Georgetown Stainless Mfg. Corp.

234 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Georgetown Stainless Mfg. Corp. and Sheet Metal Workers' International Association , Local Union No. 399, AFL-CIO. Case 11-CA-4649 July 17, 1972 DECISION AND ORDER BY CHAIRMAN MILLER AND MEMBERS FANNING AND JENKINS On March 22, 1972, Trial Examiner Phil Saunders issued the attached Decision in this proceeding. Thereafter, the General Counsel filed exceptions to the Trial Examiner's Decision 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 authority in this proceeding to a three-member panel. The Board has considered the record and the Trial Examiner's Decision in the light of the exceptions and brief 1 and has decided to affirm the Trial Examiner's rulings, findings, and conclusions and to adopt his recommended Order. ORDER Pursuant to Section 10(c) of the National Labor Relations Act, as amended, the National Labor Relations Board adopts as its Order the recommend- ed Order of the Trial Examiner and hereby orders that the complaint herein be, and it hereby is, dismissed in its entirety. i In adopting the Trial Exanuner's conclusion that the Respondent is not a successor-employer of the employees of Rokco, Inc, we rely, in addition to the cases cited by the Trial Examiner in his Decision, on the facts of record and our decisions in Gladding Corporation, 192 NLRB No 40, and Gales Equipment Company, Inc, 194 NLRB No 124, cf Southland Manufacturing Corp, 186 NLRB No I I I TRIAL EXAMINER'S DECISION STATEMENT OF THE CASE PHIL SAUNDERS, Trial Examiner: On August 9, 1971,1 Sheet Metal Workers' International Association, Local Union No. 399, AFL-CIO, herein the Union, filed a charge alleging that Georgetown Stainless Manufacturing Corporation, herein the Respondent or Company, had violated Section 8(a)(5) and (1) of the National Labor Relations Act, as amended. Briefly, the complaint alleges that the Union is the certified collective-bargaining representative of the employees in an appropriate unit of Rokco, Inc., that the Union had entered into a collective- bargaining contract with Rokco, and that thereafter the Respondent became a successor to Rokco but refused to honor the contract and to bargain collectively with the Union on all matters pertaining thereto. The Respondent denied that it was a successor employer bound to honor a i All dates are 1971 unless stated otherwise contract to which it had not agreed, and denied it had violated the Act in any respect. Pursuant to notice, a hearing was held before me and all parties were represented at the hearing and were afforded full opportunity to be heard, to introduce relevant evidence, and to present oral argument. Both the Respon- dent and the Union filed briefs. Upon the entire record in the case, including my observation of the witnesses, I make the following: FINDINGS OF FACT 1. THE BUSINESS OF RESPONDENT The Respondent is a South Carolina corporation with a plant at Georgetown , South Carolina, where it is engaged in the manufacture of stainless steel sinks and related products, and this is the only plant involved in these proceedings. During the past 12 months Respondent manufactured, sold and shipped from its South Carolina plant herein goods valued in excess of $50,000 to points directly outside the State of South Carolina, and during this same period Respondent also purchased from points directly outside the State of South Carolina goods valued in excess of $50,000. I find the Respondent is engaged in commerce within the meaning of Section 2(6) and (7) of the Act. II. THE LABOR ORGANIZATION INVOLVED The Union is a labor organization within the meaning of Section 2(5) of the Act. III. THE UNFAIR LABOR PRACTICES For several years Rokco was a manufacturer of steel and plastic products in Georgetown, South Carolina, and in 1963 a unit of all its production and maintenance employees selected the Union as their bargaining repre- sentative . The most recent contract between Rokco and the Union was executed on or about February 15, 1970, and runs for a duration of 3 years. This record shows that the last day Rokco operated their plant in Georgetown was on April 8, and that thereafter, and until May 1, three creditor banks of Rokco were in charge and had possession of the premises. It appears that the banks were the major and primary creditors of Rokco and held mortgages and encumberances on virtually all the assets of Rokco. Through legal proceedings these creditors foreclosed and obtained title to the assets of Rokco, and on May I the banks sold and conveyed title of the personal and real property to the Respondent. On April 29, the president of Rokco informed the Union by letter of the likelihood that the Respondent would acquire the assests of Rokco and would conduct a manufacturing operation, but that the Respondent would not accept the collective-bargaining contract . Richard Swiers was hired by the Company on or about April 26, was made the Respondent's vice president of manufactur- ing, and appears to have specific and general supervision over the entire Georgetown operation . The Respondent 198 NLRB No. 41 GEORGETOWN STAINLESS MFG. opened its doors for business on May 3, but it was 2 or 3 weeks later before any production resulted. By letter dated June 11, the Union notified the Respondent that they had a contract with Rokco and "its successors or assigns" which contract did not expire until February 1973, and the Union was prepared to meet with the Company and discuss the current contract. By letter dated June 29, Swiers informed the