Pay 'N Save Corp.

PAY 'N SAVE CORP. Pay 'N Save Corporation and Sign and Pictorial Painters, Paint Makers and Allied Trades Local 1094, AFL-CIO, affiliated with Painters and Allied Trades of America. Case 19-CA-6561 April 29, 1974 DECISION AND ORDER BY CHAIRMAN MILLER AND MEMBERS FANNING AND JENKINS On December 14, 1973, Administrative Law Judge Jerrold H. Shapiro issued the attached Decision in this proceeding. Thereafter, the Respondent filed exceptions and a supporting brief, and the General Counsel filed limited cross-exceptions and support- ing 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 attached Decision in light of the exceptions and briefs and has decided to affirm the rulings, findings,' and conclusions of the Administrative Law Judge 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 Administrative Law Judge and hereby orders that Respondent, Pay 'n Save Corpo- ration, Seattle, Washington, its officers, agents, successors, and assigns, shall take the action set forth in the said recommended Order. 1 The Respondent has excepted to certain credibility findings made by the Administrative Law Judge. It is the Board's established policy not to overrule an Admimstrative Law Judge's resolutions with respect to credibility unless the clear preponderance of all of the relevant evidence convinces us that the resolutions are incorrect . Standard Dry Wall Products, Inc., 91 NLRB 544, enfd. 188 F.2d 362 (C.A 3) We have carefully examined the record and find no basis for reversing his findings. DECISION STATEMENT OF THE CASE JERROLD H. SHAPIRO, Administrative Law Judge: The hearing to this case held on November 8 and 9, 1973,1 was based upon unfair labor practice charges filed by Sign and Pictorial Painters, Paint Makers and Allied Trades Local 1094, AFL-CIO, affiliated with Painters and Allied Trades of America, herein called the Union, on July 30 and October 5, and a complaint issued on October 11 on behalf of the General Counsel of the National Labor Relations Board, herein called the Board, by the Regional Director 311 of the Board, Region 19, which complaint, as amended at the hearing, alleges that Pay'n Save Corporation, herein called the Respondent, has engaged in unfair labor practices within the meaning of Section 8(axl),(3), and (5) of the National Labor Relations Act, herein called the Act. The Respondent filed an answer denying the commission of the alleged unfair labor practices. Upon the entire record, from my observation of the demeanor of the witnesses, and having considered the posthearing briefs submitted by the parties, I make, the following: FINDINGS OF FACT 1. THE BUSINESS OF THE RESPONDENT Pay'n Save Corporation, the Respondent, a Washington corporation, operates retail department stores located in the western part of the United States and maintains its principal offices and headquarters in Seattle, Washington. In the course and conduct of its business operations, the Respondent annually receives gross revenue exceeding $500,000, and annually purchases goods and materials valued over $500,000 from suppliers located outside the State of Washington. The Respondent admits that it is an employer engaged in commerce within the meaning of Section 2(6) and (7) of the Act. II. THE LABOR ORGANIZATION INVOLVED The Respondent admits that Sign and Pictorial Painters, Paint Makers and Allied Trades Local 1094, AFL-CIO, affiliated with Painters and Allied Trades Of America, is a labor organization within the meaning of Section 2(5) of the Act. III. THE ISSUES IN PERSPECTIVE The operation of the Respondent's retail outlets is directed from company headquarters, a multistory build- ing, in Seattle, Washington. Respondent operates a retail outlet on the ground and basement levels. The rest of the building contains the Company's administrative and operating departments including the advertising depart- ment. The advertising department historically, since at least 1962, has operated a sign shop . During the period material to this case, the sign shop occupied part of the third and fourth floors of headquarters . It serviced virtually all of the Company's over 100 retail stores, providing them with advertising materials such as signs, banners, and placards. The sign shop is under the immediate supervision of Ray Rosenstrom who is responsi- ble to Advertising Director Joseph Sullivan who exercises ultimate supervision and is responsible to the Company's vice president, Calvin Hendricks. The Respondent has collective-bargaining agreements with a number of labor organizations, other than the Union, covering certain of its retail clerks, pharmacists, and teamsters. The sign shop's employees have not been represented by a union. The Union, early in 1973 , filed a representation petition with the Board requesting that the 1 All dates herein, unless otherwise specified, refer to 1973 210 NLRB No. 46 312 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Board conduct a representation election among the sign shop's 11 or 12 employees. On February 22, the Board conducted a secret-ballot election among these employees; a majority selected the Union as their exclusive collective- bargaining representative. Accordingly, the Board on March 5 certified the Union as the exclusive collective- bargaining representative of the Respondent's production employees employed at its sign shop. The parties, following the Union's certification, met and discussed the terms of a collective -bargaining agreement. The Respondent broke off negotiations on May 3 and again on July 24, and on August 26 granted wage increases to employees. The General Counsel contends that the Respondent's conduct at and away from the bargaining table demonstrates that, in violation of Section 8(a)(5) and (1) of the Act, it bargained in bad faith and, further contends, that the wage increases granted by the Respon- dent were unlawful for the reason that they were given unilaterally without bargaining with the Union. Respon- dent contends that it engaged in good-faith bargaining and that it was privileged to break off negotiations and grant the wage increases inasmuch as the parties had bargained to an impasse. Also in dispute is the subcontracting of sign shop work by Respondent rather than hiring new employ- ees to replace terminated employees, and its closure of the portion of the sign shop known as the silk screen operation which resulted in the subcontracting of this work and the layoff of two employees. The General Counsel' s position is that the aforesaid subcontracting and the closure of the silk screen room was done unilaterally without bargaining with the Union and, as such, violated Section 8(a)(5) and (1) of the Act and, further contends, that this conduct was discriminatorily motivated in violation of Section 8(a)(3) and (1) of the Act. Additionally, the General Counsel urges that the Respondent's refusal to reassign the two laid-off employees to other jobs within the sign shop was unlawfully motivated. Respondent's position is that its decisions to subcontract sign shop work was motivated by legitimate business reasons. It also argues that the Union was given an opportunity to bargain over the closing of the silk screen operation, the layoff of the two employees, and the subcontracting of this work, and that the remTining subcontracting was simply a continuation of past practice. Finally, the General Counsel alleges, and Respondent denies, that certain statements made by Vice President Hendricks relating to the closing of the sign shop and another statement made by Advertising Director Sullivan relating to the closing of the silk screen operation, reasonably tended to interfere with, restrain, or coerce the employees in the exercise of their rights guaranteed by Section 7 of the Act in violation of Section 8(a)(1). IV. THE ALLEGED UNFAIR LABOR PRACTICES A. The First Bargaining Session, Early April The first bargaining session took place early in April in the office of Robert Hirstel, a labor relations consultant, who represented the Company at negotiations. The Union's spokesman was Business Representative Charles Hord. Hord had previously sent Hirstel a copy of the Union's proposed contract. Hirstel began the meeting by indicating that he did not think the parties would have "too many problems" and suggested that they review the Union's proposed contract section by section. They followed this procedure, with Hirstel, as described below, indicating that some parts of the proposal were acceptable, others unacceptable, and others would be taken under consideration. Hirstel indicated that Respondent agreed with the following parts of the Union's proposed contract: union recognition; no discrimination against employees for engaging in lawful union activities ; overtime pay for all hours worked over 8 daily and 40 weekly ; a guarantee for part-time employees of 4 consecutive hours of work at the contract rate of pay ; payment for time absent from work because of jury duty or a funeral in the immediate family; the maintenance of the company's medical, dental and pension plans ; access into the sign shop for a union business representative to investigate grievances; agreed to comply with Federal and state health and safety regula- tions and not to discriminate on the basis of race, color, religion, sex, age, or national origin ; agreed to a grievance procedure dealing with grievances over the interpretation or application of a specific clause of the contract which procedure culminated in binding arbitration; and, agreed to a no-strike-no-lockout clause. The subjects proposed by the Union which were not acceptable to Respondent were as follows: Overtime for hours worked Saturday or Sunday, with Hirstel taking the position that if a weekend day is an employee 's regular workday the employee should be paid straight time; the Union's proposals dealing with paid vacations and sick leave, with Hirstel taking the position that the Company's existing policies were reasonable ; also rejected were the proposals that the Company furnish and launder work clothes, that the Company in certain circumstances be liable for employees' clothing soiled at work, and that men not be required to wear ties and women be allowed neat casual attire, slacks, when not working in the presence of the general public-Hirstel rejected all of these proposals indicating that the Company's policies on clothing and dress were reasonable. The parts of the Union's proposal taken under consider- ation by Hirstel were as follows : Union security, in substance the Union proposed that all employees join the Union after 30 days of employment; paid holidays; the advance notification, in certain circumstances, about the discharge or layoff of an employee; the layoff and recall of employees based upon seniority; and no employee to suffer a reduction of wages or less favorable working conditions as the result of the terms of the contract. Also taken under consideration by Hirstel was the Union's wage proposal. Hirstel stated he had not consulted with the Company about the Union's wage proposal and thought that any discussion on wages should be deferred until the rest of the Union's proposals were discussed. The Union's wage proposal, a proposed scale of minimum wages based on the employees' tenure with the Company was as follows: Starting wage - $3.00 per hour 6 months to 12 months - $3.21 per hour 12 months to 18 months - $3.79 per hour PAY 'N SAVE CORP. after 18 months - $4.37 per hour after 5 years - $5.83 per hour Each sign shop employee based on the employee's length of service with the Company, as of June 15, would receive substantial immediate hourly increases followed by anoth- er substantial increase within the duration of the 1-year contract proposed by the Union. Specifically, the sign shop's employees would receive the following immediate hourly increases as of June 15; Adams, 71 cents; Brown, $1.16; Laing, $2.03; Lindstrom, $1.17; Reeves, $1.04; Trujillo, $2.05; Weston, $1.82; Woods, $2.03; Vike, 95 cents, and Tungate, 95 cents. B. The Second Bargaining Session, Late April The second bargaining session, held in Hostel's office late in April, was attended by Hord and employee Jim Lindstrom for the Union and Hirstel for the Respondent. Hirstel at the start of the meeting notified the Union's negotiators that the negotiations, contrary to his earlier expressed optimism, were going to be "rough" because there were all kinds of unspecified problems . Hirstel followed the procedure used at the first meeting; he went over each of the sections in the Union's proposed contract. Regarding the parts of the Union's proposal that Hirstel previously indicated the Company accepted and those he previously indicated it did not accept, he maintained the same position during this meeting. On the matters which Hostel at the first meeting indicated would be taken under consideration he now took the following positions : On union security, without explanation, Hirstel stated that the Company was not going to agree to a union-security agreement. On the subjects of semonty and the advance notification prior to a discharge or layoff, Hirstel stated that the Company's business operation made these proposal unfeasible. On paid holidays , Hirstel rejected the part of this proposal which designated the last workday before Christmas as a paid holiday explaining that it was not in any of the company's collective-bargaining agreements with other unions. On the Union's proposal which prohibited the Company from reducing existing wages or "working conditions" Hirstel wanted to delete "working conditions" for the reason that he did not believe its inclusion was necessary. Hirstel made the following proposal: A management rights clause ; that bonuses and discounts not be considered wages and be subject to change unilaterally by the Company; that the Company's health and welfare plan be incorporated into any contract; that the Company not be liable financially for the termination of employees made at the request of the Union; and, that grievances over errors in wage payments must be filed within 30 days of the mistake. On the subject of wages, Hirstel , using the same format as the Union, proposed a scale of minimum wages based on the employees' tenure with the company, which proposal was as follows: starting wage - $2.00 6 to 12 months - $2.15 313 12 to 18 months - $2.30 18 to 24 months - $2.45 2 to 3 years - $2.60 3 to 4 years - $2.75 4 to 5 years - $3.25 over 5 years - $3.75 Based on the unit employees' tenure as of June 15, only 3 of the 10 hourly paid employees would receive an hourly wage increase on that date under the Company's proposal: Brown, 10 cents ; Trujillo, 13 cents ; and Weston, 5 cents. The remaining employees would receive no increase in pay nor could they expect one in the immediate future. Also, the Company had recently hired two employees at an hourly rate higher than its proposed starting