Bambury Fashions, Inc., et al

BAMBURY FASHIONS, INC. Bambury Fashions, Inc., et all and National Association of Women's & Children's Apparel Salesmen, Inc. (NAWCAS-Guild),' and District 65, Retail, Wholesale and Department Store Union, AFL-CIO, Joint Petitioners. Cases 2-RC-14631, 2-RC- 14632, 2-RC-14634, 2-RC- 14654-14664, 2-RC-14666-14672, and 2-RC-14684-14693 October 30, 1969 DECISION ON REVIEW AND ORDER BY CHAIRMAN MCCULLOCH AND MEMBERS FANNING, BROWN, AND JENKINS On June 2, 1967, the petitions filed herein were consolidated for hearing on the limited issue of the status of NAWCAS as a labor organization. After the hearing, the Regional Director for Region 2, on December 13, 1967, issued a decision, entitled "Order Severing Cases And Incorporating Record Of Consolidated Hearing On Limited Issue of `Labor Organization' In Each of the Severed Cases and Interim Resolution of Facts And Applicable Legal Precedents," in which decision he found that NAWCAS qualifies as a labor organization. Thereafter, pursuant to Section 102.67(c) of the National Labor Relations Board Rules and Regulations, as amended, the Employers filed a timely request for review of the Regional Director's decision on the grounds, inter alia , that he erred in failing to make essential findings of fact upon the record and that substantial questions of law and policy are raised by reason of the absence of, and incorrect application of, officially reported precedents. NAWCAS filed a statement in opposition to the request for review. By telegraphic Order dated April 23, 1968, the National Labor Relations Board granted the request for review. The Employers and NAWCAS filed briefs on review. The Board has considered the entire record in these cases' with respect to the issues under review, including the briefs on review, and makes the following findings. In each of the consolidated cases, the Joint Petitioners seek to represent a unit of the named Employer's traveling salesmen , excluding its resident 'Other Employers are Kay Windsor Sales Corp , Banff, Ltd , Band Box Sportswear, Inc , Heckler Corp , Jack L. Honig, Inc , Janice Juniors, Inc , Marcia Frocks, Miss Glamour Coat Co , Arthur J Saunders Co , Schwartz & Lieberman, Style Vogues, Susan Laurie, Inc , Carol Craig, Inc., Knitique , Mac Shore Classics, L'Aiglon Apparel, Inc , Pantsmaker, Inc , Sunnyvale, Inc , Talbot Knitting Mills, Jo Matthew, Inc , Ann Barry Frocks, Inc , Berkshire Sportswear Co , M. Berman & Sons, Bilioy, Inc , Blue Jean Corp , Brownie Knitting Mills, Fairfield Knit, Korell Corp, Lora Lenox, and Sportswear U.S.A 'Referred to herein as NAWCAS. On July 7, 1969, the parties, by agreement , offered into evidence as Employers' Exhibit 6A the 1967 Standard Contract of NAWCAS Exhibit 6A is hereby made part of the record . In their letter of transmittal the Employers state that references on pages 47 and 48 of their brief to the NAWCAS "Standard Contract" are to provisions of Exhibit 6A 447 or showroom salesmen. As above indicated, the hearing held herein was confined to the issue of the status of NAWCAS as a labor organization and was adjourned indefinitely pending interim resolution of this issue. In its brief to the Regional Director, the Employers contended that NAWCAS is not qualified to act as a labor organization because (1) its primary function is the operation of a business in direct competition with the Employers, (2) high ranking officials of NAWCAS, who set major policies, are also representatives of management or employers in the industry in which NAWCAS seeks certification, (3) most of the members of NAWCAS are independent contractors, (4) NAWCAS uses coercive means to obtain and retain members, and (5) NAWCAS seeks certification to avoid prosecution by the Federal Trade Commission in a restraint of trade complaint proceeding. The Regional Director, in his interim decision, found that NAWCAS is a labor organization within the meaning of Section 2(5) of the National Labor Relations Act' because it admits to membership resident salesmen who are admittedly employees and it exists in part for the purpose of representing employees in collective bargaining with employers. He rejected the arguments advanced by the Employers in support of their contention that NAWCAS is disqualified from acting as a labor organization. As to (1), he found no direct competition as alleged. As to (2), he found that NAWCAS is not controlled by members who are management officials in the industry. He rejected the third basis without determining whether traveling salesmen are independent contractors or employees, finding that as NAWCAS satisfies the two-part test of the statutory definition of a labor organization, it is not disqualified merely because members other than resident salesmen may be independent contractors or employees. As to arguments (4) and (5), he found them not germane to the instant proceedings. In their brief on review, the Employers contend, inter alia , that the Regional Director erred in failing to find (1) that the traveling salesmen, who comprise most of the membership of NAWCAS, are independent contractors and (2) that, because NAWCAS is principally engaged in conducting