Starlite Cutting, Inc.

STARLITE CUTTING Starlite Cutting, Inc. and its alter ego Petal Pink Novelty, Inc.; and Joseph Fornaro and Chil- dren's Dress, Infants' Wear, Housedress and Bathrobe Makers' Union, Local 91, Internation- al Ladies' Garment Workers' Union. Case 2- CA-18563 24 June 1986 SUPPLEMENTAL DECISION AND ORDER BY CHAIRMAN DOTSON AND MEMBERS DENNIS, JOHANSEN, BABSON, AND STEPHENS On 1 December 1982 the National Labor Rela- tions Board issued its decision and Order' in the above-captioned proceeding in which it directed, inter alia, that the Respondents, Starlite Cutting, Inc. and its alter ego Petal Pink Novelty, Inc.; and Joseph Fornaro, an individual, their officers, agents, successors, and assigns, make whole em- ployees Roberto Rubi and Domingo Candelaria, and Children's Dress, Infants' Wear, Housedress and Bathrobe Makers Union, Local 91, Internation- al Ladies' Garment Workers' Union (the Union) for losses resulting from the Respondents' unfair labor practices. On 15 February 1983, the United States Court of Appeals for the Second Circuit en- tered a judgment enforcing the Board's Order. A controversy having arisen over the amount of backpay due under the terms of the Decision and Order, the Regional Director for Region 2 on 31 January 1984 issued a backpay specification and notice of hearing alleging the amount of backpay due and notifying the Respondents that they should file a timely answer complying with the Board's Rules and Regulations. The Respondents failed to file an answer. On 17 February 1984 the General Counsel in- formed the Respondents of the requirement to file an answer and of the General Counsel's intention to file a Motion for Summary Judgment if no answer was received by 1 March 1984. The Re- spondents did not file an answer. On 10 April 1984 the General Counsel filed with the Board a Motion for Summary Judgment. On 18 April 1984 the Board issued an order transferring the proceeding to the Board and a Notice to Show Cause why the General Counsel's motion should not be granted. The Respondents filed no response. On the entire record, the Board makes the fol- lowing 1 265 NLRB 530 (1982) 1071 Ruling on the Motion for Summary Judgment Section 102.54 of the Board' s Rules and Regula- tions provides that if an answer is not filed within 15 days from the service of the specification the Board may find the specification to be true. The Respondents have failed to file an answer to the backpay specification, have not responded to the Notice to Show Cause, and have not offered any explanation for their failure to do so. There- fore, the allegations of the specification stand un- controverted and are deemed to be admitted as true. Accordingly, the Board grants the General Counsel's Motion for Summary Judgment and con- cludes that the net backpay due the discriminatees is as stated in the computations of the backpay specification, and orders the Respondents to pay those amounts to the discriminatees. However, the specification shows that in com- puting the net backpay amount specified above for discriminatee D. Candelaria, no deductions were made for his interim earnings, if any, since he was unavailable to the General Counsel for questioning. Accordingly, we shall order the Respondents to pay this discriminatee's specified net backpay to the Regional Director for Region 2 to be held in escrow for a period not exceeding 1 year from the date of this Supplemental Decision and Order to afford the General Counsel an opportunity to locate and examine Candelaria as to his interim earnings. Should it thereby be determined by the Regional Director that deductions are warranted the amount so deducted shall be returned to the Respondents and the remainder paid to the discri- minatee. In the event that the General Counsel at the end of the 1-year escrow period has failed to locate the discriminatee, we adhere to the rule established by the Eighth Circuit in NLRB v. Brown & Root,2 and hold that the award shall lapse and the full net backpay amount for that discriminatee shall be re- turned to the Respondents.3 We find that this rule of limitation will effectuate the policies of the Act by facilitating the swift and orderly resolution of the Board's backpay proceedings, thereby affording finality and stability to the Board's judgments and 2 311 F.2d 447, 456 (8th Cir. 1963), enfg. 132 NLRB 486 (1961). 