rate for such employees. In response to the Company's wage proposal, Hord told Hirstel that in effect this was not an offer for the reason that although no one would suffer a loss of earnings it was less than what most of the unit employees were then earning and as a result very few of the employees would receive increases . Hord also pointed out to Hirstel that the Company was hiring employees at a higher hourly rate than the $2 it had proposed. Hirstel insisted Hord present the Company's wage offer to the employees. When Hord refused Hirstel warned that the Company, itself, would communicate this wage offer to the employees. C. The Third Bargaining Session, May 3 The parties met on May 3 for the third time, at the Respondent's headquarters. The Respondent was repre- sented by Hirstel and for the first time also present was its vice president, Calvin Hendricks. The Union was repre- sented by its spokesman, Hord, and by employee Lind- strom. The Union's negotiators stated that it accepted in certain specified instances the Respondent's objections to its proposed contract and expressly modified its proposed contract accordingly. Specifically, the Union accepted the Respondent's positions and withdrew its proposals dealing with paid vacations, paid holidays, and paid sick leave and withdrew its proposal calling for company liability for soiled clothing. Also, the Union modified its position on seniority now proposing that in layoffs and recall seniority would govern only where it did not impair the Company's operating efficiency and only where the senior man was qualified for the job. Hirstel rejected this proposal, without explanation, simply stating that the Respondent had made its offer. Also, as described below, the Union reduced its wage demands. Finally, the Union made no objections to the Respondent's proposed management rights clause or the Company's further proposal that bonuses and dis- counts not be considered wages. The Union did object to the Respondent's proposed 30-day statute of limitation for grievances over wages instead proposing a 90-day statute of limitations. In response Hirstel stated that in the Company's opinion 30 days was a sufficient time. Briefly stated, the parties were still in dispute over union security; seniority; clothing allowance; dress regulations; a statute of limitations for the filing of grievances over wages ; advance notice to terminated employees; and 314 DECISIONS OF NATIONAL LABOR RELATIONS BOARD wages. In addition, without explanation, Hirstel at this meeting specifically rejected the proposal that the terms of the contract be for 1 year. On the subject of union security, Hord informed Hirstel and Hendricks that the Union considered it "a must" and pointed out that the Respondent in denying it to the Union in these negotiations was acting inconsistent with its conduct in negotiations with other unions where it had agreed to union security. Hirstel nor Hendricks denied the truth of Hord's assertion but Hirstel, without explanation, stated that the Company refused to agree to a union- security agreement. On wages the Union modified its previous hourly proposal as follows: Starting wage - $2.85 ($3.00) 2 6 to 12 months - $3.15 ($3.21) 12 to 18 months - $3.45 ($3.79) 18 to 24 months - $3.75 ($4.37) 2 to 3 years - $4.05 ($4.37) 3 to 4 years - $4.50 ($4.37) 4 to 5 years - $5.00 ($4.37) over 5 years - $5.50 ($5.83) Regarding the one salaried sign shop employee, Cy Crawford, the Union proposed a 5.5 percent increase. As of June 15, each of the sign shop's hourly paid employees pursuant to the Union's new proposal would have received substantial hourly increases immediately, and an additional increase within the duration of the Union's one year contract. The total of the immediate increase for each employee under the new proposal compared with the Union's first proposal, shown in "( )", follows: Adams, 65 cents (71 cents); Brown 1.10 ($1.16); Laing, 1.75 ($2.03); Lindstrom, 83 cents ($1.17); Reeves, 70 cents ($1.04); Trujillo, $1.43 ($2.05); Tungate, 80 cents (95 cents); Weston, $1.50 ($1.82); Vike, 80 cents (95 cents); and Woods, $1.75 ($2.03). The Union's new wage offer was rejected by Hirstel, for the expressed reason that the company had made its wage offer and that was as much as "they could go". At the conclusion of the meeting, Hord stated that he thought the parties should consult with a Federal Media- tor. Hirstel rejected this request for the reason that there was no sense in contacting a mediator because the Respondent had made its offer; in the words of Hirstel, "You have it, and that's it". D. The Union Sets a Strike Deadline for May 31 and the Respondent Notifies the Employees of Its Intent To Close the Sign Shop The Union's business representative, Hord, met with the sign shop's employees subsequent to the bargaining session of May 3 and brought them up to date about the state of the negotiations. The employees voted unanimously to strike the Company. The Union secured stiike sanctions 2 The figure in "( )" refers to the Union's earlier proposal made at the first bargaining session. 3 Hendricks testified that he had selected May 25 as the date for closing the sign shop for the reason that the Union had notified hun that the employees were all striking as of May 31 so he decided to close the shop at from its District Council and, then, on May 18 by letter, Hord notified Hirstel and Hendricks that the sign shop's employees had voted unanimously "in favor of not working beyond May 31," inasmuch as the parties had not succeeded in reaching an agreement, but expressed a desire "to meet at any time and place prior to June 1." Upon his receipt of this letter, the Respondent's vice president, Hendricks, met with the sign shop's employees on May 22. Hendricks, in the presence of advertising director, Sullivan, on May 22 told the employees that the Respondent had negotiated as far as it could with the Union, that the Union had not accepted "anything that the company had to offer," that the Company would not benefit by any of the Union's proposals, and in the circumstances the only alternative for the Company was to permanently close down the sign shop and that the date of the closure would be May 25 since the employees were going out on strike on May 313 An employee asked if there was any way that the shop could remain open, specifically, if it would stay open if the employees repudiated the Union. Hendricks answered "no" explain- ing that the Respondent had been looking into the matter and believed it could get the work done on the outside for less money.4 E. Sullivan, the Respondent's Advertising Director, on May 23 Speaks with Employee Brown about Her Failure To Receive a Wage Increase One of the employees attending the May 22 meeting was Kathleen Brown. The day after the meeting, May 23, Joseph Sullivan, the Company's advertising director and the person with ultimate control over the sign shop, called Brown into his office and expressed his regret over the closing of the sign shop. Sullivan offered to assist Brown to find a job with another employer, expressed his apprecia- tion for her work performance, and apologized for not being able to increase her pay. In Brown's words, Sullivan stated that the Respondent, "could not pay me any more at that time because the union had come into the picture." Sullivan apologized repeatedly for the closure of the print shop and told Brown, as she credibly testified, "if this had not come about with the Union, I would probably be making more than the union could probably negotiate for us in the contract form and more than union scale called for." At the conclusion of the conversation, Sullivan asked Brown to tell another employee to come to the office to speak with Sullivan. F. The Respondent Agrees To Keep the Sign Shop Open, at Least for the Time Being, and To Resume Negotiations It is undisputed that the Union had not received any notification from the Respondent of its intent to close the sign shop and to terminate the employees. The Union's first information about this matter came from the employ- the end of the week, Friday, May 25, rather than wait until the middle of the following week, Thursday, May 31. 4 What took place at the May 22 meeting, described above, is based upon a synthesis of the testimony of Hendricks and employee Reeves which is not in conflict on material matters. PAY 'N SAVE CORP. ees after they had been told this by Hendricks on May 22. Union Representative Hord immediately, on May 23, filed an unfair labor practice charge with the Board in Case 19-CA-6432 alleging, in substance, that the Respondent had violated the Act by threatening on May 22 to terminate the sign shop's employees. Hord credibly testified that after filing this charge he contacted Commis- sioner Toner of the FMCS and asked him to arrange a meeting with the Respondent to try and resolve the situation. Previously, according to Hord's credible testimo- ny, on more than one occasion, he had asked Commission- er Toner to try and arrange a meeting for further negotiations with the Company. Obviously, if such a meeting had been scheduled it would have been unneces- sary for Hord to call Toner on or about May 23. Hirstel would have me believe, however, that as early as May 17, in response to a phone call from Commissioner Toner, Hirstel had arranged to meet with the Union on May 25 but due to a death in the family was called out of town, and as a result Hendricks represented the Company at the meeting on May 25. 1 do not believe Hirstel . In manner and demeanor, he generally was not a convincing witness. Hendricks did not corroborate him on this point. Also, Hirstel's testimony does not jibe with his earlier conduct and is too pat to be true. Thus, it is undisputed that at the end of the May 3 bargaining session Hirstel emphatically rejected the Union's proposal that negotiations be resumed with a Federal mediator. Also, for a meeting to have been arranged on May 17, as Hirstel testified, for May 25 which coincidentally turned out to be the date that the Company on May 22 announced it was closing the sign shop, is too pat to be true. Based on the foregoing, and on the Respondent's conduct at the meeting of May 3 and its conduct upon receipt of the Union's letter of May 18 requesting negotiations, I find that on May 3 it was the intent of the Respondent, understood by the Union, to refuse to continue to meet and negotiate with the Union, that the Respondent as claimed by Hirstel did not prior to its receipt of this letter agree to meet with the Union but rather agreed to meet and resume negotiations with the Union after it received the letter and only after the Union, as described below, agreed to call off its strike deadline. On May 25, Hendricks met with Hord at the offices of the Federal Mediation and Conciliation Services, herein called the FMCS, at which time the Respondent agreed to temporarily continue operating the sign shop and resume bargaining and the Union as its part of the bargain agreed to call off the strike and withdraw its unfair labor practice charges filed against the Respondent. Specifically, it is undisputed that Hord proposed that the Union would withdraw its unfair labor practice charges and call off its scheduled strike if the Respondent would agree to keep the sign shop open and return to the bargaining table. Hendricks agreed to this proposal but specifically told Hord he would not guarantee how long that the Company would keep the sign shop open.5 Following the meeting of May 25, Hendricks went back S What took place, described above, at the office of the FMCS on May 25 is based on the undemed and credible testimony of Hord s What took place, described above, at the meeting between the employees and Hendricks on May 25 is based on a synthesis of the 315 to the Company's headquarters and in the presence of Union Representative Hord brought the employees up to date on the recent developments. He told them that the Union had agreed to withdraw its unfair labor practice charges and to lift its strike deadline and that the Respondent had agreed to keep the sign shop open "at least on a temporary basis" and that the parties would resume negotiations but that it did not mean that it would result in an agreement . Hendricks asked Hord if he had given an accurate representation of the recent develop- ments and Hord replied "basically."e G. The Meeting between Hord and Hirstel on June 4 On June 4, Hord and employees Woods and Lindstrom met briefly with Hirstel at the office of the FMCS. There was no discussion, as such, about the terms of a contract, but Hirstel was brought up to date about what had occurred since the last bargaining session . Hirstel during the course of the briefing reviewed various materials in his file and when he came to the Union's letter of May 18 which announced the strike deadline and requested negotiations, Hirstel stated if he had seen the letter he would have told the Company to close and never reopen the sign shop; a thinly veiled threat to close the shop permanently in the event the employees ever again voted to support the Union's bargaining position by striking. Employee Woods stated the work performed in the sign shop could not be done cheaper by the Company on the outside. Hirstel, in response, stated that if the Company had to pay the wages proposed by the Union it would close the shop and subcontract the work. Hirstel also warned that even if the Company and Union reached an agreement, the Company still "may close the shop down." 7 H. The Fourth Bargaining Session, June 6 On June 6 the Respondent's negotiators, Hirstel and Hendricks, met with the Union's negotiators at the offices of the FMCS. Only two matters were discussed, union security and wages. The Respondent's representatives stated that Respon- dent would accept the union-security agreement proposed by the Union with one change, employees would have 90 days to join the Union rather than the conventional 30 days. In proposing the 90 days, Hirstel testified, the Respondent was motivated by a desire to cushion the expense of union membership to the new employees who were at the low end of the wage scale and who did not receive a pay raise under the Respondent's wage proposal until employed 90 days. On the subject of wages, the Respondent proposed a 3- year contract with all employees receiving an immediate 5 cents per hour increase. Also, Respondent modified its previous proposed minimum wage scale, and proposed a 5.5 percent increase at the start of the second and 3d years of the contract for those employees not receiving the testimony of Hord, Hendricks, and employee Reeves which is not in conflict on material matters. r What took place, as described above, on June 4 is based upon the undemed and credible testimony of Hord. 316 DECISIONS OF NATIONAL LABOR RELATIONS BOARD minimum under the minimum wage schedule. The Compa- ny's