaint issued on Decem- ber 11, 1967, presents the question whether the Respondent (hereinafter called the Company) violated Section 8(a)(5) and (1) of the National Labor Relations Act, as amended, by making certain changes in its grievance procedure after the expiration of the collective-bargaining contract in which the grievance procedure was established, all without notice to Local 342, International Chemical Workers Union, the collective-bargaining representative of its employees. Upon the entire record and my observation of the witness- es, and after due consideration of the briefs filed by the General Counsel and the Company, I make the following- FINDINGS AND CONCLUSIONS 1. THE BUSINESS OF THE COMPANY The Company, a Delaware corporation, operates among others a plant at Cincinnati, Ohio, where it is engaged in the manufacture and sale of pigments, dyes, and pharma- ceutical intermediates. During the past calendar year the Company shipped more than $50,000 worth of its products from its plant at Cincinnati to out-of-state destinations. Upon these facts I find, as the Company admits, that it is engaged in "commerce" and operations "affecting commerce" within the meaning of Section 2(6) and (7) of the Act 11. THE LABOR ORGANIZATION INVOLVED Local 342, International Chemical Workers Union (herein called the Local) is a labor organization within the meaning of Section 2(5) of the Act. III THE UNFAIR LABOR PRACTICES A. The Company's Violations of Section 8(a)(5)and (1) of the Act 1. The collective-bargaining contracts between the Company and the Local On May 5, 1965, the parties entered into a 2-year collec- tive-bargaining contract which was made effective commenc- ing on April 15, 1965. This contract contained a four- step gnevance procedure culminating in binding arbitration. The Local gave the Company timely notice of its intention to terminate the contract and the contract expired by its terms on April 15, 1967. Before the contract expired the Company offered to extend it on a day-to-day basis with either party required to give 48 hours' notice in writing of its intention to terminate, but the Union refused to agree. On June 16, 1967, the parties agreed on the terms of a new collective-bargaining contract which was to become THE HILTON-DAVIS CHEMICAL COMPANY effective as of June 23 and was to run until April 15, 1970. This contract contained the same four-step grievance procedure, with binding arbitration as Step 4. 2 The Company's unilateral action with respect to the grievance procedure On Friday, April 14, 1967, the day before the 1965- 67 contract expired, the Company's Industrial Relations Manager J. W Smith distributed among Company's officers and supervisors a memorandum, in pertinent part, as follows: TO Division Superintendents April 14, 1967 Department Heads Supervisors cc Company Officers Subject: Operation Without a Union Contract The contract between the Company and Local 342 will expire at 12:00 Midnight tonight. The following conditions will apply and management personnel must conduct themselves in accordance with these instruc- tions. a. All practices and, benefits of the previous con- tract will be continued until further notice, except that the grievance procedure and the dues check off under the expired contract no longer are in force. In order to maintain a harmonious relationship, management will discuss any problem with any employee and if he chooses he may have someone accompany him. Such action does not constitute an acknowledgement that the grievance procedure in the terminated contract is in effect nor does it give any right to the employee or the union to arbitrate any issue. If questions arise concerning practices under the expired contract, the Industrial Relations Depart- ment should be called into the discussion. While no notice was given the Union of the Company's discontinuance of the grievance procedure, employees promptly became aware of the Company's action through seeing copies of the memorandum on their supervisors' desks One of the copies of the memorandum was given the Local President Landon Williams. The following Mon- day, April 17, Williams told Robert Hawkins, a representa- tive of the International, about the Company's action respecting the grievance procedure and the dues checkoff. Hawkins promptly communicated this information to Thom- as Boyle, a vice president of the International and national coordinator of the Sterling Drug Council of the Internation- al, of which the Company is a part. Boyle called John Ward, vice president in charge of employee relations of Sterling Drug that same day, April 17, and expressed the opinion that the Company was violating the Act by refusing to entertain grievances from the Union and stated that the Company's action might precipitate a strike. Ward replied that he would consult counsel and call Boyle back. On April 20, 1967, Ward called Boyle back and informed him that the Company would issue a new notice and that the Company would receive and process grievances 247 as before. This is Boyle's testimony . Ward testified that he told Boyle in the April 20 conversation that while the Company would process postcontract grievances up to arbitration, it would not submit such unresolved griev- ances to arbitration In view of the Company's contention, discussed below, that its decision not to arbitrate postcontract grievances was not reached unilaterally, it is necessary to resolve the inconsistencies between Boyle's and