trade shows for the sale of apparel by its traveling salesmen, who comprise most of its membership and control its activities, it is in direct business competition with the Employers in the sale of their products and is, therefore, disqualified. NAWCAS is an association of approximately 12,500 salesmen principally' engaged in the sale at wholesale of women's and children's apparel, accessories and related items. It was formed in 1946 'Section 2(5) of the Act states The term "labor organization" means any organization of any kind, or any agency or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work 179 NLRB No. 75 448 DECISIONS OF NATIONAL LABOR RELATIONS BOARD primarily to coordinate and strengthen the trade shows conducted by a number of trade association of such salesmen. Currently it has 73 affiliates located throughout the United States and Canada, which are separately incorporated and have their own constitutions, bylaws and regulations,. The affiliates are grouped geographically into 10 regions. The affiliates within the Manhattan Region are made up of resident salesmen who are admittedly employees of manufacturers of women's and children's apparel.' Virtually all other affiliates are made up of traveling salesmen.' Salesmen who are not members of an affiliate,' may nevertheless be eligible for membership in NAWCAS under the title of "individual regional members."' Each affiliate has its own officers and board of directors. Typically, eligibility for election to the board of governors is conditioned on 3 years full membership in good standing. Only members of the board of governors are eligible to become officers. Each affiliate elects delegates (the number depending on the size of its membership) to the national convention of NAWCAS which meets annually. At the convention the delegates elect a president, executive vice president, secretary and treasurer of NAWCAS Delegates of affiliates within each region caucus separately to elect a regional vice president. The NAWCAS officers, the regional vice presidents, and the three immediate past presidents of NAWCAS constitute the Executive Advisory Council (EAC). The EAC and the Board of Governors (made up of the EAC, all past presidents and the convention delegates) are the governing bodies of NAWCAS. Since its formation the principal function of NAWCAS continuously has been to coordinate the trade show activity of affiliates.' These affiliates hold, on the average, four to five trade shows a year, each usually lasting 3 to 5 days. Only full members of an affiliate may exhibit at its trade shows Moreover, to qualify for participation, the 'Resident salesmen were members of NAWCAS at the time of its formation but discontinued their membership shortly thereafter However, certain resident salesmen rejoined NAWCAS in 1963 and, effective January I , 1964, they were required , as a condition of membership in NAWCAS, to become members of an affiliate within the Manhattan Region if one were formed to serve the industry where they were employed ' It appears that some inactive or retired salesmen are members of certain affiliates in order to enjoy the fraternal benefits offered 'In a typical affiliate , a traveling salesman must have traveled his territory for at least 2 years and be a member in good standing of NAWCAS to qualify for full membership Associate members of affiliates have no voting rights 'Among the members of NAWCAS are approximately 200 who are currently manufacturers or occupy managerial positions in the industry The rules and regulations of NAWCAS were amended in 1959 to provide that henceforth no affiliate would accept a manufacturer as a member or associate member NAWCAS also revised its constitution and bylaws in 1961 to provide that henceforth a manufacturer , wholesaler or jobber would not be admitted to individual membership in NAWCAS However, those salesmen who became members prior to these changes and subsequently became manufacturers or management officials in the industry have been allowed to retain their memberships but have generally been prohibited from holding elective office traveling salesman must have executed a NAWCAS-approved standard contract or its equivalent with the manufacturer whose line of apparel is to be exhibited. The standard contract contains the following provisions: I The Company employs the Salesman, and the Salesman agrees to act as salesman for the Company, for a period of one (1) year from the date hereof, ... . 