Union that the Respondent could not accept the contract with Rokco nor did he have any indication that Respondent's employees desired to be represented by the Union, and therefore Swiers declined to enter into any discussions. Rokco manufactured a line of stainless steel sinks and also "fabricated," i.e., built by hand, a number of custom made items for commercial use. Swiers testified that the Respondent primarily manufactures "deep drawn sinks" and the bulk of the business would be a "cheap sink." Swiers then stated, "Well, the vast majority of our business will be in sinks where there was much more business done by Rokco in fabrication." According to Swiers the emphasis was placed on "custom fabrication," while the Respondent was placing its principal emphasis on "mass production" of sinks, and Swiers concluded that Rokco never did get volume production on an inexpensive sink although admitting that Rokco did produce large quanti- ties of a more expensive sink. According to Swiers he expects to meet a goal of 12,000, cheap sink units each month, and stated that the Company already has back orders for 10,000 of these sinks. In its purchase from the creditors the Respondent acquired the manufacturing machinery and equipment formerly belonging to Rokco, as forestated, and since the start of their operations the Company has used, at one time or another, about 90 percent of this equipment. However, Swiers stated that new machines and equipment have also been brought into the plant and he has "more than double" the machinery that was in the plant when the Respondent took over. Swiers testified that he first started receiving new equipment the early part of June, and during the first 3 months of their operations they were getting about one truckload a week of new machinery.2 Swiers stated that employees had to be trained before the new hydraulic press finally delivered in December from Denmark could be operated, but that several other pieces of the new equipment were similar to those already in the Plant, and therefore very little training was necessary. While the Respondent did not "formally adopt" all the different job classifications setup by Rokco-these classifi- cations have not changed to any appreciable extent. As pointed out, Rokco had a machinist-diemaker classifica- tion and the Respondent has machinists and diemakers and toolmakers; Rokco had a layout job in the fabrication department and Respondent has such work also; Rokco had a maintenance mechanic classification and so does the Respondent; Rokco had a fabrication welder classification and so does the Respondent. All in all this record reveals that the Respondent has its employees performing work in at least 19 job classifications used by Rokco, and when 2 The Company first acquired a lift truck, then got lathes, a shaper, shears, an overhead polisher, stroke sanders, presses, dies, and a good deal of tooling. 235 asked to identify operations now performed by Respon- dent that were not performed by the employees for Rokco, Swiers mentioned that they now have a diemaker who can do die spotting-a highly skilled toolmaking operation. The Company admits that during the initial phase of their hirings, in May and early June, most of the people put on their payroll had been employees of Rokco. In May the Company hired a total of 28 employees-4 or 5 of these 28 employees had been employees of a creditor bank at the time the Respondent took over, but with prior experience at Rokco; another 6 or 7 of those hired in May were immediately made supervisors by the Company and had been with Rokco previously; about 16 of the 28 were unit employees and had also previously been with Rokco; and only 3 people hired in May had not been with Rokco previously, and they all occupied supervisory positions. In June the Respondent hired 21 unit employees, 12 of whom had prior experience with Rokco; and in the period from June I to June 15, only 2 people were hired who did not have former Rokco affiliations and experi- ence. In July the Company hired four unit people, and two of the four had prior experience with Rokco. In August there were seven unit employees hired and four had been with Rokco. In September six unit people were hired, but only one had been with Rokco; and during the next 4 months only three employees were hired and none of them had been with Rokco previously. From May I until January 1, 1972, the Company hired a total of 69 people-including supervisors-and of this number 44 of them had been with Rokco previously .3 Swiers testified that he had encountered continual difficulties with his production line manufacturing low cost sinks, and as a result only about 1,000 units of low cost sinks were produced from May I to January 18, 1972 (date of hearing). However, the 1972 overall production poten- tial for the Respondent is reflected in their official sales forecast. In his testimony Swiers agreed that their 1972 production forecast shows the following: On page 1-35,000 high cost sinks. On page 2-135 high cost sinks, 4,500 low cost sinks. On page 3-550 high cost sinks, 500 custom fabricated counter tops, 125 custom fabricated drain boards. On page 4-115 custom fabricated counter tops, 630 custom fabricated sculleries. On page 5-73 custom fabricated drain boards, 93 other custom fabricated items or parts (drain boards or counter tops). On page 6-93 custom fabricated items (drain boards or counter tops). On page 7-55 custom fabricated items (drain boards or counter tops). On page 8-3,800 J Bowls, a production item which is manufactured for