Ward's testimony concerning the Company's asserted notification to the Local that the Company would not submit grievances to arbitra- tion Boyle's testimony as a whole leaves the impression that he was unaware of the Company's decision not to arbitrate until after the negotiations for a new contract were completed in the last half of June 1967. Thus Boyle testified that when he asked Ward at.a-bargaining meeting on June 16, 1967, whether the Company would submit pending unresolved grievances to arbitration Ward answered, "Yes." Ward was not recalled and asked about this conversation. I have some difficulty in accepting this testimony at its face value. I think it unlikely that Ward would have flatly told Boyle that the Company would arbitrate postcon- tract grievances when, as found below, the Company's written policy promulgated on April 20 was exactly the opposite. On the other hand, I am doubtful about Ward's testimony that he specifically stated to Boyle on April 20, 1967, that the Company would not arbitrate postcontract grievances. It should be borne in mind that both men were testifying as to events which had occurred about a year earlier. Neither witness impressed me as having an accurate present recollection of the events as to which they were testifying. I am convinced that Ward did not flatly tell Boyle on April 20„ 1967; that the Company would not arbitrate postcontract• grievances. Until a griev- ance arose which could not be settled short of arbitration there was no occasion for Ward to make such a sweeping statement which was likely to exacerbate relations between the parties and might possibly precipitate a strike. And it might turn out that all postcontract grievances could be disposed of short of arbitration Considering all the testimony in the light of the probabili- ties of the situation, I find that Ward in his April 20 conversation with Boyle made some-response to the effect that the Company would go ahead and process grievances. Regarding the conversation between Boyle and Ward at the June 16 negotiating meeting, I do not credit Boyle's testimony that Ward told him, in answer to Boyle's specific question, that the Company would submit postcontract grievances to arbitration. Rather I conclude that Ward made some more general reply concerning following the old procedure which left Boyle with the impression that the Company still proposed to follow all of the provisions of the old grievance procedure, including the arbitration provision. On April 20, 1968, the Company issued a new notice to officers and supervisors, as Ward had told Boyle it would. The notice is as follows 248 DECISIONS OF NATIONAL LABOR RELATIONS,BOARD TO: Division Superintendents Department Heads Supervisors cc Company Officers Subject Operation Without a Union Contract A number of questions have arisen over-the method of handling grievances now that. the Union Contract has expired. Therefore, we wish to make it clear that although the grievance procedure itself is not formally in effect, we will. continue the handling of grievances in the same manner as they have been in the past. Since the contractual provisions of arbitration are no longer in effect such grievances will only be processed through Step 3. [s] J.W. Smith J.W. Smith Industrial Relations Manager The Local was not furnished with a' copy of this notice; nor was it ever informed,as to its contents A total of 28 grievances arose during the interim period between two contracts, from April 15, 1967, to June 23, 1967. Of these 20 were disposed of by the parties at least by Step 3 under the procedure set forth in the expired 1965-67 contract. As to the remaining eight undisposed of grievances, the Company formally declined the Union's requests that such eight grievances be submitted to arbitra- tion. B. Conclusions Concerning the Company's Unilateral Action with Respect to the Grievance Procedure The facts set forth hereinabove establish that the Company on April 14, 1967, the eve of the expiration of the 1965 contract, decided to discontinue processing grievances under the procedure provided in the 1965-67 contract and formally notified its supervisors to follow this policy. This change remained in effect until April 20. It was put into effect without consultation with the Local. After receiving a protest from the Local that its conduct was unlawful, the Company on April' 20 issued revised instructions to its supervisors that grievances would be handled as in the past up through Step 3 of _the grievance procedure of the expired contract but that any grievances arising after the expiration of the 1965-67 contract which remained unresolved after Step 3 processing would not be submitted to arbitration. The Local, however, was not notified at this time of the Company's decision, which was reached without consultation, with the Local, the Com- pany thereafter refused the Local's requests to, submit eight postcontract grievances to arbitration. The General Counsel's complaint in this case alleges a two-pronged violation of Section 8(a)(5) and (1) of the Act. Paragraph 6(a)^ of the, complaint alleges a violation based upon the Company's action, from April 14 to 20, 1967, in refusing to process postcontract grievances. Para= graph 6(b) complains of the Company's action on and after April 20, 1967, in refusing the Local's requests for submission to arbitration of certain postcontract grievances. The Company in its brief does not seriously address itself to the paragraph 6(a) allegation. The Company appar- ently recognizes that an employer violates his bargaining duty where he unilaterally alters or discontinues a previously existing formal grievance procedure without giving the employees' representative an opportunity to bargain about the change-that is, a grievance procedure not including a provision for arbitration. The Company's position is in accord with settled law. Bethlehem Steel Company (Ship- building Division). 