8 We therefore overrule Duncan Foundry & Machine Works, 222 NLRB 768 (1976), to the extent the Board there held , without explana- tion or citation to any supporting precedent , that a respondent's backpay obligation would continue without exception indefinitely beyond the 1- year escrow period though the discriminatee could not be found . Insofar as the General Counsel's Casehandling Manual, Sec. 10656.10, similarly conflicts with our ruling we decline to follow it The Casehandlmg Manual provides guidance only and is not a form of authority binding on the General Counsel or the Board 280 NLRB No. 120 1072 DECISIONS OF NATIONAL LABOR RELATIONS BOARD freeing the Board to devote its time and resources to other cases.4 ORDER The National Labor Relations Board orders the Respondents, Starlite Cutting, Inc. and its alter ego Petal Pink Novelty, Inc.; and Joseph Fornaro, an individual, their officers, agents, successors, and as- signs, to make whole each of the employees named below by paying them in the amounts set forth ad- jacent to their names, plus interest computed in the manner prescribed in Florida Steel Corp., 231 NLRB 651 (1977), and accrued to the date of pay- ment, minus tax withholdings required by law: Roberto Rubi $ 1,212.00 Domingo Candelaria 11,740.00 Union Funds 10,963.13 MEMBER DENNIS, dissenting in part. I cannot agree with the majority that, absent "extraordinary" situations, unavailable discrimina- tees shoul forever be precluded from receiving a backpay award should they fail to come forward to collect it during the 1-year escrow period estab- 4 We are not unmindful that this rule may result in the forfeiture of all backpay due a discriminatee under a Board judgment. However, a discn- minatee has no entitlement to backpay The remedy of backpay is a public not a private right and an individual discnmmatee has no property right in an award pending his actual receipt of it State Journal, 238 NLRB 388, 389 (1978). Nor does this rule impose an undue burden on the discn- mmatee. In order to avoid forfeiture the discnminatee need do no more than simply keep the General Counsel apprised of his whereabouts Final- ly, by allowing a full year for the discnminatee to be found the risk of forfeiture actually occurring is slight Nevertheless we recognize that there may arise an extraordinary situa- tion in which a discnmmatee may have compelling reasons to justify the failure to come forward or otherwise make his or her whereabouts known to the General Counsel during the 1-year escrow period Upon the discnminatee's showing by a preponderance of the evidence that there were compelling reasons to justify the failure to come forward during that period, we would find an exception to the rule , and permit the discrimmatee to claim the award Absent such showing, however, a respondent shall not remain obligated to pay the net backpay amount specified for the discnminatee after the end of the 1-year escrow period A reasonable standard of finality is consistent with the maxim that "the law favors repose" of its disputes, and is intended to correct heretofore haphazard and inconsistent practices in the Regions Contrary to the view of our colleagues, statutory provisions providing for the execution of a judgment by a plaintiff who already has come forward and who has won his due are clearly distinguishable Moreover, it is difficult to imag- ine how the equitable doctrine of ]aches, which is a defense to estoppel, properly should be applied in this context where the employee in ques- tion never has come forward to complain, much less to collect his due In this regard, a rule which allows such an individual to present "compel- ling circumstances" is flexible, does not "automatically " extinguish rights, and operates considerably less harshly than say, statutes of limitation, such as our own, 29 U.S.C § 160(b), which oftentimes may work to deny a purported discnrmnatee recovery from the wrongdoer. The rule we adopt today also is consistent with the general practice in class actions under Rule 23, Fed R.Civ P, in which class members have a limited time in which to come forward to claim their share of the recovery so that the limited resources of the judicial system will be preserved, and so that liti- gation, at some reasonable time, will be concluded lished after a Supplemental Decision and Order issues computing the award.' Although I agree it is not unduly burdensome for discriminatees to keep the General Counsel in- formed of their whereabouts, it is nevertheless an unfortunate fact that contested unfair labor practice proceedings may take a substantial number of years to complete.2 As the days stretch into months and the months into years, the prospect of receiving backpay may dim. It is therefore not surprising that some discriminatees fail to keep the General Coun- sel informed despite the pendency of an unfair labor practice