commercial use, and in essence a sink which fits into other equipment. Swiers then stated that the above sales forecast for 1972, but which was prepared in October, had been revised 3 Twelve of the forty-four hired by the Company were on a layoff status from Rokco and had been laid off sometime prior to April 8, when Rokco last operated its Georgetown plant, as aforestated 236 DECISIONS OF NATIONAL LABOR RELATIONS BOARD upwards, and this revision calls for 147,000 cheap sink units for 1972. At the outset of their operation in May, the Respondent may have picked up at least some of the customers formerly served by Rokco.4 Swiers testified that Rokco was strong in the hotel and restaurant business and sold their products to these establishments, whereas the Respon- dent's cheap sink would be sold to plumbing wholesalers for ultimate residential use. Concluding Findings The critical issue is whether the Respondent is the successor to Rokco, and if it is, of course, the Respondent is obligated to honor and adhere to the collective-bargain- ing agreement between Rokco and the Union. The William J. Burns International Detective Agency, Inc., 182 NLRB No. 50. If successorship is not found-then Respondent is under no current obligation to the Union. Travelodge Corporation, 182 NLRB No. 52. The Union argues that there is a "striking similarity" between the operations of Rokco and Respondent, and compares the similarity between the two by making specific references to the same machinery and equipment, the same supervision, access by the latter to the names of customers of the former through purchase of the accounts receivable, the hiring by the latter of the former's production and maintenance employees, the similarity of the jobs performed by the bargaining unit employees, and further points out that both the Respondent produced "a full line" of sinks and related fabricated specialty products. The Union concludes its argument by maintaining that there was a continuance of essentially the same business between Rokco and the Company and without a signifi- cant interval. The Board has consistently held that "[w]here the enterprise remains essentially the same, the obligation to bargain of a prior employer devolves upon his successor in title . . . . Where, however, the nature or extent of the employing enterprise, or the work of the employees, is substantially changed, the transfer of apart, or even all, of the physical assets does not carry with it the duty of the former owner to continue bargaining with the former exclusive representative" (Cruse Motors, Inc., 105 NLRB 242, 247). Recognizing the vast number of varying situations which can anse, and which have arisen where there had been a change in the employing industry, the Board has informally evolved a set of criteria to determine whether the employing industry remains substantially the same. The questions asked by the Board have been grouped as follows: (1) whether there has been a substan- tial continuity the same business operations; (2) whether the new employer uses the same plant; (3) whether he has the same or substantially the same work force; (4) whether the same jobs exists under the same working conditions; (5) whether he employs the same supervisors; (6) whether he uses the same machinery, equipment, and methods of production; and (7) whether he manufactures the same produce or offer the same services.5 It is therefore appropriate to analyze the facts of the instant case to ascertain whether, and to what extent, they meet the foregoing criteria. However, before doing so it should be noted at the very outset that Rokco had been failing financially at its Georgetown location for some time and on April 8 had to close its doors, and thereby ceased to exist as a going concern inasmuch as it quit all manufactur- ing operations. Between April 8, and May 1, control of the premises rested in three bank creditors, and by legal proceedings the banks then obtained the assets of Rokco, and as a result the Respondent dealt with the creditors in obtaining the plant and its equipment, and not with Rokco. Moreover, during the approximate 3-week hiatus between April 8 and May 1-five former employees of Rokco remained on the premises, but only for bookkeeping and caretaking purposes and were paid by, and were employees of, the bank creditors and not Rokco. The Respondent's argument in this phase of the case is as follows: Rokco's operations were a failure. After the financial failure of its operations, the Respondent purchased the physical assets from creditors. Drastic changes had to be made in the utilization of these assets in order for a profitable operation to be established. Respondent developed a new product, and entirely new and different sales market and a new sales organization. It brought in new and different machinery and equipment at a cost exceeding the total value of equipment on hand at the Plant at the time of purchase. A new production line was established with the new equip- ment. The manufacture of plastic products was discontinued completely and the machinery sold. Departments were rearranged. Job functions were changed. Former Rokco employees were retrained. Turning now to the first criterion of whether there was a continuity of the same business operations, this record establishes that the Respondent does not carry on all of the operations which were conducted by Rokco. The manufac- ture of plastic products was never undertaken by the Respondent, and all machinery and assets relating to such manufacturing were sold and