136 NLRB 1500, 1502, 1503, affd in this respect and remanded sub. nom. Industrial Union of Marine and Shipbuilding Workers of America, AFL-CIO v. NL.R.B., 320 F 2d 615, 6.17-622 (C.A. 3), cert. denied 375 U.S. 984; Celotex- Corp., 146 NLRB 48, 59-60, enfd. 364 F.2d 552, 553, 554 (C.A. 5), cert. denied 385 U.S. 987, Motoresearch Company and Kems, Corporation, 138 NLRB 1490, 1492; Kingsport Publishing Corporation, 165 NLRB No. 116, Granite City Steel Company, 167 NLRB No 35. See also United Nuclear Corporation, 156 NLRB 961, 965, enfd: 381 F.2d 972, 977-978 (C.A. 10). According- ly, I' find,, as alleged in paragraph 6(a) of the complaint, that the Company by unilaterally discontinuing from April 15 to 20, 1967, its former procedure for adjusting grievances has violated Section 8(a)(5) and (1) of the Act. Regarding the allegations of paragraph 6(b) of the com- plaint the Company makes both a factual and legal argu- ment. Concerning the former, the Company argues that it did not in fact take unilateral action regarding its nonarbi- tration position because it informed the Union of its position and the Union did not seek to bargain about the matter and did not raise any objections. As to the Company's legal argument, the Company contends that its refusal of the Union's requests to submit to arbitration certain unresolved postcontract grievances did not constitute unilat- eral action in violation of Section 8(a)(5) of the Act because an arbitration procedure (1) does not concern "wages, hours, and other terms and conditions of employment" within the- meaning of Section 8(d) of the Act, and (2) exists wholly outside of the employer-employee relationship by virtue of the contract, as a means of resolving contractual disputes. Regarding the Company's factual argument, I have found, contrary to. the Company's, contention,, that the, Company did not in fact inform the Local concerning its nonarbitration policy until a considerable period of time after it had been put into effect Hence, I must reject the Company's contention, that it afforded the Local an opportunity to bargain about its change in policy. As to the Company's legal argument, it is true that arbitration procedures have their origin only in contracts. However, it does not necessarily follow that such procedures, when. included as the final step in comprehensive grievance procedures, do not relate to "terms and conditions of employment" with, respect to which employers are required to bargain collectively with the exclusive, representative of their employees. As I construe the Third Circuit's decision in the Bethlehem case, that Court reached the opposite conclusion; namely, that grievance and arbitration proce- dures are within the phrase "wages,. hours, and other terms and conditions of employment" (320 F.2d at 620). As THE HILTON-DAVIS CHEMICAL COMPANY stated by the Trial Examiner in Kingsport Publishing Corpo- ration, 165 NLRB No. 116, "It would, of course, seem totally inconsistent to hold that a grievance procedure would survive a contract but that the arbitration clause, the final and binding part of that procedure , would not " Reason and logic in my opinion support the view that an arbitration procedure should be regarded as being in the same category as any other step in a contractually established grievance procedure and can no more be unilaterally discontinued by the employer after the expiration of the contract than can any of the earlier steps in the grievance procedure I cannot agree with the Company's conclusion that the Board in its Bethlehem decision (136 NLRB 1500) necessari- ly directed its ruling only to the grievance procedure and not to arbitration . While this conclusion is arguable, in my opinion it can be argued with equal or even greater force that the Board in Bethlehem, stating that "it is with respect to the unilateral action taken in . . . altering an existing grievance procedure that we now believe that the Respondent violated Section 8(a)(5) of the Act," intend- ed to refer to the entire existing grievance procedure which, as here, included arbitration as the final step. This was the conclusion of the Third Circuit upon reviewing the Board's Bethlehem decision Thus the Court, after reciting the fact that there was no agreement in effect when Bethle- hem's unilateral action occurred, stated (320 F.2d at 620): Bethlehem was justified in discontinuing enforcement of the union shop and checkoff because these conditions are wholly dependent upon the existence of an agreement conforming to the §8(a)(3) proviso. The company's abrogation of seniority rights and its alteration in the grievance and arbitration procedure, however, finds no such protection in the statute. The vice in this was not the refusal to comply with the provisions of an agreement which had already expired, but the unilateral elimination of accrued seniority rights, and the substitution of a new employer -devised grievance procedure in lieu of the one which existed under the expired contract' The