proposed revised minimum wage schedule was: starting pay - $2.05 per hour after 3 months - $2.20 per hour after 9 months - $2.35 per hour after 15 months - $2.50 per hour after 2 years - $2.65 per hour after 3 years - $2.75 per hour after 4 years - $3.25 per hour after 5 years - $3.75 per hour The Union's negotiators stated that they would submit the Company's proposals to the sign shop's employees for consideration. I. The Respondent on June 15 Notifies the Union of its Decision To Close the Silk Screen Operation and Lay Off Two Employees Hendricks, the Respondent's vice president, on Friday, June 15, by phone notified Hord that the Company had decided to close the portion of the sign shop known as the silk screen operation and lay off the two employees who regularly did this work . Specifically, Hendricks told Hord that he was calling to notify him that the Company was laying off employees Jim Lindstrom and Mark Reeves explaining that the fire department had inspected the area occupied by the silk screen operation and found that it did not comply with the fire code. The Company, Hendricks told Hord, had to do certain things to meet the require- ments set by the fire code, and since the Company did not know what it was going to do with the sign shop they had decided to close down the silk screen room and lay off employees Lindstrom and Reeves. Hord expressed his appreciation for the notification and said he did not think Lindstrom or Reeves should be laid off for the reason that the parties were in the middle of negotiations and were trying to reach an agreement. Hendricks did not reply and this ended the conversation. Thereafter, the Union neither at negotiations nor otherwise brought up the matter of the closure of the silk screen room or the layoff of the two employees because, Hord testified, that he had already objected to Hendricks about the layoff. J. The Fifth Bargaining Session, June 18 On June 18, the negotiators for the Respondent and the Union met at the FMCS. Hirstel and Hendricks represent- ed the Company and Hord with an employee committee and a representative of the Union's District Council represented the Union. The only subject discussed was wagessa Hord at the start of the meeting presented Hirstel and Hendricks with a document which showed exactly what each unit employee would receive under the Respondent's last wage proposal. The analysis showed that 7 of the 10 hourly paid unit employees would receive an immediate increase of 5 cents per hour, two employees would receive sa By this stage of negotiations , Hord and Hostel testified that it was their belief that only two matters of importance remained in dispute , wages, and union security and that if the issue of wages could be resolved that the dispute over union security would resolve itself an immediate increase of 15 cents per hour, and the remaining employee would receive an immediate increase of 18 cents per hour . Of the 10 unit employees 5 would receive additional hourly increases of 25 cents, 25 cents, 15 cents, 15 cents and 10 cents, respectively, within the 1st year of the 3-year contract proposed by the Company. However, five of the employees-Adams, Laing, Woods, Lindstrom, and Reeves-would receive an increase of only 5 cents per hour over the entire 1st year. Viewed another way, during the 3 years of the contract the hourly rate of the unit employees, all of whom are named immediately hereafter, would be increased by the amounts aside of their names : Adams, 55 cents (65 cents); ,9 Brown, $ 1 ($1.10); Laing, 40 cents ($ 1.75); Woods, 40 cents ($1.75); Lind- strom, 93 cents (83 cents); Reeves, 80 cents (70 cents); Trujillo, $ 1.23 ($1.43); Weston, $ 1.65 ($1.50); Vike, $1.00 (80 cents); and Tungate, $1.00 (80 cents). After Hirstel and Hendricks had checked the accuracy of the Union's written analysis, Hord told them the Compa- ny's proposal was not adequate insofar as employees Adams, Woods, Lindstrom , and Reeves would receive an increase of only 5 cents per hour over the 1st year of the contract, explaining that after they paid their union dues these employees, in effect, would receive no increase in pay. Hord proposed that each employee in the 1st year of the contract should receive at least a 10 cents per hour increase.-Hirstel and Hendricks left the room to consider this proposal. When they returned, Hirstel asked Hord if the Unior was rejecting the Company's last wage offer. Hord repLed he was only rejecting the first part of the offer, the part which dealt with the grant of an immediate wage increase of 5 cents per hour . Hirstel replied he was happy the Union had rejected the Company's wage proposal stating that the Company had not figured out the actual increases called for by its proposal and upon reviewing the Union's analysis discovered it had mistaken- ly offered more of an increase in wages than it had wanted to give. Hirstel then expressly modified the Company's wage offer in the following manner: The Company would grant an immediate general wage increase of 10 cents per hour to all employees, that as previously proposed, the employees would get a 5.5-percent increase at the start of the 2d and 3d years but that 5 cents an hour of the 10 cents given in the 1st year would be taken off any 5.5-percent increase granted at the start of the 2d year . Also, Hirstel modified the minimum wage schedule previously proposed by eliminating the increase in pay given an employee with 5 years of seniority and by reducing the hourly minimum rate granted to employees with 4 years seniority from $3.25 to $3.05. A comparison of the Respondent's new wage proposal with its previous one reveals the following two differences: (1) During the 1st year of the 3-year contract, employees Laing, Woods, Lindstrom, Reeves, and Adams would receive an additional increase of 5 cents per hour to bring their total increase for this period up to 10 cents per hour. This increase of 5 cents, however, would be deducted from 9 The figure in the "( )" refers to the wage increase provided by the Union's proposal by the end of the first year, as compared to the increase under the company's proposal over a three year period. PAY 'N SAVE CORP. increases granted to them in the 2d year. (2) By virtue of the reduction in the minimum hourly rate paid to employees with 4 years of service certain employees would receive less of a total increase over the 3 years of the contract than under the Company's previous proposal. Specifically, Lindstrom's hourly increase over the 3 years dropped from 93 cents to 58 cents per hour; Reeves' from 80 cents to 45 cents; Trujillo's from $1.23 to 88 cents; and Weston's from $1.65 to 70 cents. Hord rejected the Company's new proposal stating that Hirstel was "negotiating backwards." Hirstel insisted that this was the Company's proposal. Hord then proposed that the Company guarantee the employees a general wage increase of 20 cents per hour the 1st year plus the Company's "original proposal." Hirstel stood firm explain- ing, "No, we made our proposal." The meeting ended with Hirstel and Hendricks stating that "This was the [the Company's] last offer." Hord indicated he would get back to them.'° K. Hord Meets with Hendricks on July 12 at which Time Respondent Proposes To Implement Its Wage Increase without a Contract On July 12, in the morning, Hord telephoned Hendricks and requested that they meet in an attempt to arrive at an agreement. Hendricks agreed and they met later that day at Hendricks' office. Hord asked if there was any way they could work out a 1-year agreement which on wages simply called for a 5.5 percent basic increase for all employees. Hendricks rejected this proposal stating that the Respon- dent needed a 3-year contract and that the Company had made its last offer. In substance, Hendricks then proposed that the employees forget about a collective-bargaining agreement and that the Respondent implement its last wage proposal. Hord asked for and received permission from Hendricks to meet immediately with the sign shop's employees in a company conference room to communicate the Company's latest proposal.ii Hord met with, and explained to, the employees about the state of the negotiations and informed them about Hendricks' proposal of an immediate wage increase without a contract. The employees instructed Hord to reject this proposal. During the course of talking with the employees, Hord was notified by them that the Company had been subcontracting out a substantial amount of sign shop work previously performed by the sign shop's employees. L. The Respondent Breaks Off Negotiations Following his meeting with the sign shop's employees, Union Representative Hord on July 13 by letter notified Hendricks that his proposal "to implement a pay raise in the absence of a complete contract" was not acceptable to the Union and that the Union considered the Respondent's 'practice of subcontracting work normally performed by 10 What took place, as described above, at the June 18 meeting is based on the credible testimony of Hord I reject Hendricks' testimony insofar as it differs with respect to the new rate proposed by the Company for employees with 4 years seniority and also reject Hirstel's testimony insofar as it implies that the subject of union security was discussed at this meeting 317 the people in the sign shop an unfair labor practice and request that the practice be stopped immediately." The letter ended with a request that the Respondent resume negotiations and negotiate in good faith until an accepta- ble contract was consummated. On July 24 Hendricks, by letter, responded as follows: As we discussed, and both agreed on this date, we are at a complete impasse as far as our negotiations are concerned for a contract. There appears to be no solution to our problem and it would appear that no further negotiations will accomplish anything. You mentioned in a recent letter, that you consid- ered the practice of sub-contracting work of the sign shop as an unfair labor practice. If you are not aware, you should be made aware, that we have sub-contract- ed sign shop work for many, many years and of course are planning to continue to do so. Further, as we discussed, we ran into some difficulties with the fire department concerning our silk screen operations and have found it necessary to discontinue that part of our sign shop operation. This work likewise, is being sub- contracted since at this time there is no other method of producing this work. Hord testified that his last conversation with Hendricks occurred on July 12 or 13 when by phone he briefly told Hord that the employees had rejected the Company's proposed wage increase without a contract and that Hord would confirm the Union's position on the matter by letter. Hendricks, on the other hand, testified Hord telephoned him on either July 23 or 24 which resulted in his letter of July 24 to Hord described above. Hord convincingly denied that this alleged conversation ever took place. In bearing and demeanor Hord appeared more believable. In addition, Hendricks in testifying about the alleged conver- sation of July 23 or 24 was extremely vague and evasive. Moreover, his testimony about this alleged conversation on certain points does not jibe with the contents of the July 24 letter which on its face appears to be a response to Hord's earlier letter of July 13. Thus, when Hord allegedly phoned him on July 23 or 24, Hendricks testified, "The general tone of the conversation was can we get back together again to discuss negotiations. My response was no, we are not going to change our position. We then concluded there was no reason for any further negotiations." There was no discussion, as implied in the letter of July 24, about the difficulties encountered by the Respondent in the silk screen room. Nor, as Hendricks indicated in the letter and as he testified on direct examination, as described above, did Hord indicate there was no reason for further negotiation or that an impasse had been reached. For, on cross-examination when pressed to be more specific about the content of the conversation, Hendricks was not a convincing witness, his testimony became vague and evasive, and eventually he reluctantly admitted that Hord 11 What took place, as described above, when Hord met with Hendricks on or about July 12 is based upon Hord's credible testimony. Hendricks' testimony essentially is no different. Both witnesses, however, were vague about what words were exchanged, Hendricks more so than Hord Of the two, in bearing and demeanor, Hord impressed me as the more trustworthy. 318 DECISIONS OF NATIONAL LABOR RELATIONS BOARD did not express the belief that negotiations were at an impasse or that future negotiations would be futile. For the reasons set out above, I find that Hord did not talk with Hendricks immediately prior to the letter of July 24. I further find that Hendricks' letter of July 24 was a belated answer to Hord's letter of July 13 and constituted an unequivocal refusal to meet with the Union and to continue negotiations for a collective-bargaining agree- ment. M. The Respondent on August 26 Implements Its Last Wage Offer On August 26 there were 5 hourly paid sign shop employees. The Respondent, on this date, granted wage increases to four of the five employees. The hourly increases were either identical to or slightly below the increase the employees would have received on that date under the Respondent's last wage proposal . It is undisput- ed that the Union was not notified by the Respondent of its intent to effectuate this wage increase. Also it is undisputed that, as described above, the Union as well as the sign shop's employees had specifically rejected a proposal by Respondent that such wage increases be granted without a contract. N. The Respondent Closes the Part of the Sign Shop Known as the Silk Screen Room The sign shop during the period material to this case was located on the third and fourth floors of the Company's headquarters. One part of the department was known as the silk screen room or operation. It regularly employed two employees and was on the fourth floor . The remainder of the sign shop's employees worked on the third floor. In the past the sign shop's employees had complained to management about the heat and the fumes in the silk screen area. In May, the Seattle fire department conducted a routine investigation of the building and notified the Company that in certain areas including the silk screen area it was violating the city's fire ordinances . In early June, the fire department rechecked and indicated that the Company by its remedial action was now in compliance with fire regulations in virtually all respects. But, at this point, another group of fire department inspectors because of a complaint filed by an employee conducted another investigation of the silk screen area . On June 12 and 13, a team of inspectors inspected the area