2. (a) [Specification of the salesman's commission rate and description of his exclusive territory.] The Salesman has the exclusive right and authority within the territory herein described, to determine, select or otherwise designate the times and places, including organized apparel shows or salesmen's group exhibits, where the line will be shown or exhibited. The Company further agrees that if the Salesman belongs to any organized apparel shows or salesmen's groups within said territory that the Company's line will be exhibited only at such shows or with such groups; provided, that this provision shall not require a Company which has its principal place of business within said territory and maintains a show room on its premises to close such show room. (b) The Salesman shall not be charged with or be liable for advertising allowances granted by the Company to customers, nor shall there be any decrease or reduction of commissions on nationally advertised merchandise groups and items. (c) The Salesman will not make any representations, warranties or commitments binding the Company without the prior written consent of the Company. (d) The Company agrees to refer to the Salesman for attention all inquiries concerning its products received by the Company from any source or by any means whatsoever from the above described territory. (e) The Company agrees to give Salesman credit for all sales made in Salesman's territory or to customers therein, whether the orders for such sales are sent in by Salesman, received by the Company through the mails, or taken at the Company's place of business, or otherwise. (f) The Company shall have the option of accepting or rejecting any order taken by the Saleman, and no commissions shall be payable hereunder except on goods actually shipped by the Company and received and accepted by the purchaser, provided, however, that the Company guarantees to pay the Salesman commissions on a minimum of eighty-five percent (85%) of accepted orders, whether shipped or not. (g) An order will be considered accepted unless the Company notifies the Salesman in writing of 'As above noted , affiliates in the Manhattan Region and an undisclosed number of others do not conduct trade shows BAMBURY FASHIONS, INC. any orders rejected within days. 3. The Company shall advance the Salesman - - - - - Dollars (& - - - ) per week (per month), which is to be used by Salesman to cover his traveling expenses and incidental expenses in his employment, and is to be charged against him as a drawing account and deducted from any amounts due Salesman as commissions. Any excess of said drawing account over and above the amount of commissions due at the end of this agreement or any renewal thereof shall not be a personal charge against the Salesman and there shall be no liability upon the Salesman to refund any excess of drawing account over commissions. 4. (a) The Salesman agrees to diligently and faithfully work the territory assigned to him in an endeavor to secure business for the Company. (b) The Company shall furnish the Salesman with all samples, sample bags, hangers, cases and other paraphernalia necessary to the employment, all of which the Salesman agrees to return to the Company and to be liable for any failure to return any portion thereof at the request of the Company, provided that the Salesman shall not be liable to the Company for any loss of the foregoing equipment in the event the same shall be stolen, destroyed or damaged under circumstances which do not result from the negligence of the Salesman or his failure to exercise ordinary care to safeguard property. 5. (a) Either party shall have the right to terminate this contract prior to the expiration of the term, provided written notice of intention to terminate is given the other party at least 60 days before the commencement of the next selling season.... . (b) In the absence of a 60 day written notice prior to the expiration of the term, this agreement shall be automatically renewed from year to year subject to the same terms and provisions as contained herein. 6. (a) The Company agrees to furnish Salesman with a copy of all invoices and orders covering any goods shipped into the above described territory or sold to customers therein, and to furnish Salesman with a statement on the fifteenth (15th) of each month covering the amount of sales for the previous month, and the amount of commissions due Salesman. The amount due the Salesman shall be payable at the time the statement is rendered. (b) In the event of termination of services, the Salesman shall receive commissions on all orders and sales as provided in Section 2 and on all reorders on such sales or orders, even though the shipments thereof are not made until after such termination of services. 7 The Salesman may carry additional lines only with the full knowledge of the Company, provided that no additional line be a conflicting 449 line. 8. The Company agrees that for the purpose of the Federal Insurance Contributions Act and the applicable State Social Security and Unemployment Compensation Acts, the Salesman shall be considered an employee and covered under said Acts. 9. It is hereby agreed that this agreement and writing constitutes and expresses the whole agreement of the parties with reference to employment and representation, and compensation for or in respect to such employment and representation, of the Salesman by the Company and all promises, undertakings, representations, agreements, and understandings and arrangements with reference to such employment, representations and compensation are herein merged. No alterations or variations of the terms of this agreement and contract shall be valid unless made in writing and signed by both of the parties hereto. 