liquidated by the Respon- dent and the space converted for warehouse purposes. It was also established that before the Respondent engaged in any production the entire machine shop was moved to a new location in the plant, and a new press was installed adjacent to the old machine shop area. As indicated earlier Respondent used its parent organization as its outside sales outlet and representative for the selling of its products. Rokco apparently had its sales organization within its own home corporate structure and also circulated its own trade catalog. It was further established by the Respondent that its inexpensive sink products are and will be sold primarily to plumbing wholesalers for residential installation, and will not be sold to hotel and restaurant business places as was the practice of Rokco in marketing its more expensive sinks. 4 Brass Craft is the parent organization of Respondent, and it acts as the items in the catalog put out by Rokco Respondent's sales staff or representative and also circulates the trade 5 Fanning, Labor Relations Obligations of a Purchaser, Labor Relations catalog listing the items which customers can order. Swiers stated that Yearbook-1967, pp 284, 286, Morris, the Developing Labor Law (B.N A "undoubtedly" some customers contacted their sales organization about 1971), p 368. See also J-P Mfg, Inc, 194 NLRB No 161 GEORGETOWN STAINLESS MFG. Respondent initiated and continues its manufacturing operations at the Georgetown plant, which is the same plant in which Rokco had conducted its manufacturing operations. It appears that these facts satisfy the second criterion. Turning to the third criterion of whether the Respondent had substantially the same work force as Rokco, up to the middle of June, there were only two unit employees hired by the Respondent who were not former employees of Rokco, as detailed earlier herein. However, as the months went by the Respondent started hiring more and more employees who had never worked for Rokco. Up to the time of the trial before me in January 1972, the Company had hired approximately 61 unit employees, and about 39 of them had been with Rokco previously; however, 12 of these 39 had been laid off prior to the closing of Rokco on April 8. This record does not indicate or reflect the total number of employees formerly employed by Rokco to do unit work, and, therefore, I cannot determine whether the Respondent acquired a majority or has less than a majority of Rokco's former work force. In determining the question of successorship, the Board has frequently considered the proportion of the predecessor's employees which constitute the unit as the new employer. Pargament Fidler, Inc., 173 NLRB 696; Alabama Precast Products, Inc., 163 NLRB 993; and Lloyd A. Fry Roofing Co., Inc., 176 NLRB No. 136. In Lincoln Private Police, Inc., 189 NLRB No. 103, the Board said: While we do not mean to imply by our decision herein that successorship can never be found where the new employer acquires less than the predecessor' s entire business, or hires less than a majority of the predeces- sor employer's work force-indeed the Board has held otherwise in prior cases-[citing Fry and other cases in a footnote] we do require in such circumstances that other sufficient criteria exist which, in balance, warrant a finding that there has been no basic change in the employing industry. The next question for my consideration is whether the same jobs exist and under the same working conditions. The Respondent has virtually all the job classifications as did Rokco, and it is apparent that for the most part the present employees do basically the same jobs that were previously performed by employees of Rokco-possibly under somewhat different conditions, but, nevertheless, it seems that these overall facts essentially satisfy this criterion.6 Admittedly, six of the Respondent's eight or nine supervisors formerly worked for Rokco, and, therefore, it must be recognized that the Respondent's supervisory hierarchy bears a great deal of resemblance to that formerly existing at Rokco. As set forth above, the Respondent acquired the equipment and machinery of Rokco and, admittedly, it has been able to use most of this equipment. However, by June new equipment started arriving at the plant, and this influx 6 Persons who formerly worked for Rokco do not have seniority or benefits in excess of those provided to other employees, and former Rokco employees were required to complete employment process, including preemployment physical examination, the same as all other applicants It appears also that hospitalization insurance was purchased for the employ- ees, whereas Rokco had not maintained such insurance for its employees, 237 of new equipment continued to the extent that the plant now has more new machinery than old, and at a cost to the Respondent in excess of $300,000. Since the ultimate issue is whether the employing industry has remained "substan- tially the same," the amount or proportion of the former employer's machinery acquired and used by the new employer would appear to have as much significance as the relative size of the units of the two employers. J-P Mfg., supra. However, there is no question but that the Respondent has continually endeavored to establish a production line in order to mass produce thousands of inexpensive sinks, and in these respects Swiers stated as follows: "Rokco ran their equipment at an extremely slow pace. We are gearing up the running to an extremely fast pace with the same equipment in one case only; they didn't make