explaining to company officials that an employee had filed a formal complaint. The inspectors during the course of the investigation informed the Company's officials that the silk screen area was extremely hazardous , that sparks from the motors of the silk screening equipment could ignite the area, that the toxic fumes from the chemicals were excessive, and they could not understand why the Company had not had a major explosion or as one inspector put it, "blown off the map." A company official asked why the fire department had recently placed its stamp of approval on the same conditions now found hazardous. The inspector stated it was a matter of 12 In fact Koyano had quit earlier that week and Tungate earlier that day had given notice to Sullivan that she was terminating her employment at the perception and that the current inspectors had more expertise in this area. The conclusions of the fire department's inspectors were relayed to the Respondent's vice president, Hendricks, who consulted with Advertising Director Sullivan and thereaft- er, on June 14, decided to close the silk screen operation temporarily. The main reason for this decision, Hendricks testified, was the fire department's conclusion that the hazardous conditions could result in an explosion. On June 15, the Respondent temporarily closed its silk screen operation, laid off the two employees, Lindstrom and Reeves, who regularly worked there, and since then has contracted out all of the work formerly performed in this part of the sign shop. On the same date, as previously described, Hendricks notified Union Representative Hord by phone of the Respondent's decision to close the silk screen room and lay off employees Lindstrom and Reeves. Likewise, the Company on June 15 notified all of the shop's employees of this decision . At 4 p.m. Advertising Director Sullivan met with the employees and notified them of the closure of the silk screen room and the layoff of Lindstrom and Reeves. Sullivan told them that the closure was not related to the Union but the fire department had found the area unsafe and hazardous. The rest of the sign shop, Sullivan told the employees, would not be affected by the closure of the silk screen room and work for the other employees would go on as usual. Employee Adams pointed out that since employee Koyano had quit earlier that week and employee Tungate was quitting as of that day, it left two vacancies in the sign shop.12 Continuing, Adams observed that Lindstrom and Reeves were more than qualified to perform the work and asked that they be reassigned to these vacancies rather than laid off. Sullivan answered in the negative stating that the Respondent "won't be filling those positions." When another employee asked why the Company did not spend the money to remedy the fire hazard, Sullivan said it would be too costly. Another employee challenged this assertion whereupon Sullivan appeared to lose his temper and stated that the closing of the silk screen room was the fault of an employee who had complained to the fire department. 0. The Respondent Subcontracts the Sign Shop's Work It is undisputed that following the close, on June 15, of the part of the sign shop known as the silk screen room or operation, that the Respondent subcontracted this work to outside vendors and will continue to do so until it resumes operating its remodeled silk screen room . I shall now determine if the Respondent at or about the same time also began to subcontract work other than silk screening done by Lindstrom or Reeves normally performed by its sign shop employees. The Company's records establish that the only work subcontracted by the Respondent's sign shop during 1972 was done by two companies , Allied Reproductions Inc., and Advertising Aids. From January 1, 1971, until April 26, 1973, these were the only outside vendors, according to end of the day. PAY 'N SAVE CORP. 319 the Respondent's records, that did work for the sign shop. Employee Kathleen Brown testified that the work per- formed by these two companies for the sign shop was not the type of work performed by the sign shop's own employees rather it was work which had traditionally been contracted out to these companies . The testimony of Brown, a very impressive witness, was not rebutted by the Respondent . To the contrary, Vice President Hendricks who testified he was not competent to answer questions in this area testified it was his understanding that the work done for the Respondent by Allied Reproductions was not the kind of work traditionally done by the sign shop's own employees and that at least 90 percent of this work had not been performed by the sign shop's own employees. Respondent did not call a witness, competent or otherwise, to rebut Brown's testimony. Based on the foregoing, I find that the work performed for the Respondent's sign shop by Allied Reproduction and Advertising Aids was the type of work which traditionally was not performed by the sign shop's own employees but had always been contracted out. The first time the Company's records reveal the subcontracting of sign shop work to a company other than Allied Reproduction or Advertising Aids is on April 26 when sign shop work was subcontracted to Metro Plastics Inc. Thereafter such work was subcontracted to either Metro Plastics or Morup Signs on May 1 and 14 ; June 1, 4, 13, 23, 28, and 30; and during July, August, and September. In this regard, employee Brown testified that in June the Respondent for the first time commenced to contract out work normally performed by the sign shop's employees, this included nonsilk screen work such as multilith and banner work and further testified that this work was being done for the Respondent by Mitchell Plastics 13 and Morup Signs. Brown's testimony was not rebutted by the Respondent and is substantially corrobo- rated by the Respondent's records as well as the testimony of Calvin Hendricks, the Respondent's vice president. In substance, Hendricks admitted that starting in about late May the Respondent subcontracted a greater amount than usual of its nonsilk screen type sign shop work normally done by its sign shop employees. Specifically, Hendricks testified that there was a period of time when the Respondent was considering whether to permanently close the sign shop.14 During this period the Respondent, Hendricks testified, did not hire replacements for those employees who left the Respondent's employ. Since the Respondent's retail outlets continued to have their normal demand for signs, and a number of the sign shop's employees had quit, the Respondent was forced to subcontract, Hendricks admits, a greater than normal amount 15 of the sign shop's work other than silk screen type work. Respondent's course of conduct, contracting out the sign is There is no such name in the Company's subcontracting invoices as Mitchell Plastics, but there is a Metro Plastics . I am convinced and find that Brown mistakenly referred to Metro Plastics as Mitchell Plastics. 14 Hendricks was vague and evasive whenever he was asked to identify the period of time that the Company was allegedly trying to decide whether to permanently close the sign shop . It is clear, however, that this period began on May 22, the day Hendricks notified the employees of the Respondent's intent to shut the sign shop, and continued until late September when the Respondent resumed hiring employees. shop's work rather than replacing terminated employees, by its very nature was calculated to erode the bargaining unit, and this is exactly what happened . Thus, the Respondent's employment records, General Counsel's Exhibit 15, show that the sign shop through 1971 and 1972 averaged between II and 12 employees, in January and February 1973 employed 11 employees , and in March through May 1973 employed 12 employees . In late June 1973 the employment complement dropped to seven where it stayed through July and dropped to six in August and September. When the aforesaid figures for June through September are increased by two , to account for the two laid-off silk screen room employees, it is clear that from late June through September the Respondent by virtue of its policy of not replacing terminated employees was two to three employees below its normal employment comple- ment.16 Respondent commenced to once again hire employees in late September, hiring one employee on September 25 and two others the first 2 days in October. Soon after their hire the Company ceased subcontracting what is known as multilith work and assigned some of this work to the new hires. Based upon the foregoing, I find that starting on or about June I the Respondent commenced to subcontract work normally performed by its sign shop employees, that previously the Respondent except for a de minimus amount had not subcontracted this type of work, and that an effect of the subcontracting was to reduce the whole number of jobs in the bargaining unit. One last comment on the issue of the alleged subcon- tracting of sign shop employees' work: I have found, in agreement with the Respondent, that it did not refuse to bargain with the Union over the subcontracting of the silk screening work caused by the closing of this part of the sign shop on June 15. Respondent urges that its subcon- tracting invoices introduced into evidence by the General Counsel do not differentiate the subcontracting of the aforesaid silk screen type work from other work normally done by sign shop's employees. Therefore, Respondent argues that the General Counsel has not met his burden of establishing that the Respondent during times material to this case subcontracted work normally done by the sign shop excluding the silk screening work over which it had fulfilled its bargaining obligation. I agree that the Respon- dent's subcontracting invoices on their face are ambiguous. The General Counsel, however, in certain limited respects did clarify the invoices. But, more important, the testimony of employee Brown, the admissions of Vice President Hendricks, and the Respondent's employment records when considered with the Respondent's subcontracting invoices altogether sufficiently demonstrate that commenc- ing on or about June I Respondent began to subcontract is Hendricks' uncorroborated testimony that the increase in subcontract- ing was only a matter of degree, that in the past the Company has traditionally subcontracted out work performed by the sign shop's employees, is not supported by the record. It is refuted by the Company's own records and the credible testimony of employee Brown. ie In reality the Respondent was even more undermanned than described above, for employee Weston who is included in the above computations as being at work, as a matter of fact, was absent with a broken wrist from about May to October. 320 DECISIONS OF NATIONAL LABOR RELATIONS BOARD nonsilk screen type work normally performed by its sign shop's employees and that this subcontracting had an adverse impact on the bargaining unit. At the very least, the evidence adduced by the General Counsel was sufficient to shift the burden of going forward with evidence on this issue to the Respondent. Cf. N. L R B. v. Melrose Processing Co., 351 F.2d 693, 695-696 (C.A. 8, 1965). The Respondent had easy access to competent witnesses who could have cleared up any ambiguity in its subcontracting invoices and refuted the General Counsel's contention. I presume that the reason the Respondent did not adduce any such evidence was that it would have been unfavorable to the Respondent's position. P. Discussion and Ultimate Findings 1. The closing of the sign shop's silk screening room The Respondent on June 15 closed its sign shop's silk screening room and laid off the two employees Jim Lindstrom and Mark Reeves, who regularly worked there. The General Counsel alleges that the closing was discrimi- natorily motivated or was motivated by the Respondent's animus toward employees who complained about unsafe working conditions. Respondent contends that the closing and the resultant layoffs were motivated by hazardous working conditions brought to the Company's attention by fire department inspectors. The record supports Respon- dent's position. On June 13, fire department inspectors notified company officials that conditions in the silk screen room were extremely hazardous and the building was in danger of being "blown off the map." This warning was communi- cated to the Respondent's vice president, Calvin Hen- dricks. Hendricks testified that because of the hazardous conditions he decided to close the silk screen room and lay off the two employees. The record as a whole does not demonstrate that Hendricks was using the findings of the fire department's inspectors as a pretext to discriminate against employees because of their union activities or to undermine the Union or to punish employees for grieving about the unsafe working conditions.17 In so concluding, I have considered that Respondent ignored the earlier complaints voiced by its employees about conditions in the silk screening area and, in response to an earlier investiga- tion by the fire department, had remedied the violations found rather than stop operating the silk screen room. But to ignore employees' grievances and to act upon the warnings given by the fire department's inspectors makes good sense considering the expertise and the authority of the fire department. And the difference in the Company's reaction to the second inspection is not unreasonable. This inspection revealed a more hazardous condition indicating the need for more extensive repairs or remodeling. In this IT Unlike the General Counsel, I find nothing sinister or coercive in Advertising Director Sullivan's announcement of the closure and layoff to the sign shop's employees and shall recommend that this portion of the complaint be dismissed. Sullivan's remarks are not coercive and do not indicate improper motivation. He simply told the employees that the silk screen operation was being discontinued and the two employees were being laid off because the fire department had found the area unsafe and hazardous and if the employees were unhappy over tkis state of ai `airs that connection, Hendricks testified that the reason for not remedying the hazardous conditions and not continuing to operate the silk screen room was that the Respondent had already made plans, which were to be shortly implemented, to gut and remodel the entire floor and build a new sign shop, including a new silk screen room.'