10. The parties hereto agree to arbitrate any dispute arising out of any of the terms and provisions of this agreement. The parties may refer such dispute to the National Association of Women's and Children's Apparel Salesmen, Inc. for arbitration under procedures established by the Association. If this is not mutually agreeable to both parties, they may refer such dispute to an arbitrator mutually agreeable to both parties. If both parties cannot agree upon one arbitrator, then, each party shall appoint one arbitrator, and the two arbitrators so selected shall select a third person to compose a panel of three arbitrators, who shall hear and determine the dispute, the cost of such arbitration hearing to be borne equally by both parties. The decision of any such arbitration hearing shall be final and binding upon both parties. The affiliate conducting a trade show rents the necessary facilities and equipment, solicits registrations from members qualified to exhibit, and makes the necessary arrangements. The registrant is required to pay a registration fee, to submit requisitions for booth space and equipment, and to reimburse the affiliate therefor. The affiliate provides assistance to the registrants in obtaining needed employees: assistants, models, chauffeurs, etc. The registrant may also employ other traveling salesmen who are associate members with the restriction that they be employed only in the registrant's booth and assist in exhibiting only the line carried by the registrant. Each show is governed by the rules and regulations of the sponsoring affiliate and violation of the rules may result in a fine or suspension. A number of the rules are designed to prevent members from participating in competing shows. The trade shows conducted by NAWCAS affiliates are one of a number of methods by which apparel is sold in the industry. In addition to direct 450 DECISIONS OF NATIONAL LABOR RELATIONS BOARD mail sales, many manufacturers have a New York City sales office; some also have regional sales offices in key cities throughout the country. Some manufacturers sell to jobbers who in turn sell to retailers. With respect to some types of apparel, retailers may use a common buyer who engages in pool buying, dealing directly with a manufacturer. The oldest method is through road or traveling salemen. Aside from NAWCAS-affiliated trade shows there are "unaffiliated" markets operated by other organizations of traveling salesmen. There are also merchandise marts which lease office and showroom space to manufacturers' representatives and salesmen on a year-round basis. Finally, groups of traveling salesmen organize caravans which regularly travel from city to city showing their lines. In recent times, NAWCAS has devoted a substantial amount of time to studying the impact of merchandise marts on its affiliates' shows and has considered the feasibility of establishing its own merchandise marts. The existence of competition between the various methods of selling apparel in, the industry is made manifest by the pending complaint proceeding before the Federal Trade Commission in which a hearing examiner of that agency issued an initial decision, on April 18, 1968, that NAWCAS and its agents, in a number of the practices they follow and rules and regulations they impose on their members in connection with trade show activites, have engaged in illegal restraints of trade. In December 1964, NAWCAS revised its constitution to add as one of its purposes "to represent the members as their bargaining agent and where appropriate to negotiate collective bargaining agreements in their behalf." In December 1965, the membership ratified a resolution establishing NAWCAS as a guild. NAWCAS has prepared a standard collective-bargaining agreement and seeks to execute it with the Employers here involved for NAWCAS members carrying their lines of apparel.10 Although the record herein, confined as it is to the issue of the labor organization status of NAWCAS, does not enable us to determine the independent contractor status of the particular traveling salesmen sought to be represented in the instant petitions, it does contain sufficient evidence to permit a resolution of this issue with respect to those traveling salesmen who, as full members of NAWCAS affiliates, have executed a NAWCAS-approved contract with the manufacturers whose lines they carry. As to these traveling salesmen, applying the common law right of control test," we are satisfied that under the terms of the standard contract above quoted at "It is noteworthy that item 9 of this form contract, relating to territorial policy, which applies only to traveling salesmen , contains the same terms as found in paragraph 2(a) as well as in other provisions of the standard contract which manufacturers must execute with traveling salesmen before their lines of apparel may be exhibited at a NAWCAS trade show. length, including the evidence in the record as to the practice thereunder, they are granted the right to control the means by which the manufacturer's line of apparel is sold within a defined territory, and the manufacturer retains the right to control only the result. We rely especially on paragraph 2(a) of the contract which sets forth the salesman's exclusive territory and expressly grants him the exclusive