case. I also agree that proceedings under the Act must at some point finally close. But absent evidence of an overriding burden on the General Counsel greater than any I can imagine from the present record, which is devoid of evidence on this point, I would not close proceedings as to unavailable dis- criminatees after only 1 year. No State, for exam- ple, precludes executing a money judgment after only 1 year, and only a few do so before 10.3 Nor do Federal remedial statutes, such as the Fair Labor Standards Act, support my colleagues' new policy. That act directs the Secretary of Labor to hold recovered unpaid minimum wage or overtime payments in a special deposit account for 3 years, not 1 year.4 Significantly, unavailable discrimina- 1 The majority incorrectly implies that the Board 's decision in Duncan Foundry & Machine Works, 222 NLRB 768, 770 In 5 (1976), created a surprising new rule by holding that refunding the escrowed funds at the end of the escrow period did not extinguish the respondent 's backpay li- ability In fact, in Brown & Root, 132 NLRB 486 , 497-498 ( 1961), enfd 311 F 2d 447 (8th Cir 1963), the Board stated the General Counsel should "report to the Board" at the end of the 1-year escrow period, it did not say the respondent's liability would be extinguished With the ex- ception of one aberrant case, Plasucrafts. Inc, 248 NLRB 1179, 1181 (1980), and despite the court of appeals contrary rule, 311 F.2d at 456, Brown & Root, has remained Board law until today See, e g , Steve Alm Ford, 190 NLRB 661, 662 (1971), Top Mfg Co, 254 NLRB 976, 976-977 (1981) 2 In Fugazy Continental Corp, 276 NLRB 1334 (1985 ), for example, a case involving unavailable discriminatees, almost 10 years elapsed be- tween the unfair labor practices found and a second Supplemental Deci- sion and Order setting forth backpay due the affected employees That decision is subject to further litigation in a court of appeals itnd the Su- preme Court 3 Most States bar proceedings to execute money judgments only after 10 or 20 years have passed from the date the judgment was entered. Those States include California (10 years), Cal Civ Proc. Code § 337 5 (Deering 1972), Michigan (10 years), Mich State Ann § 27A 5809(3) (Callaghan 1977), and New York (20 years), N Y Civ Proc Law § 211 (McKinney 1972) Fed R Civ P 69(a) provides that money judgments ob- tained in Federal court shall be exectued "in accordance with the prac- tice and procedure of the state in which the district court is held " As I have stated , I do not dispute that proceedings involving unavail- able discriminatees should at some point finally close Accordingly, my position is no less consistent than the majority's with class action practice to the extent that "class members have a limited time in which to come forward to claim their share of the recovery " • 29 U S C § 216 ( 1982) That act also provides that unrecovered sums be turned over to the Federal Treasury after 3 years, not to the employer who unlawfully failed to pay minimum or overtime wages STARLITE CUTTING tees remain discriminatees ; that is, the General Counsel has established that they were victims of unlawful discrimination. My colleagues' new policy, however, will unfairly penalize those discri- minatees who fail to keep the General Counsel in- formed of their whereabouts during protracted liti- gation. The penalty of total backpay forfeiture is out of all proportion to such discriminatees' ne- glect. Even discriminatees who lie about their in- terim earnings are less severely penalized. American Navigation Co., 268 NLRB 426 (1983). A disproportionately harsh penalty for neglectful discriminatees and a windfall for the wrongdoers who discharge them hardly effectuate the policies of the Act.5 Rather, these results are contrary to the fundamental statutory purpose of "making the employees whole for losses suffered on account of an unfair labor practice." Nathanson v. NLRB, 344 U.S. 25, 27 (1952). MEMBER STEPHENS, concurring and dissenting. I concur in the establishment of a 1-year period from the date of a Supplemental Decision and Order for the escrow of backpay amounts for dis- criminatees such as employee Candelaria who cannot be located when the hearing on the back- pay specification is held. NLRB v. Sure-Tan, Inc., 672 F.2d 592, 606 (7th Cir. 1982), revd. on other grounds 467 U.S. 883 (1984). The 1-year period af- fords the Regional Office a reasonable time to search for the discriminatee without delaying the backpay hearing and with assurance that the money will be there to pay the award if the discri- minatees is located. There could be real inequity