& Also, it is undisputed that the size of the equipment used in silk screening and the nature of the operation made it impossible to relocate the silk screen operation to another part of the building. For all of these reasons, I find that on June 15, in temporarily discontinuing its silk screen operation, the Respondent was motivated by legitimate business considerations . Accordingly, I shall recommend that this portion of the complaint be dismissed. It is undisputed that ever since the discontinuation of the sign shop's silk screen operation the Respondent has subcontracted the silk screen work formerly done by its own employees. The General Counsel alleges that the Respondent, in violation of Section 8(aX5) of the Act, subcontracted this work and laid off the two employees who formerly did the work without adequate notice to and consultation with the Union. I cannot agree for the following reasons. The decision to discontinue operating the sign shop's silk screen room, which was not unlawfully motivated, was arrived at immediately after the inspectors from the fire department notified the Respondent that the conditions in that area created both a fire hazard and the danger that the building would be blown up. The Respondent's vice president, Calvin Hendricks, without any delay and prior to implementing the decision to cease operating the silk screen room, notified Union Representative Charles Hord about the closure, including the layoff of the two employees, and indicated the reasons for the Respondent's actions. Hord did not request bargaining with respect to either the decision or its impending effect upon employees Lindstrom and Reeves, but instead took the position that it was not proper for the Respondent to lay off the employees. In these circumstances, particularly the nature of the reason which motivated the Respondent to discon- tinue the silk screen operation, I am of the opinion that the Respondent's notification to the Union was timely. I further find by its failure, after receiving notice, to request that the Respondent bargain with it over the impact of the closing on the sign shop's employees, that the Union waived its rights in that matter. Cf. U. S. Lingerie Corporation, 170 NLRB 750, 751-752, and White Consoli- dated Industries, Inc., 154 NLRB 1593. Accordingly, I shall recommend that this portion of the complaint be dis- missed. 2. The threat to close the sign shop On May 22, the vice president of the Respondent, Calvin Hendricks, notified the sign shop's employees that they the fault lay with the employee who, by filing a complaint, had caused the fire department to investigate . This was an accurate representation of what had occurred. is It is undisputed that the arrangements to remodel the fourth floor were finalized in late 1972 and that about September 1 the construction began and the floor was completely tom up . The remodeling was still in process at the time of the hearing in this matter. PAY 'N SAVE CORP. 321 were being terminated as of the end of the workweek, May 25, explaining that since the Union would not compromise its bargaining position, the only alternative was for the Respondent to permanently close the sign shop and further stated that, even if the employees repudiated the Union, that the shop would be closed for the reason that the Respondent had discovered it could save money by subcontracting the work. The General Counsel alleges that this threat to close the sign shop , in violation of Section 8(a)(1), was made to discourage the employees from supporting the Union by striking against the Respondent. Obviously, the sign shop's employees "are particularly sensitive to rumors of plant closings [and] take such hints as coercive threats . . . ." N.LR.B. v. Gissel Packing Co., 395 U.S. 575, 619-620 (1969).19 ' The crucial question is the motivation behind the threat . I believe that the entire sequence of events-the timing of the threat, the Respon- dent's contemporaneous unlawful refusal to continue contract negotiations, the Respondent's other contempora- neous conduct designed to undermine the Union, the hostility expressed over the strike deadline by one of the Respondent's negotiators, and the complete lack of substance to the reason advanced by the Respondent to justify the threat of closure-in its entirety establishes that in telling the employees that it was closing the sign shop the Respondent was motivated by a desire to undermine the Union. The threat to close was made for the first time on Tuesday, May 22. It came immediately on the heels of the Union's letter of Friday, May 18 , presumably received by Respondent on Monday, May 21. This letter notified the Respondent, for the first time, that its sign shop employees had unanimously voted to strike on May 31. This coincidence between the receipt of the announced strike deadline and the Respondent's announced decision to close the sign shop wa.y not explained at the hearing. Also relevant in evai' the Respondent's motivation is the fact to continue operating the sign shop ont i ,..:.n the Union agreed, among other things, to cancel the strike. Hendricks did not explain, at the hearing, why what was announced as an unalterable decision to close was reversed when the Union agreed to call off its strike. The announcement of the impending closure came out of the blue. The Respondent previously had given no indication to either the Union or the employees that it was considering closing the sign shop or subcontracting the work. I am convinced that if the Respondent on May 22 was sincerely considering the closing of the sign shop because of the Union's wage proposal that the Respondent would have appraised the Union of its claimed position and tested the Union's willingness to it-ake concessions to Respondent to enable it to keep the sign shop operating. Moreover, at the time the Respondent announced its intt:nt to close the shop the Union had not adopted a bargaining 1e Although not raised by the Respondent as a defense , I note that the instant case does not involve the closure of a business operation in the literal sense of the term and in this respect the principles annunciated by the Supreme Court in N.L.RB. v. Darlington Manufacturing Co., 380 U.S. 263 (1%5), are not relevant. In Darlington the Supreme Court equated the antiunion subcontracting of part of an employer s operation, as here, with a "runaway" shop and distinguished the two from the closing and discontin- psition which reasonably would have led the Respondent to believe it was unyielding on economic matters. To the contrary, the Union at the negotiation meeting prior to the threat to close had indicated its position was flexible inasmuch as it had yielded on a number of economic matters and had modified its initial wage proposal. The threat to close was made contemporaneous with other conduct engaged in by Respondent, all of which was designed to undermine the Union's bargaining position and dissipate its support among the employees. At the same time he announced to the sign shop 's employees the impending closure, Hendricks implied that the closure was attributable, in part, to the Union's unwillingness to compromise "on anything" during the contract negotia- tions. This was a false representation obviously designed to blame the Union for the closure, thereby causing the employees to repudiate the Union. In a similar vein, Advertising Director Sullivan on May 23 blamed the failure of employee Brown to receive a wage increase on the Union and told Brown that but for the Union she probably would have received an increase above the Union's wage scale. Likewise, the threat of closure itself, in the context in which it was made, was calculated to impress upon the employees that their continued employment likely would be affected adversely by the Union 's bargain- ing demands. The aforesaid direct dealing with the unit employees by Respondent was engaged in at a time when, as I describe below, the Respondent had unlawfully broken off contract negotiations and had previously not even hinted to the Union that it was contemplating closing the sign shop or subcontracting the work. Simply stated, the threat to close the sign shop, when viewed in perspective, is part of a course of conduct designed to destroy the Union and subvert the Union's position as the employees' bargaining agent. The Respondent's hostility toward the employees for voting to support the Union by striking is manifested by the reaction of its negotiator, Hirstel, to the Union's letter announcing the strike deadline . In substance, Hirstel indicated to the Union's negotiators, which included two of the employees, that if the employees in the future should ever set another strike deadline, that Hirstel would tell the Company to close the sign shop permanently. The Respondent at no time-to the Union during the period of negotiations or at the hearing-substantiated its contention, made for the first time on May 22 to the employees, that it had decided to close the sign shop, in part, as "it had been looking into the matter and believed it could get the work done on the outside for less money." The first and last time that the Respondent appraised the Union during the period of negotiations that if it was forced to pay the wages proposed by the Union, it would close the sign shop and subcontract the work was on June uance of part of an operation which was involved there. Id at 272, 273, fn. 16. 20 That the employees so understood the import of Hendricks ' threat is demonstrated by the fact that one of the employees specifically asked whether the repudiation of the Union by the employees would be sufficient to cause the Respondent to reopen the sign shop, 322 DECISIONS OF NATIONAL LABOR RELATIONS BOARD 4 when Hirstel, without any further explanation or clarification, told this to the Union's negotiators.21 At the hearing the sole evidence adduced by the Respondent to substantiate the reason for its decision to close the 'sign shop was the testimony of Hendricks which in its entirety follows: Q. Could you please advise the Court in your own words the economic factor that was present throughout these bargaining discussions? What were the economic considerations as to the continued operation of the sign shop? A. Well, the discussions related primarily to the wages of the employees, the wage demands that were made and the wages we were going to pay , and also our own considerations were the distance involved in getting signs to stores , transportation costs, whether we should operate sign shops in various areas or do sign work by outside agencies in various areas or whether we should be doing it all centrally. Just the cost factors involved in all of it. This testimony which can only be characterized as vague and evasive was given in an unconvincing manner. Moreover, it was not corroborated by any of the other officials who presumably allegedly consulted with Hen- dricks. The Respondent for some unexplained reason did not present one bit of evidence explaining its reason or reasons for deciding to close the sign shop which led to the announcement of the impending closure to the employees on May 22. Under the circumstances, I presume that any such evidence would have been unfavorable to the Respondent and would not have supported Hendricks' statement made to the employees on May 22 that it was cheaper to subcontract the work . In fact, Hendricks, as described above, did not make any such contention at the hearing. Based on the foregoing, I find that on May 22, in threatening the employees with the closure of the sign shop, the Respondent was motivated by a desire to discourage the employees from supporting the Union and by an improper intent to undermine the Union. According- ly, by engaging in this conduct the Respondent , as alleged in the complaint, violated Section 8(axl) of the Act. Hendricks' subsequent announcement on May 25 to the employees that the Respondent had agreed to continue operating the sign shop on "a temporary basis" was not sufficient, in my opinion, to dissipate the coercive effect of the earlier threat of closure. Hendricks did not disa- -,w the earlier threat but rather told the employees that the Respondent had reached an agreement with the Union whereby the Union had agreed to call off its strike and the Respondent had agreed to keep the sign shop in operation only on a temporary basis . In the context in which it was made, Hendricks' warning that the sign shop was only in 21 Based on the credible testimony of Hord , who was an impressive witness. Hendricks on the subjects of the closing of the sign shop and the subcontracting of work, in hearing and demeanor was not a convincing witness. In response to a leading question he indicated that Respondent at negotiations advised the Union of the economic considerations relating to the decision to close the sign shop. No attempt was made by Hendricks to put some flesh and blood on this vague generalization . Hirstel on this matter . xistence temporarily could only have been construed by the employees as a none too subtle threat that the Respondent would close if the employees decided to reinstate the strike deadline or otherwise continue to support the Union's bargaining position. Accordingly, as alleged in the complaint, I find that by engaging in this conduct the Respondent violated Section 8(axl) of the Act. I have found, as alleged by the General Counsel, that the threat by Respondent to close its sign shop violated Section 8(axl) of the Act for the reason that it was an act designed to undermine and destroy the Union's support among the employees and to discourage them from engaging in a lawful strike. The employees exercise of the right to strike in support of their bargaining representative's bargaining position is not only protected by the Act but is a vital part of the process of collective bargaining. Part of the task facing a newly certified bargaining representative is to effectively generate the support of the unit employees to strike, if necessary, in support of the Union's demands. The deliberate effort by Respondent by its threat to permanently close its sign shop to discourage the employ- ees from striking in support of the Union constitutes a clear undercutting of the Union's function as bargaining representative. The spectre of this threat hanging over the sign shop's employees permanently impaired the Union's vitality as the employees' bargaining representative, for the threat was calculated to significantly dampen the employ- ees' future willingness to engage in concerted activities in support of the Union's bargaining position. Briefly stated, the threat to close the sign shop, when viewed in light of Respondent's employment and subcontracting policies, which I have found to be illegally motivated , was conduct designed to undermine and destroy the Union's representa- tive status while collective-bargaining negotiations were taking place and, as such, demonstrated that the Respon- dent was bargaining in bad faith wrl thereby violated Section 8(aX5) of the Act. Cf. Wire h .,.. ' N corp., Corp., 198 NLRB No. 90. I realize that this viu..a..._ was not specifically pleaded but it is well settled that "courts as well as the National Labor Relations Board have held that a material issue which has been fairly tried by the parties should be tried by the Board regardless of whether it has been specifically pleaded." American Boiler Manufacturers Association v. N.LRB., 366 F.2d 815, 821 (C.A. 8, 1966), and cases cited therein . This is such a case 22 3. The subcontracting There can be no doubt that the Respondent's sign shop operation during the period from about June 1 into early October was significantly different from its customary operation. Previously, the Respondent had not subcon- tracted work performed by the sign shop employees and had customarily replaced terminated employees. Com- also had to be led by Respondent's counsel and was just as vague and evasive as Hendricks in his testimony and ultimately agreed, in effect, that Hord's version of the negotiations was correct on this point. 