Michigan Ladder Co.

MICHIGAN LADDER CO. Michigan Ladder Company and International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, and its Local Union No. 769. Case 7-CA-24918 30 September 1987 DECISION AND ORDER BY MEMBERS JOHANSEN, BABSON, AND STEPHENS On 18 September 1986 Administrative Law Judge Marion C . Ladwig issued the attached deci- sion . The Respondent filed exceptions and a sup- porting brief, and requested oral argument.' The General Counsel filed cross-exceptions and a brief in support of the cross -exceptions and in answer to the Respondent's exceptions ; the Charging Party filed a brief in support of the judge 's decision and in reply to the Respondent's exceptions; and the Respondent submitted a letter in response to the General Counsel's cross-exceptions. The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has considered the decision and the record in light of the exceptions , cross-exceptions, and briefs and has decided to affirm the judge's rul- ings, findings,2 and conclusions only to the extent consistent with this Decision and Order and to adopt the recommended Order as modified. 1. The judge found that the Respondent violated Section 8(a)(5) and (1) of the Act by contracting out bargaining unit work without affording the Union a meaningful opportunity to bargain over the decision. This conclusion was based on the judge's finding that , under the circumstances of the case, the decision to contract out work normally performed by bargaining unit employees was a mandatory subject of bargaining under Otis Eleva- tor, 269 NLRB 891 (1984). The judge further found that the Union did not waive its right to bargain. The judge considered the question of the Union's waiver of its right to bargain under both the facts as recounted by the Respondent's witnesses and the facts as recounted by the General Counsel's wit- nesses, whom he credited . He found that, under either version, the Respondent presented the con- tracting out scheme to the Union as a fait accom- i The Respondent has requested oral argument The request is denied as the record, exceptions, and briefs adequately present the issues and the positions of the parties 2 The Respondent has excepted to some of the judge's credibility find- ings The Board's established policy is not to overrule an administrative law judge's credibility resolutions unless the clear preponderance of all the relevant evidence convinces us that they are incoi rect Standard Dry Wall Products, 91 NLRB 544 (1950), enfd 188 F 2d 362 (3d Cir 1951) We have carefully examined the record and find no basis for reversing the findings 21 pli, so that the Union was not afforded any mean- ingful opportunity to bargain over the decision. We agree with the judge's findings and conclusions. First, we agree that under the circumstances of this case the decision to contract out unit work was a mandatory subject of bargaining under Otis Eleva- tor.3 Second, we agree that under either account of the Respondent's disclosure to the Union of • the proposal to contract out the unit work , the Re- spondent presented nothing more than a fait ac- compli to the Union, and therefore the Union did not waive its right to bargain over the decision.4 2. The judge also concluded that the strike by the Respondent's bargaining unit employees that began on 8 May 1985 was an unfair labor practice strike. He based this conclusion on his finding that the strike was caused by the Respondent's "sham bargaining" over the subcontracting issue in its meetings with the Union on 26 and 29 March 1985 and its contract negotiations up to the time of the strike on 8 May. In the judges's view, the Re- spondent from 26 March through 8 May continued to engage in sham bargaining on the issue of con- tracting out by "treating the unilateral subcontract- ing as a fait accompli , with no intention of bargain- ing in good faith on the issue ." We agree that the strike was an unfair labor practice strike from its inception, but in so concluding we do not rely on the judge's characterization of the Respondent's ne- gotiating position as sham bargaining . Instead, we find that the strike arose in reaction to the Re- spondent's unilateral decision to subcontract unit work, presented to the Union as a fait accompli on 26 March . In this regard , it is settled Board law that "the correct standard in determining whether a strike is an unfair labor practice strike is whether it is one which is caused `in whole or in part' by an unfair labor practice." Citizens National Bank of Willmar, 245 NLRB 389, 391 (1979) (footnote 8 We agree with the judge's conclusion that the Respondent was obli- gated to bargain with the Union over its decision to contract out work performed by bargaining unit employees In doing so , we find that the judge's conclusion is consistent with the Supreme Court's opinion in First National Maintenance Corp. v NLRB, 452 U S 666 (1981), and with any of the views expressed in Otis Elevator, supra Further, we find it unnec- essary to pass on the Board's decision in Garwood-Detroit Trucking Equip- ment, 274 NLRB 113 ( 1985), because we agree with the judge that that case is factually distinguishable from the present case 4 Members Stephens and Johansen note that, in agreeing that the Re- spondent did not afford the Union a reasonable opportunity for bargain- ing, they are not faulting the Respondent simply for having worked out a detailed plan for the subcontracting in advance See Owens-Corning Fiber- glas Corp, 282 NLRB 609 (1987) However, where, as here, an employer conceals and misrepresents details of an arrangement already worked out with the subcontractor when it presents the plan to the bargaining repre- sentative and when the employer agrees with the subcontractor to put the arrangement into effect at a time when the bargaining representative is still in the dark about what is happening , they cannot find that the em- ployer has afforded the bargaining representative the opportunity for ne- gotiations that is its due under the Act 286 NLRB No. 4 22 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD omitted); see also Tufts Bros., Inc., 235 NLRB 808 (1978). The record reflects that the Union contin- ued to object vigorously to the decision to subcon- tract throughout the negotiation meetings that took place between 26 March and the strike, and we find that these continued objections to the Re- spondent's unfair labor practices warrant the con- clusion that a cause of the strike was the Respond- ent's unlawful unilateral action in contracting out the work without affording the Union a meaningful opportunity to bargain over the decision. 