in depriving a respondent of its funds for a longer period, however; as in the present case, it is often quite possible that the amount may exceed the li- ability that would be fixed once the discriminatee has appeared and submitted to examination regard- ing interim earnings and efforts to mitigate dam- ages. Because circumstances may differ from case to case, however, I would permit the Regional Di- rector to apply to the Board at the end of the escrow period for a 1-year extension of the escrow, 5 That a discriminatee has no private property right to receive a back- pay award does not, as the majority suggests, justify denying the award more readily In State Journal, 238 NLRB 388 (1978), the case on which the majority relies, the Board invoked the principle that backpay awards are public rights, rather than private rights, to require the respondent to pay backpay to a discriminatee although it had already paid it to another person in good faith pursuant to an expired wage assignment . If State Journal suggests anything about the relative importance of private rights and public rights, it suggests public rights are entitled to greater protec- tion, not less At any rate, although the award here will be paid to a pri- vate individual, the Board in the underlying unfair labor practice decision found it would "effectuate the policies of the Act" for the Respondent to pay it 1073 as was permitted in Top Mfg. Co., 254 NLRB 976 (1981). I dissent from the majority's holding that a re- spondent's liability should be deemed extinguished at the end of the escrow period. As Member Dennis points out, this is contrary to well-estab- lished Board precedent with the exception of one aberrant case. Furthermore, the majority opinion gives an ironic twist to the precedent on which it relies for the proposition that backpay is a public and not a purely private right. In the cited case' the Board stated that proposition in rejecting a contention that the backpay obligation could be re- garded as extinguished with less than payment of the full amount to the discriminatee. The Board there emphasized both "the public interest in deter- ring unfair labor practices" and the public interest in fashioning a remedy "to make whole an employ- ee for loss of pay suffered by reason of discrimina- tion." State Journal, supra, 238 NLRB 388, 389. It is hard to see how either is served by extinguishing a respondent's liability after the 1-year escrow period. To be sure, the interests of stability, finality, and efficient allocation of agency resources must be given some weight. But even the majority con- cedes that there may be circumstances when those interests are overcome by the interests of a late-ap- pearing discriminatee in securing the award that remedies the discrimination against him. Thus it holds that a discriminatee appearing after the escrow period may claim the award upon a show- ing of "compelling reasons" for having failed to come forward during the escrow period. Consider- ing that the respondent is the wrongdoer and the discriminatee the victim of the wrong, I would re- verse the burden of proof. I would not provide for any automatic extinction of liability, but rather would leave it open to a respondent to raise a de- fense of laches, in which it could show that its abil- ity to examine the discriminatee on the subject of interim earnings and mitigation has been prejudiced and that extinction of backpay liability or reduction of the amount owed is warranted.2 I agree with- I State Journal, 238 NLRB 388, 389 (1978) (rejecting the respondent's contention that it had satisfied backpay liability by paying the amount in question to the discnmmatee's former wife under a revoked wage assign- ment), citing Teamsters Local 705 (Randolph Paper Co.), 227 NLRB 694 (1977) (because the backpay remedy is a public rignt, the respondent may not reduce its obligation through a setoff of dues allegedly owed it by the discnmmatee) 2 I am not persuaded to abandon this view by the class action analogy cited by the majority. When there is a limited fund to be divided up among claimants, it is obviously necessary to establish a fixed date for registering claims A respondent's assets are not such a fund, however, and payments to discriminatees who have been located need not wait a determination whether other discriminatees may be found 1074 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Member Dennis that cases in which a discrimina- not appear likely to impose any substantial cost on tion comes forward after the escrow period are Agency resources. likely to be rare, so this flexible procedure would