22 For the same reason I have found, infra although not specifically pleaded, that Respondent violated Section 8(aX5) by refusing to meet with the Union commencing on July 24. PAY 'N SAVE CORP. 323 mencing on or about June 1 Respondent changed its hiring and subcontracting policies. Although the demand by its retail stores remained constant, the Respondent decided not to replace terminated sign shop employees. Respon- dent was able to handle the flow of sign shop work only by subcontracting work which in the past had been tradition- ally performed by the sign shop's employees. During this period of time, due to the aforesaid employment and subcontracting policies, the normal complement of em- ployees in the sign shop was substantially reduced. And, as described later in this decision, employees Lindstrom and Reeves, who were laid off on June 15, were not assigned to existing vacartoies in the sign shop because of the Respondent's decision to subcontract rather than fill job vacancies. This is the kind of basic change in operations which an employer, in my opinion, is obligated to bargain with his employees' representative. For, by subcontracting out the work, the Respondent adversely affected the bargaining unit, diminishing the whole number of jobs performed by unit employees, International Union, United Automobile, Aerospace & Agricultural Implement Workers [GM Corp.], v. N.L.RB., 381 F.2d 265, 266 (C.A.D.C., 1967), resulting "in significant impairment of job tenure , employment security or reasonable anticipated work opportunities." Westinghouse Electric Co., 150 NLRB 1574, 1576. In these circumstances, the Respondent, by virtue of Section 8(ax5) of the Act, was obligated not to change its hiring and subcontracting policies unilaterally without first consulting and bargaining with the Union. Fibreboard Paper Products Corp. v. N.L.RB., 379 U.S. 203 (1964). Yet, the Respon- dent on or about June 1, during the course of its negotiations with the Union, ceased hiring employees and commenced to subcontract work normally performed by the sign shop employees. The Respondent at no time gave the Union an opportunity to bargain about the matter.23 In response to the complaints of the sign shop 's employees, the Union by letter of July 13 protested to Respondent about the subcontracting. Hendricks, the Respondent's vice president, by letter replied that the Respondent had subcontracted sign slop work for "many many years"24 and planned to continue following this established policy. Respondent, in short, made it clear that it did not regard its subcontracting of sign shop work as a bargainable matter. The Supreme Court has ruled otherwise (Fibreboard Paper Products Corp., supra), and based on the foregoing, I find that commencing on or about June 1 and continuing thereafter the Respondent, by unilaterally changing its hiring practices and by subcontracting work normally performed by its sign shop employees without first consulting and bargaining with the Union, violated Section 8(aX5) and (1) of the Act. This evidence concerning the nature of the Respondent's subcontracting does not, however, stand alone. There is, I find, persuasive evidence in the record that the subcon- tracting was the result of the Respondent's unlawful conduct engaged in for the purpose of undermining the 23 The statement of Respondent's negotiator , Hostel, made at the negotiation meeting of June 4 that if the Company had to pay the Union's wages, it would close the sign shop and subcontract the work, is not the type of notice contemplated by the Act. "Knowing what [Respondent ] intended to do is not the same as being notified that it is about to do it." Overnite Union's representative status. Thus, it is admitted that the reason Respondent, contrary to past practice, did not replace terminated sign shop employees but instead subcontracted the work was because this was the period when the Respondent, allegedly, was considering whether to cease operating the sign shop. Respondent had no legitimate reasons, however, for engaging in this conduct butt, as I have found, the Respondent's initial decision to close the sign shop announced to the employees May 22 and the later announcement that the shop would remain in operation only on a temporary basis was unlawfully motivated conduct engaged in for the purpose of discour- aging the employees from supporting the Union and to undermine the Union. Under these circumstances, I find that the record establishes that commencing on or about June 1 , when the Respondent unilaterally changed its hiring policies and unilaterally commenced to subcontract work normally performed by its sign shop employees, the Respondent was motivated by a desire to disparage and undermine the Union. This conduct by itself constitutes a violation of Section 8(aX5) of the Act. Town & Country Manufacturing Co., 136 NLRB 1022, 1026. Likewise, it constitutes a violation of Section 8(aX3) of the Act. Town & Country Manufacturing Co., supra 4. The refusal to reassign employees James Lindstrom and Mark Reeves to other work when their work in the sign shop's silk screen room was terminated On June 15, employees James Lindstrom and Mark Reeves, regularly employed as silk screen operators, were laid off as the result of the temporary closing of the sign shop's silk screen room. I have found, contrary to the position of the General Counsel, that the closing of the silk screening operation was not unlawfully motivated. The General Counsel also alleges that the evidence establishes the Respondent violated the Act by failing and refusing since June 15 to reassign Lindstrom and Reeves to work which then existed in the sign shop. Lindstrom and Reeves, although regularly performing silk screening, were qualified to do other types of work in the sign shop. Each was proficient in preparing show cards, a skill needed in the sign shop when they were laid off and for the following period. Two of the sign shop 's employees, Arthur Koyano and Susan Tungate, had voluntarily terminated their employment the week of the layoff, and another employee, Maureen Weston, was absent from work with a broken wrist which indicated to the Respon- dent she would be incapacitated for quite some time. In these circumstances, since the production of show cards constituted a substantial part of the sign shop's work volume, it is not surprising that the shop's employees, due to the lack of manpower, were late by as much as 3 weeks Transportation Co. v. N.LRB., 372 F.2d 765,769 (C.A. 4, 1967). 24 The letter was patently false insofar as it implied that the Company had a past practice of subcontracting the type of work performed by the sign shop's employees. The only work customarily subcontracted was work not normally performed by these employees. 324 DECISIONS OF NATIONAL LABOR RELATIONS BOARD in filling the orders submitted by the Respondent's retail outlets.25 Reeves, who had been employed since February 1972, was regarded by the Respondent as an extremely valued and skilled employee who during the normal course of his workweek performed a wide variety of assignments, including some of the most skilled work in the department. Also, it is undisputed that the sign shop's employees, including both Lindstrom and Reeves, when hired were "hand picked" and carefully screened, and that it is the intent of the Respondent to train its employees to perform all of the jobs in the department, progressing from the supple jobs to the ones demanding a higher degree of skill.28 Plainly, the Respondent has an interest to do everything in its power to retain in its employ satisfactory employees. There is no evidence or contention that Respondent was not satisfied with the work of either Reeves or Lindstrom. Contrariwise, Hendricks testified that when the silk screen room is rebuilt that the Respondent in all probability intended to offer them reemployment. The evidence set out above, in my opinion, establishes that on June 15 the Respondent was of the opinion that Reeves and Lindstrom were capable of satisfactorily performing work in the sign shop other than silk screening. This conclusion is bolstered by the fact that in explaining its reason for not reassigning Lindstrom and Reeves to other work, rather than layin* them off, the Respondent at no time has questioned their ability to do such work; rather, as described below, it has contended that it had a full complement of employees. On June 15, there were two vacancies in the sign shop caused by the recent voluntary terminations of employees Koyano and Tungate . In response to the comment of an employee that Lindstrom and Reeves were competent to fill these two job vacancies, Advertising Director Sullivan on June 15 did not deny their ability to handle the work but, in refusing to assign them to these vacancies, stated that the Respondent "won't be filling those positions." Likewise, at the hearing, Vice President Hendricks testified that Respondent on June 15 did not consider continuing employing Lindstrom and Reeves in the sign shop, rather than laying them off, because the Respondent had a full complement of employees or, in his exact words, "we had all the people that we needed to run the sign shop ." But, as I have found, the Respondent's normal complement of employees in the sign shop in June had dropped by two or three even though the demand for signs by the Respon- dent's retail outlets continued.27 Obviously, in these circumstances, Hendricks' testimony that the Company on 25 I have considered employee Brown's admission that the sign shop "has been meeting" its work load of show cards in a timely fashion. When Brown's testimony is viewed in its entirety, it is clear that she was referring to the operation of the sign shop at the time she was testifying, November. Her undenied testimony, as a whole, is to the effect that prior to the time the Respondent commenced to hire new employees, late September, that the lack of manpower caused a hardship in the sign shop. se In this regard, I note that, as indicated by the parties' wage proposals during negotiations, the employees are not classified by any particular job they perform. 27 It is a fair inference that the stores ' demands for signs had even increased during this period inasmuch as during 1973 and prior to November, the Respondent had added approximately 13 stores. June 15 "had all the people we needed to run the sign shop," is accurate if one of two things occurred. The sign shop had been overstaffed or the signs needed by the Respondent's stores were being produced some place other than the sign shop28 The latter is what was occurring. For, Hendricks admitted, at the hearing, that on or about June 1 the Respondent changed its sign shop's employment and subcontracting policies. It stopped replacing terminated employees and instead subcontracted the work formerly done by the terminated employees. I have found that the Respondent engaged in this conduct , without bargaining with the Union, for the purpose of disparaging and undermining the Union in violation of S.- *;on 8(axl), (3), and (5) of the Act. Based on the foregoing, I find that an June 15 the Respondent had work available for Lindstrom and Reeves which they were capable of performing in a satisfactory manner and that during the normal course of business they would not have been laid off but would have been assigned to other work in the sign shop. They were laid off, however, because of the Respondent's unlawful practice of subcon- tracting work rather than filling existing job vacancies. In these circumstances, the Respondent's refusal on June 15 to continue to employ Lindstrom and Reeves was the direct result of its unlawful hiring and subcontracting practices and, as such, constitutes a violation of Section 8(axl) and (3) of the Act. 5. The failure to bargain in good faith The basic issue here involves an allegation of surface bargaining. The General Counsel contends that the evidence shows that Respondent did not negotiate with a sincere intention to reach an agreement with the Union. Respondent contends it was engaged in hard bargaining. Section 8(d) of the Act defines the duty to bargain as the mutual obligation "to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment , or the negotiation of an agreement." The statutory standard thus adopted contem- plates a willingness to enter into discussion with an open mind and a sincere intention to reach an agreement consistent with the respective rights of the parties. N.LR.B. v. Texas Coca-Cola Bottling Co., 365 F.2d 321, 322 (C.A. 5, 1966). Section 8(d) also expressly provides that the collective-bargaining obligation "does not compel either party to agree to a proposal or require the making of a concession." It is thus clear that while a party may not come to the bargaining table with a closed mind, neither is he bound to yield any position fairly maintained. See N.L.R.B. v. American National Insurance Co., 343 U.S. 395, as I have carefully considered, as Respondent suggests, a third possibility, namely that with the termination of the silk screening operation the three or four employees who had spent an average of 2 hours a day helping there could now devote together a total of about 8 additional hours a day to other sign shop work, thereby eliminating the need to replace employees who terminated their employment . But, as indicated above, the testimony of employee Brown indicates there was a need for replacements. More significant is the failure of Hendricks to specifically give this as the reason for the Company's failure to replace employees Koyano and Tungate. He testified in substance that the failure to replace them was because the Company had instituted a ban on hiring new employees and was subcontracting the extra work , a policy I have found to have been unlawfully motivated. PAY 'N SAVE CORP. 325 404. But, as one court has reminded us, bad-faith bargaining is prohibited though done with sophistication and finess and the right to refuse to make concessions cannot be used as a cloak to conceal a purposeful strategy to make bargaining futile. NLRB. v. Herman Sausage Co., 275 F.2d 229, 