it run fast, we will make it run fast." Swiers also explained the difference in pressing operations-he testi- fied, "The processing Rokco used to manufacture on the press-number one, it was on a mechanical press. We are going to manufacture on a hydraulic press that's being set up right now." Swiers further stated that the welding equipment used in the making of their cheap sinks had to be brought in. It would seem to me that insofar as methods of production are concerned, in relation to the manufactur- ing of sinks, Respondent is engaged in a distinctly different operation. The last criterion is whether the Respondent manufac- tures the same product or offers the same services. Swiers established that Rokco was never able to mass produce an inexpensive sink, and stated that 60 percent of Respon- dent's business will be in cheap sinks. The Union argues that such statements, couched as they are in the future tense, are meaningless expressions of future expectations. While admitting that only 1,000 units of inexpensive sinks have been manufactured up to the present because of numerous troubles on the production line, and therefore various references in the testimony relating to future production, nevertheless, there is reliable and credited testimony by Swiers that ever since the Company opened its doors he has been endeavoring to put into production high-volume, low-priced sinks, and in order to accomplish this objective he had to bring in, from outside sources, a new hydraulic press, two additional single action presses, welding equipment, deck polishing and trimming equip- ment, and miscellaneous items such as sanders, a punch press, and spray equipment. In this transition period, it is readily recognized why immediate production of a low cost sink was impossible and why different production methods had to be delayed. However, on the basis of the facts in this record, I am satisfied that Respondent 's initial continuation in the same general type of manufacturing was merely a temporary expedient, and that a change in the nature of the operation to be performed was not only imminent and certain at the time of the transfer from the creditors to Respondent, but was in fact soon implemented by the arrival of new machinery, which had been and the pay rates for Respondent's employees are equal to and in some cases even higher than those formerly paid by Rokco It is further noted that Respondent received no credit for Rokco's workman's compensation or liability insurance experience and is apparently treated by the State as a new corporation 238 DECISIONS OF NATIONAL LABOR RELATIONS BOARD purchased earlier in efforts to effectuate the change as soon as possible. It should be further noted that Rokco's production of sinks in its Georgetown plant was also integrated with a plant in Carrollton, Ohio, and it appears that items produced for Rokco's high-priced sink were made at both the Carrollton and Georgetown plants, and most of Rokco's fabrication work was done at Georgetown-while Respondent's entire operation is done at its Georgetown plant. It is apparent from the foregoing discussion that the circumstances and situations in the instant case do not satisfy all of the various criteria prescribed for determining whether the Respondent is substantially the same as Rokco. The determination must therefore be on "on balance" consideration of the various factors. See, e.g., Lincoln Private Police, supra. In this regard is the fact that the Respondent was not a continuity of the same business operations-also indicative of the above is the fact that Rokco ceased to do business as a going concern and after a distinct hiatus of 3 weeks Respondent dealt with the creditors; the fact that the Respondent purchased new machinery in excess of $300,000 and operates most of the equipment different than Rokco is also a significant factor. So, too, is the marked difference in the main product manufactured-the mass production of inexpensive sinks by the Respondent, all manufactured within its George- town plant. It appears to me these factors outweigh the fact that the Respondent used the same plant building, that it retained the same job classifications, and that it employed supervisors and unit employees who had worked for Rokco. On balance, therefore, I find and conclude that the nature and character of the employing industry at the Georgetown, South Carolina, facility has been sufficiently altered so that the Respondent is not a successor to Rokco. CONCLUSIONS OF LAW 1. Respondent is an employer within the meaning of Section 2(2) of the Act and is engaged in commerce within the meaning of Section 2(6) and (7) of the Act. 2. Sheet Metal Workers' International Association, Local Union No. 399, AFL-CIO, is a labor organization within the meaning of Section 2(5) of the Act. 3. Respondent is not a successor to Rokco , Inc., and has not engaged in unfair labor practices within the meaning of Section 8(a)(5) and ( 1) of the Act, as alleged in the complaint. Upon the foregoing findings of fact , conclusions of law, and the entire record, I hereby issue the following recommended: 7 ORDER The complaint is dismissed in its entirety. 7 In the event no exceptions are filed as provided by Sec 102 46 of the 102 48 of the Rules and Regulations, be adopted by the Board and become Rules and Regulations of the National Labor Relations Board, the findings , its findings, conclusions, and Order, and all objections thereto shall be conclusions, and recommended Order herein shall, as provided in Sec deemed waived for all purposes