Company's reliance on Proctor & Gamble Independ- ent Union v. Proctor & Gamble, 312 F.2d 181 (C.A. 2), and Local Union No. 998, UAW v. B. & T. Metals co., 315 F 2d 432 (C A. 6), in my opinion, is misplaced Both cases involved actions by unions to compel the employers to arbitrate grievances under the terms of collective -bargain- ing contracts In the B. & T Metals Co. case the court held that the grievance there involved was not of a kind which was arbitrable under the contract in any event whether the contract was still in effect or not . The court did not deem it within its province to pass on the question whether the contract was still in effect or not because, in its view, this was an unresolved factual matter which it was up ' I cannot concur with the Company's conclusion that the Third Circuit in Bethlehem was not concerned with the abandonment by the Company of the grievance procedure set out in the agreement but rather with the infringement on the Union's role as exclusive bargaining represent- ative caused by such action As I read the Third Circuit's decision, Bethlehem's abandonment of the grievance procedure was the crux of this particular violation of Sec 8(a)(5) 249 to the District Court to pass on in the first instance. The B. & T. Metals Co case is not relevant to the issues in the instant case. While there is dictum in the Proctor & Gamble case which appears to lend support to the Company's position, all that the court held in that case was that arbitration of grievances arising under a contractually established griev- ance procedure could not be compelled in an action based on the contract, where the conduct giving rise to the grievance occurred after the expiration of the contract in which the grievance procedure was established. In arriving at this conclusion the court rejected the contention that the court could grant the relief requested by the Union, not under the contract, but because the refusal to arbitrate constituted in the circumstances of the case a unilateral change in conditions of work in violation of Section 8(a)(5) of the Act The "federal courts," the Second Circuit stated, "are without competence to pass upon its claim of unfair labor practices." Such claims, as the court held, are within the "exclusive jurisdiction" of the Board (312 F.2d at 190). It does not follow, as the Company appears to suggest, that because the Company was free after the expiration of the contract from contractual inhibitions against unilater- ally discontinuing the arbitration procedure that the Board cannot pass on the question whether such a unilateral act constituted an unfair labor practice within the meaning of Section 8(a)(5) of the Act Indeed, the portions of the court's opinion above quoted indicate to the contrary.2 Accordingly, I conclude that the Company by discontinu- ing the arbitration feature of its established grievance proce- dure without notifying the Local of its intentions in this regard and giving it an opportunity to bargain collectively about the proposed change and by thereafter refusing the Local's requests for arbitration of certain grievances arising after the expiration of the 1965 contract has refused to bargain collectively with the Union in violation of Section 8(a)(5) and (1) of the Act CONCLUSIONS OF LAW 1. Local 342, International Chemical Workers Union is the exclusive collective-bargaining representative of the Company's production and maintenance employees employed at its Cincinnati, Ohio, plant including receiving clerks, traffic clerks, drivers, drum inspectors, order clerks, raw material checkers, janitors and janitresses, and power house laborers, but excluding all executives, superintendents, division heads, chemical supervisors, foremen, laboratory employees (general and departmental), co-op students, pro- fessional employees, watchmen, licensed stationary engi- neers, licensed firemen, office clerical employees and any supervisory employees within the meaning of the National Labor Relations Act, as amended. ' The suggestion in fn 10 of the court's opinion (312 F 2d at 190) that the Board itself "does not require the employer to refrain from abandoning arbitration without collective bargaining at the termination of an agreement containing an arbitration clause," in my opinion, reads more into the Board's decision in the Bethlehem case (136 NLRB 1500), than the language of the decision warrants 250 DECISIONS OF NATIONAL LABOR RELATIONS BOARD 2. The arbitration aspect of the grievance procedure established in the 1965-67 collective-bargaining contract between the Company and the Local comes within the definition of "terms and conditions of employment" con- tained in Section 8(d) of the Act and therefore is a mandatory subject of collective bargaining. 