232 (C.A. 5, 1960). Obviously, in evaluating the Company's state of mind at the bargaining table, the several positions and tactics of the Company both at and away from the bargaining table must be considered in relation to each other and the total bargaining picture. Thus, while the Respondent has engaged in some conduct independently violative of Section 8(aX5), (3), and (1) of the Act; other conduct, standing alone, might not otherwise be found unlawful. All of the evidence, however, including the independent violations, must be added together to determine whether, thus totaled, such evidence preponderates in favor of the conclusion that the Company engaged in mere surface bargaining.29 In my opinion, the following factors in their totality demonstrate that Respondent was not bargaining with a sincere desire to reach an agreement. (a) Respondent on May 3 and on July 24 broke off collective-bargaining negotiations, refusing further meet- ings and discussions with the Union for the purpose of obstructing bargaining.30 On May 3, the Respondent's labor relations consultant, Hostel, broke off negotiations and refused to meet further with the Union. "We made our offer; you have it, and that's it," Hirstel told the Union's negotiator. I cannot, in the circumstances of this case, regard this conduct as a tactic or a bargaining technique designed to stimulate negotiations. No one, least of all an experienced labor relations consultant, could have reason- ably believed that on May 3 negotiations were deadlocked or that further negotiations would not have been fruitful. The bargaining had just commenced. The Respondent, in effect, had just made its first offer . The Union, except for union security, on May 3 had indicated a willingness to modify its bargaining positions. Specifically, on May 3, immediately before the Respondent broke off negotiations, the Union in response to the Respondent's demands had modified and eliminated a number of its proposals in a manner agreeable to the Respondent. Additionally, it accepted the Respondent's proposed management rights clause and reduced its initial wage demands. All of these circumstances, absent an explanation by Respondent for its conduct, establish that the Respondent in breaking off negotiations on May 3 was not motivated by a belief that negotiations had reached an impasse but rather by a desire to obstruct bargaining.31 (b) On May 22, the Respondent's vice president, Calvin Hendricks, to undermine and disparage the Union, held a meeting with the sign shop's employees where he falsely blamed the Union for the breakdown in negotiations and 29 N.L.R B. v Insurance Agents' International Union, AFL-CIO [Pruden- tial Insurance Co.], 361 U.S. 477, 505-506 (1959). Justice Frankfurter, in his separate opinion, said that the Court "has recognized that the significance of conduct, itself apparently innocent and evidently insufficient to sustain a finding of an unfair labor practice, 'may be altered by imponderable subtleties at work . . . .' Activities in isolation may be wholly innocent, lawful and 'protected' by the Act, but that ought not to bar the Board from finding, if the record justifies it, that the isolated parts 'are bound together as the parts of a single plan [to frustrate agreement ]. The plan may make the parts unlawful' " at the same time, in violation of Section 8(aX5) and (1), threatened the employees with discharge. Specifically, as I have found, the Union tried to stimulate negotiations and get Respondent back to the bargaining table by setting a strike deadline and requesting a resumption of bargaining prior to the deadline. Hendricks did not acknowledge the Union's request for negotiations, but instead met with the employees on May 22, at which time he falsely told them that the breakdown in negotiations was caused by the refusal of the Union to compromise "on anything" during negotiations. He also told them that the sign shop would be closed by Respondent on May 25 and their employment terminated, a threat which I have found was motivated by a desire to discourage the employees from striking and to undermine the Union's representative status. (c) On May 23, in a further effort to disparage and undermine the Union the Respondent, through its Adver- tising Director Sullivan, blamed the failure of employee Kathleen Brown to receive a wage increase upon the Union and told Brown that but for the Union she probably would have received an increase above the Union's scale of wages.a2' (d) On May 25, Respondent, through its Vice President Hendricks, engaged in further conduct designed to undermine the Union and to destroy its effectiveness as the employees' exclusive bargaining representative. On that date, I have found, the Respondent violated Section 8(axl) and (5) by Hendricks' implied threat to the employees that they would be discharged if in the future they supported the Union's bargaining position. (e) On June 4, at the first meeting between the parties after the agreement by Respondent to resume negotiations, the Respondent's negotiator, Hostel, none too subtly warned the Union's negotiators that if the sign shop's employees should again vote to strike in support of the Union that Hirstel would tell the Company to permanently close the sign shop. Also, Hirstel, in effect, told the Union's negotiators that it was futile for the Union to even negotiate a contract for the reason that even if the parties did reach agreement, the Respondent might still close the sign shop. (f) On or about June 1, immediately after Respondent agreed to resume bargaining and keep the sign shop operating on a temporary basis, the Respondent violated Section 8(axl), (3), and (5), as I have found, by embarking upon a course of conduct-refusing to replace employees and subcontracting-deliberately calculated to erode the bargaining unit for the purpose of destroying and under- mining the Union. (g) At the negotiation meeting held on June 18 when Union Negotiator Hord indicated that he was in substan- tial agreement with the Respondent's recent wage propos- al, Hirstel withdrew the offer and substituted a less so The May 3 refusal to negotiate is discussed herein, whereas the July 24 refusal is discussed below in subsection 6. 31 The law is settled that, absent a genuine impasse in negotiations, the Respondent was obligated to meet at reasonable times with the Union to negotiate a contract. Transport Company of Texas, 175 NLRB 763, fn. 1. 32 1 reject the contention of the General Counsel that by engaging in this conduct the Respondent violated Section 8(axl) of the Act. The matter which was not alleged as an independent violation was not litigated by Respondent. 326 DECISIONS OF NATIONAL LABOR RELATIONS BOARD favorable one. The new offer was still a significant one in terms of what it offered.33 But the manner in which Hirstel notified Hord of its withdrawal and the withdrawal itself, as Hirstel must have known, was calculated to disrupt negotiations. The cavalier assertion made by Hirstel to Hord to justify the change, the Company had miscalculat- ed in drafting the proposal, rings false. The Respondent during this entire period of time allegedly was vitally concerned about whether labor and other costs would make it more profitable to subcontract its sign shop work. I find it hard to believe that in this area the Company made a miscalculation. Neither Hirstel nor Hendricks, at the hearing, were called upon to testify about this matter. Under the circumstances, I am convinced that in abruptly reducing the Company's wage offer on June 18 that Hirstel was not motivated by a desire to correct a miscalculation but by a desire to place an obstacle in the way of Hord's acceptance of any such proposal. (h) On July 12, Hendricks summarily , without consider- ing the matter, rejected a new wage offer proposed by Hord which drastically reduced the Union 's previous proposal. According to the terms of the Union's July 12 proposal, three of the six hourly paid employees employed on that date received less of an increase than proposed by the Respondent in its last wage proposal. Specifically, Hord on July 12 proposed a 1-year contract calling for a 5.5-percent increase. This resulted in the then employed hourly employees receiving the following hourly wage increase. Brown-10 cents (30 cents);34 Laing-21 cents (10 cents); Woods-21 cents (10 cents); Trujillo-12 cents (33 cents); Vike-10 cents (15 cents); and Weston-13 cents (10 cents, plus another 10 cents within 5 months). Hendricks did not even consider the proposal but summarily turned it down, stating that the Respondent had made its final offer and needed a 3 -year contract. Respondent's need for a 3-year contract was not explained. Of course, Respondent was not obligated under the Act to agree to this proposal or for that matter any proposal but, in view of the nature of the proposal , Hendricks' abrupt rejection, without even considering the matter , is not the type of conduct engaged in by someone who has a sincere desire to reach an agreement. To sum up : The Respondent at the bargaining table engaged in conduct inconsistent with a good-faith desire to reach agreement : Respondent refused to meet and negoti- ate a contract with the Union and engaged in this conduct with the object of disrupting negotiations; likewise, the Respondent repudiated a wage proposal for the purpose of disrupting negotiations; Respondent rejected without giving the matter any consideration , the Union's most recent wage proposal which constituted a drastic reduction over the Union's previous proposals and on its face seemed to cost less than even the Respondent's own proposal; and the Respondent's negotiator informed the Union during negotiations that it was futile for the Union to negotiate for a contract, explaining that even if an agreement was as I specifically reject the General Counsel's contention that Respon- dent's wage proposals advanced on June 6 and 18 were below the Respondent's existing wage policy or practice . There is insufficient evidence to demonstrate that at the time of the events material to this case that the Respondent maintained any kind of a wage policy or practice for its sign shop employees. reached by the parties the Respondent might discontinue the sign shop. Assuming that the Respondent's conduct at the bargain- ing table is ambiguous, not by itself sufficient to demon- strate that the Respondent was engaged in surface bargaining, I am of the opinion that the Respondent's conduct away from the bargaining table removes any such ambiguity and establishes the Respondent 's bad faith. For, contemporaneously with the negotiations, the Respondent was engaged in a course of conduct designed to undermine and eventually destroy the Union. Respondent, to prevent the Union from exercising economic leverage to support its bargaining position, held the continuous specter of discharge over each one of the bargaining unit employees; Respondent for the purpose of weakening the Union engaged in an employment and subcontracting policy calculated to erode the bargaining unit ; and the Respon- dent, for the purpose of discouraging the em loyees from supporting the Union, falsely represented to the employees the Union's position during negotiations , blamed the Union for the employees' failure to receive wage increases, and implied that without the Union they would get higher hourly increases. On the basis of all the above considerations , viewed in their totality, I find and conclude that Respondent failed to meet its obligations under Section 8(aX5) and (1) of the Act to bargain in good faith with the Union. 6. The Respondent refuses to hold further negotiation meetings and grants a wage increase On July 12, Union Representative Hord initiated a meeting with the Respondent's Vice President Hendricks in an attempt to arrive at an agreement . Hord proposed a 1-year contract with a 5.5-percent hourly increase for all of the unit employees. Hendricks summarily rejected the proposal, stating the Company needed a contract of 3 years' duration and had made its final offer on wages. Hendricks proposed that the Respondent be allowed to implement its wage proposal without a contract. The same day, Hord relayed this proposal to the employees who rejected it and, on July 13, by letter, Hord notified Hendricks that the Company's proposal to grant a wage increase without a contract was not acceptable to the Union. Hord ended the letter by requesting that the Company resume negotiations and negotiate with the Union until an acceptable contract was consummated. On July 24, by letter, Hendricks notified the Union that the Respondent refused to meet with the Union because negotiations were at an impasse and that further negotia- tions would accomplish nothing. On August 26, four of the five hourly paid employees employed in the siggnn shop were granted a wage increase by the Respondent substantially identical to what was called for under the Respondent's last wage proposal. Respondent, absent a genuine impasse in negotiations, 34 The figure-in the "( )" refers to the wage increase that the employee would receive immediately under the Respondent's final proposal advanced on June 18. Of course, the Respondent's contract was for 3 years and provided for additional substantial wage increases for four of the six employees during the last 2 years. PAY 'N SAVE CORP. 327 was not privileged to refuse to meet for further negotiations with the Union nor, absent such an impasse, was the Respondent privileged to grant its last wage offer over the Union's objections. See Hi-Way Billboards, Inc., 206 NLRB No. 1. In my opinion, there was no genuine impasse in negotiations, nor did Respondent believe that one existed. The crucial issue in dispute was wages. The Union appeared willing to negotiate on economic matters, including wages, at all times. In fact, the last time the parties met, July 12, the Union had so drastically revised its proposal on wages that the gap between the parties on this issue had closed significantly . And it appears from Hendricks' response to this offer that perhaps wages as such was no longer the crucial issue , but that the key to the bargain lay in the duration of the agreement , a matter which previously had not been a subject of discussion. Moreover, the parties did not discuss the Union's new proposal. Respondent's negotiator rejected it summarily and spent most of the meeting trying to persuade the Union to give the Respondent permission to implement its wage proposal absent an agreement . For all of these reasons, I do not believe that the parties on July 12 had either exhausted bargaining possibilities nor had they reached the stage where further meetings would have been fruitless. In addition, I am convinced that the circum- stances belie Hendricks' claim that he believed the parties had reached an impasse. Rather, the objective circum- stances establish