right within that territory "to determine, select or otherwise designate the times and places, including organized apparel shows or salesmen's group exhibits, where the line will be shown or exhibited," and in which the Company agrees, with a limited qualification, that if the salesman belongs to any such organized shows or groups within the territory the Company's goods will be exhibited only there. The other quoted provisions of the contract do not, in our opinion, detract from this broad grant of control,over the means by which the manufacturer's line is to, be sold.' 2 Accordingly, we find that the traveling salesmen who participate in NAWCAS trade shows are independent contractors. As these traveling salesmen comprise the voting members of those NAWCAS affiliates which conduct trade shows, we also find, in the light of the facts above recited, that through their elected delegates to annual conventions of NAWCAS they exercise substantial majority control over that body. Although the resident salesmen members of affiliates in the Manhattan Region are admittedly employees of apparel manufacturers, and a substantial number of the individual regional members of NAWCAS may also have employee status, these employees clearly have a minority voice in the affairs of NAWCAS. Finally, notwithstanding the fact that NAWCAS, as found by the Regional Director, satisfies the two part test of the statutory definition of a labor organization, we find that it is disqualified from acting as such because its interest in representing employee salesmen in the industry conflicts substantially with its primary interest in coordinating and strengthening the trade show activities of its affiliates. We agree with the Employers that NAWCAS in its trade show activities in behalf of independent contractor traveling salesmen members, is engaged in the business of selling apparel in direct competition with apparel manufacturers. As above found, the terms "This test turns essentially on whether the person for whom the services are performed retains the right to control the manner and means by which the result is to be accomplished, or controls only the result . If the latter, the status is that of an independent contractor The resolution of this question depends on the facts of the case No one factor is determinative ' The record contains no testimony of traveling salesmen concerning the practice they follow in implementing the provisions of the contract which they execute with manufacturers . Although not controlling our finding herein, we note that the FTC hearing examiner in his initial decision found the traveling salesmen members of NAWCAS to be independent contractors, and in Appendix B of his decision has set forth record facts pertaining to the relationship of traveling salesmen to manufacturers, none of which facts is inconsistent with the right of control of the means granted traveling salesmen in their contracts with manufacturers BAMBURY FASHIONS, INC. 451 of the contracts which some of these manufacturers execute with traveling salesmen not only establish the latter as independent contractors but must in all respects meet with the approval of NAWCAS as a prerequisite to exhibition of the manufacturer 's lines of apparel at NAWCAS trade shows . Illustrating this competition , paragraph 2(a) of the standard contract prohibits the manufacturer from engaging in showroom sales of its line while the traveling salesmen is exhibiting that line at a trade show; and paragraph 2(c) restricts the manufacturer in its use of alternative selling methods by requiring it to credit the traveling salesman for any sales of the line made by it within his exclusive territory . Although manufacturers whose lines are sold by traveling salesmen members of NAWCAS may by agreement in fact not utilize competing methods of selling those lines, the potential for competition is very real. By the same token , although the conflict between the collective-bargaining interests of NAWCAS and its interests in increasing the sales volume of its traveling salesmen members may be minimized at present because of the contractual commitments of the manufacturers not to compete with the traveling salesmen involved , the conflict would become clear and immediate if the manufacturers for any reason wished to alter those contractual commitments. And as the Board indicated in Bausch & Lomb Optical Company, 108 NLRB 1555, what disqualifies a union from acting as such when it also conducts a business enterprise in the same industry, is the latent danger that it may bargain, not for the benefit of unit employees, but for the protection and enhancement of its business interests which are in direct competition with those of the employer at the other side of the bargaining table. We conclude, therefore, applying the rationale of Bausch & Lomb to the facts of these cases, that NAWCAS is disqualified from acting as a labor organization herein." Accordingly, we shall dismiss the petitions filed by the Joint Petitioners in these cases ORDER It is hereby ordered that the petitions filed herein be, and they hereby are, dismissed. 58 "Cf David Buttrick Company, 154 NLRB 1468, and 167 NLRB No