3. The Company by its action which became effective on April 15, 1967, in unilaterally discontinuing the grievance procedure set forth in the expired 1965-67 contract, by its action on April 20, 1967, in unilaterally reinstituting its former grievance procedure but omitting the arbitration stage thereof, and by its action thereafter in refusing the Union's requests for arbitration of postcontract grievances in accordance with the former procedure, has refused to bargain collectively with the Local in violation of Section 8(a)(5) and (7) of the Act 4. The aforesaid unfair labor practices affect commerce within the meaning of Section 2(6) and (7)of the Act. THE REMEDY Having found that the Company violated the Act by taking unilateral action with respect to matters as to which it was obligated to bargain collectively with the Union, my Recommended Order will provide that the Company cease and desist therefrom and from like and related conduct. Since the Company's violations included its action in refus- ing to process grievances through the arbitration stage of the grievance procedure, my Recommended Order will direct that the Company process through the arbitration stage in accordance with Step 4 of the expired 1965- 67 contract such ones of the eight postcontract grievances as to which the Union hereafter requests the Company in writing to submit to arbitration. See Local 485, Interna- tional Union of Electrical, Radio & Machine Workers, AFL- CIO (Automotive Plating Corp.). 170 NLRB No. 121. Upon the foregoing findings and conclusions and the entire record and pursuant to Section 10(c) of the Act, I hereby issue the following: RECOMMENDED ORDER The Respondent, The Hilton-Davis Chemical Co., Divi- sion of Sterling Drug, Inc., Cincinnati, Ohio, its officers, agents, successors, and assigns, shall: 1. Cease and desist from: (a) Refusing to bargain collectively with Local 342, Inter- national Chemical Workers Union, as the exclusive repre- sentative of its employees in the appropriate unit stated above by making unilateral changes in its grievance proce- dure, including the arbitration provisions thereof, or any other terms or conditions of employment of said employees, without prior consultation and bargaining with Local 342, International Chemical Workers Union. (b) In any like or related manner interfering with, restrain- ing, or coercing employees in the exercise of their rights guaranteed by Section 7 of the Act 2. Take the following affirmative action which it is found will effectuate the policies of the Act. (a) Submit to arbitration in accordance with Step 4 of the grievance procedure of the expired 1965-67 contract with Local 342, International Chemical Workers Union, such of the eight postcontract grievances as said Local hereafter requests, in writing, be submitted to arbitration. (b) Post at its Cincinnati, Ohio, plant copies of the attached notice marked "Appendix " Copies of said notice, on forms provided by the Regional Director for Region 9, after being duly signed by Respondent's representative, shall be posted by Respondent immediately upon receipt thereof, and be maintained by it for 60 consecutive days thereafter, in conspicuous places, including all places where notices to employees are customarily posted. Reasonable steps shall be taken by the Respondent to insure that said notices are not altered, defaced, or covered by any other material.' (c) Notify the Regional Director for Region 9, in writing, within 20 days from the receipt of this Decision, what steps have been taken to comply herewith.' ' in the event that this Recommended Order is adopted by the Board, the words "a Decision and Order" shall be substituted for the words "the Recommended Order of a Trial Examiner" in the notice In the further event that the Board's Order is enforced by a decree of a United States Court of Appeals, the words "a Decree of the United States Court of Appeals enforcing an Order" shall be substituted for the words "a Decision and Order " ' in the event that this Recommended Order is adopted by the Board, this provision shall be modified to read "Notify said Regional Director, in writing, within 10 days from the date of this Order, what steps Respondent has taken to comply herewith " APPENDIX NOTICE TO ALL EMPLOYEES Pursuant to the Recommended Order of a Trial Examiner of the National Labor Relations Board, and in order to effectuate the policies of the National Labor Relations Act, as amended, we, hereby notify our employees that: After a trial in which both sides had the opportunity to present their evidence, a Trial Examiner of the National Labor Relations Board has found that we violated the Act and has ordered us to post this notice and keep our word about what we say in this notice. A Trial Examiner of the Board has found that we violated the Act when we changed our grievance and arbitration procedure after the expiration of our 1965-67 collective-bargaining contract without bargain- ing with Local 342, International Chemical Workers Union about such changes WE WILL NOT change our grievance and arbitration procedure or any other term or condition of employ- ment in the future without first bargaining with the Union about such matters. WE WILL NOT in any like or related manner interfere with, restrain, or coerce our employees in the exercise of the rights guaranteed in Section 7 of the Act. THE HILTON-DAVIS CHEMICAL COMPANY If requested by the Union to do so, WE WILL submit to arbitration under Step 4 of the grievance and arbitration procedure or our 1965-67 contract the eight grievances which were filed after the contract had expired on April 15, 1967, but which were not settled in Step 3. THE HILTON-DAVIS CHEMICAL CO., DIVISION OF STERLING DRUG. INC. (Employer) 251 This notice must remain posted for 60 consecutive days from the date of posting, and must not be altered, defaced, or covered by any other material. If employees have any question concerning this notice or compliance with its provisions, they may communicate directly with the Board's Regional Office, Room 2407, Federal Office Building, 550 Main Street, Cincinnati, Ohio 45202, Telephone 684-3686. Dated By (Representative) (Title)