that in refusing to hold further meetings with the Union the Respondent was motivated by a desire to obstruct negotiations. Based on the foregoing, I find that the Respondent, by its refusal on July 24 to meet and negotiate with the Union and by its unilateral grant of wage increases on August 26, violated Section 8(a)(5) and (1) of the Act. By themselves, the Respondent's refusal to meet with the Union and its unilateral increase of wages, absent a genuine impasse, each was a violation of Section 8(aX5). Hi-Way Billboards, Inc., supra. Assuming, however, that an impasse existed on July 12 and 24, I am convinced that discounting Hen- dricks' conduct on these dates that the other evidence discussed in subsection 5, supra, establishes that as of July 24 the Respondent was not bargaining in good faith. In this circumstance, "where good faith [bargaining] on the part of management is lacking, the courts will not recognize the existence of a bargaining impasse." N.LKB. v. Safeway Steel Scaffolds Company of Georgia, 383 F.2d 273, 280 (C.A. 5, 1967); Accord: Hi-Way Billboards, Inc., supra. For this additional reason, I further find that the Respondent, by refusing to meet with the Union on July 24 and by unilaterally implementing its wage proposal on August 26, violated Section 8(a)(5) and (1) of the Act. Upon the basis of the foregoing findings of fact and the entire record, I make the following: CONCLUSIONS OF LAW 1. Pay 'n Save Corporation, the Respondent, is an employer engaged in commerce within the meaning of Section 2(6) and (7) of the Act. 2. Sign and Pictorial Painters, Paint Makers and Allied Trades Local 1094, AFL-CIO, affiliated with Painters and Allied Trades of America, the Union, is a labor organiza- tion within the meaning of Section 2(5) of the Act. 3. All production employees employed at the Respon- dent's sign shop located at 1511 Sixth Avenue, Seattle, Washington, excluding all office clerical employees, guards, managers, and supervisors as defined in the Act constitute a unit appropriate for purposes of collective bargaining within the meaning of Section 9(b) of the Act. 4. Since March 5, 1973, the above-named labor organization has been, and is now, the exclusive represent- ative of all employees in the aforesaid bargaining unit for the purposes of collective bargaining within the meaning of Section 9(a) of the Act. 5. By refusing since early April 1973 to bargain in good faith with the Union as the exclusive bargaining represent. ative of the employees in the appropriate bargaining unit; by refusing since July 24, 1973, to meet and bargain with the Union as the exclusive bargaining representative of the employees in the appropriate bargaining unit; by its unilateral actions in changing employment practices and in subcontracting bargaining unit work in a manner different in quantity and kind from that subcontracted previously, all without notification to or bargaining with the Union, and for the purpose of destroying and undermining the Union's representative status ; by its threats to cease operating the bargaining unit made in conjunction with its aforesaid illegally motivated employment and subcontract- ing ppractices; and by unilaterally increasing the wages of the bargaining unit employees on August 26, 1973, prior to bargaining in good faith to an impasse with the Union, Respondent engaged in unfair labor practices in violation of Section 8(axl) and (5) of the Act. 6. By changing its employment practices and subcon- tracting bargaining unit work for the purpose of discourag- ing its bargaining unit's employees from supporting the Union and to undermine the Union's representative status; and by refusing to assign bargaining unit work to employees James Lindstrom and Mark Reeves and laying them off on June 15, 1973, because of its aforesaid illegally motivated employment and subcontracting practices, Respondent engaged in unfair labor practices in violation of Section 8(a)(l) and (3) of the Act. 7. The aforesaid unfair labor practices are unfair labor practices affecting commerce within the meaning of Section 2(6) and (7) of the Act. 8. The Respondent has not otherwise violated the Act. REMEDY Having found that the Respondent has engaged in certain unfair labor practices, I find it necessary to order the Respondent to cease and desist therefrom and to take certain affirmative action designed to effectuate the purposes of the Act. Having found that the Respondent violated Section 8(aX3) and (5) by its unilateral change in employment and subcontracting practices, I shall recommend that Respon- dent return to its former method of operation, and shall recommend that Respondent offer reinstatement and backpay to employees Lindstrom and Reeves , who were denied continued employment because of the Respon- dent's unlawful conduct. But, contrary to the request of the 328 DECISIONS OF NATIONAL LABOR RELATIONS BOARD General Counsel, I shall not recommend backpay "for applicants refused employment or denied consideration for employment" since it is absolutely impossible to identify the particular applicants, in this category, who suffered as the result of the Respondent's unlawful conduct. Having found that the Respondent unlawfully failed and refused to consider for employment and to continue to employ James Lindstrom and Mark Reeves on June 15, 1973, I find it necessary to recommend that the Respon- dent offer them immediate reinstatement to the same positions they would have enjoyed if they had not been discriminated against. I shall also recommend that Res- pondent make Lindstrom and Reeves whole for any loss of earnings suffered as a result of the discrimination practiced against them, with backpay computed on a quarterly basis as prescribed in F. W. Woolworth Company, 90 NLRB 289, from June 15 to the date reinstatement is offered , and shall include interest at the rate of 6 percent per annum as provided for in Isis Plumbing & Heating Co., 138 NLRB 716. In order to insure that the employees in the appropriate unit will be accorded the services of their selected bargaining agent for the period provided by law, I shall recommend that the initial period of certification be construed to begin on the date Respondent commences to bargain in good faith with the Union as the recognized bargaining representative in the appropriate unit . See Mar- Jac Poultry Company, Inc., 136 NLRB 785; Commerce Company d/b/a Lamar Hotel, 140 NLRB 226, 229, enfd. 328 P.2d 600 (C.A. 5, 1964); Burnett Construction Company, 149 NLRB 1419, 1421, enfd. 350 F.2d 57 (C.A. 10, 1965). As the unfair labor practices committed by the Respon- dent are of a character which go to the very heart of the Act, I shall recommend that an order requiring the Respondent to cease and desist therefrom and to cease and desist from infringing in any other manner upon the rights of employees guaranteed by Section 7 of the Act. Upon the foregoing findings of fact, conclusions of law, and the entire record, and pursuant to Section 10(c) of the Act, I hereby issue the following recommended: ORDER 3s Respondent, Pay 'n Save Corporation, Seattle, Washing- ton, its officers, agents, successors, and assigns, shall: 1. Cease and desist from: (a) Refusing to bargain collectively in good faith with Sign and Pictorial Painters, Paint Makers and Allied Trades Local 1094, AFL-CIO, affiliated with Painters and Allied Trades of America, or refusing to meet and bargain with the aforesaid Union as the exclusive bargaining representative of the production employees employed by Respondent at its sign shop in Seattle, Washington, excluding all office clerical employees, guards, managers, and statutory supervisors. (b) Refusing to bargain collectively with the above- 35 In the event no exceptions are filed as provided by Sec . 102.46 of the Rules and Regulations of the National Labor Relations Board , the findings, conclusions, and recommended Order herein shall, as provided in Sec. 102.48 of the Rules and Regulations, be adopted by the Board and become its findings, conclusions, and order, and all objections thereto shall be deemed waived for all purposes. named Union by unilaterally subcontracting work from the aforesaid bargaining unit, or otherwise changing the wages, hours, and other terms and conditions of employ- ment of the employees employed in this bargaining unit without affording the Union an opportunity to bargain and bargaining with the Union to an impasse. (c) Laying off employees, subcontracting work, changing employment practices, or otherwise discriminating against employees in order to discourage employees in the sign shop from joining or supporting the Union or to under- mine the Union as the employees' bargaining representa- tive. (d) Threatening employees to discontinue the sign shop or otherwise threatening them with loss of their jobs because they have supported the Union or to discourage them from supporting the Union. (e) In any other manner interfering with, restraining, or coercing its employees in the exercise of their rights guaranteed in Section 7 of the Act, except to the extent that such rights may be affected by an agreement requiring membership in a labor organization as a condition of employment, as authorized in Section 8(a)(3) of the Act. 2. Take the following affirmative action which is necessary to effectuate the policies of the Act: (a) Upon request, meet and bargain collectively in good faith with the Union with respect to rates of pay, wages, hours of employment, and other terms and conditions of employment of the employees in the above-described appropriate unit and, if an understanding is reached, embody such understanding in a signed agreement. (b) Return to its former mode of operations existing in the appropriate bargaining unit described herein prior to the unilateral change in employment practices and the unilateral increase in the kind and quantity of subcontract- ing. (c) Offer to James Lindstrom and Mark Reeves immedi- ate employment at the same positions at which they would have been employed had they not been discriminated against or, if these positions no longer exist, to substantial- ly equivalent positions, without prejudice to seniority or other rights and privileges, and make them whole for any loss of earnings suffered by reason of our unlawful refusal to continue them in our employ, in the manner set forth in the section herein entitled "Remedy." (d) Preserve and, upon request, make available to the Board or its agents, for examination and copying, all payroll records, social security payment records, timecards, personnel records and reports, and all other records necessary to analyze the amount of backpay due and the rights of reinstatement under the terms of this Order. (e) Post at our headquarters in Seattle, Washington, copies of the attached notice marked "Appendix." 36 Copies of said notice, on forms provided by the Regional Director for Region 19, after being duly signed by the Respondent's representative, shall be posted by Respon- dent immediately upon receipt thereof, and be maintained as In the event that the Board's Order is enforced by a Judgment of a United States Court of Appeals, the words in the notice reading "Posted by Order of the National Labor Relations Board" shall read "Posted Pursuant to a Judgment of the United States Court of Appeals Enforcing an Order of the National Labor Relations Board." PAY 'N SAVE CORP. 329 by it for 60 consecutive days thereafter, in conspicuous places, including all places where notices to employees employed in the bargaining unit are customarily posted. Reasonable steps shall be taken by Respondent to insure that said notices are not altered, defaced, or covered by any other material. (f) Notify the Regional Director for Region 19, in writing, within 20 days from the date of this Order, what steps the Respondent has taken to comply herewith. IT IS ALSO ORDERED that the complaint be dismissed insofar as it alleges violations of the Act not specifically found. APPENDIX NoTICE To EMPLOYEES POSTED BY ORDER OF THE NATIONAL LABOR RELATIONS BOARD An Agency of the United States Government WE WILL NOT refuse to meet or bargain collectively in good faith with Sign and Pictorial Painters, Paint Makers and Allied Trades Local 1094, AFL-CIO, affiliated with Painters and Allied Trades of America, as the exclusive bargaining representative of the production employees employed in our sign shop. WE WILL NOT refuse to bargain collectively with the above-named Union by unilaterally subcontracting work normally performed by our sign shop production employees or by otherwise changing the wages, hours, and other terms and conditions of employment of these employees without bargaining to an impasse in good faith with the above-named Union. WE WILL NOT lay off employees, subcontract work, change our employment practices, or otherwise dis- criminate against employees to discourage our sign shop employees from joining or supporting the above- named Union or to undermine the Union as their bargaining representative. WE WILL NOT threaten employees that the sign shop will be closed or otherwise threaten employees with loss of jobs because they have supported the above-named Union or to discourage them from supporting the Union. WE WILL NOT in any other manner interfere with, restrain, or coerce our employees in the exercise of their rights guaranteed in Section 7 of the Act, except to the extent that such rights may be affected by an agreement requiring membership in a labor organiza- tion as a condition of employment, as authorized in Section 8(aX3) of the Act. WE WILL, upon request, meet and bargain in good faith with the above-named Union with respect to rates of pay, wages, hours of employment, and other terms and conditions of employment of our production employees employed in the sign shop and, if an understanding is reached, embody such understanding in a signed agreement. WE wu.L return to the former mode of operation existing in the sign shop prior to the time we changed our employment practices and increased the kind and quantity of subcontracting. WE wiLL offer to James Lindstrom and Mark Reeves immediate employment at the same positions at which they would have been employed had they not been discriminated against or, if these positions no longer exist, to substantially equivalent positions, without prejudice to seniority or other rights and privileges, and WE WILL make them whole for any loss of earnings suffered by reason of our unlawful refusal to continue them in our employ. Dated By PAY 'N SAVE CORPORATION (Employer) (Representative) (Title) This is an official notice and must not be defaced by anyone. 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. Any questions concerning this notice or compliance with its provisions may be directed to the Board's Office, 10th Floor, Republic Building, 1511 Third Avenue, Seattle, Washington 98101, Telephone 206-442-4532.