3. The judge did not pass on the allegation in the complaint that the Respondent violated Section 8(a)(5) and (1) by failing to afford the Union a meaningful opportunity to bargain over the effects on the unit employees of the decision to contract out unit work. The General Counsel has excepted. We find no merit in the General Counsel's excep- tion. Unlike the issue of bargaining over the deci- sion itself, the record contains no evidence that the Union was presented with a fait accompli concern- ing the effects of the decision. The record contains no evidence that the Respondent had made unilat- eral decisions regarding the fate of the unit em- ployees by 26 March. Indeed, at the time of the hearing the Respondent had not laid off the em- ployees whose duties were contracted out. Al- though the record reflects that the subject of the decision to contract out unit work was raised re- peatedly at meetings between the Union and the Respondent, it reflects no occasion on which the Union requested that the Respondent bargain with it over the effects of the decision on the unit em- ployees. Therefore, in the absence of any evidence that the Union sought bargaining over the effects of the decision, we find that the Union waived its right to bargain over this subject. See, e.g., Haw- thorn Mellody, Inc., 275 NLRB 339, 342 (1985). 4. The General Counsel has also excepted to the judge's failure to grant a make-whole remedy. Be- cause such a make-whole remedy is appropriate in this case, we will modify the recommended Order accordingly. See, e.g., University Health Care Center, 274 NLRB 764 (1985), enfd. sub nom. Nur- minco, Inc. v. NLRB, 786 F.2d 1170 (8th Cir. 1986). Thus, we shall order that the Respondent fully re- store the status quo at the time of its unlawful re- fusal to bargain. The Respondent will be ordered to offer employees laid off, terminated, or other- wise denied work opportunities as a result of its unilateral contracting out of unit work immediate and full reinstatement to their former positions or, if those positions no longer exist, to substantially equivalent positions, without prejudice to their se- niority or other rights and privileges. We shall also order the Respondent to make whole those em- ployees who were laid off, terminated, or other- wise denied work opportunities for any losses of earnings as a result of the Respondent's unilateral contracting out of unit work. Backpay shall be computed as in F. W. Woolworth Co., 90 NLRB 289 (1950), or as in Ogle Protection Service, 183 NLRB 682 (1970), as appropriate, with interest to be com- puted in the manner prescribed in New Horizons for the Retarded.5 ORDER The National Labor Relations Board adopts the recommended Order of the administrative law judge as modified and set forth in full below and orders that the Respondent, Michigan Ladder Company, Ypsilanti, Michigan, its officers, agents, successors, and assigns, shall 1. Cease and desist from (a) Contracting out bargaining unit work without good-faith bargaining with International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, and its Local Union No. 769. (b) In any like or related manner interfering with, restraining, or coercing employees in the ex- ercise of the rights guaranteed them by Section 7 of the Act. 2. Take the following affirmative action neces- sary to effectuate the policies of the Act. (a) Immediately cancel its 1 April 1985 "subcon- tracting" agreement with Custom Woodcrafters, Inc. and resume the production and maintenance work in the plant with bargaining unit employees. (b) On their unconditional application for rein- statement, offer the striking employees immediate and full reinstatement to their former positions or, if those positions no longer exist, to substantially equivalent positions, without prejudice to their se- niority or any other rights or privileges, dismissing, if necessary, any replacements, and make them whole for any loss of earnings they may have suf- fered as a result of the Respondent's failure to rein- state them on application, by payment to them of a sum of money equal to that which each would have earned as wages from 5 days after the date of their unconditional application to return to work, S In accordance with our decision in New Horizons for the Retarded, 283 NLRB 1173 (1987), interest on and after 1 January 1987 shall be computed at the "short-term Federal rate" for the underpayment of taxes as set out in the 1986 amendment to 26 US C § 6621 Interest on amounts accrued prior to 1 January 1987 (the effective date of the 1986 amendment to 26 U S C § 6621) shall be computed in accordance with Florida Steel Corp, 231 NLRB 651 (1977) The judge included a visitatorial clause in his recommended Order au- thorizing the Board , for compliance purposes, to obtain discovery from the Respondent under the supervision of the United States Court of Ap- peals enforcing the Board's Order Under the circumstances of this case we find it unnecessary to include such a clause MICHIGAN LADDER CO. to the date of the Respondent's offer of reinstate- ment, less their net earnings during such period, with backpay and interest thereon to be computed in the manner prescribed by the Board in F. W. Woolworth Co., 90 NLRB 289 (1950), and New Ho- rizons for the Retarded, 283 NLRB 1173 (1987)." (c) On request, bargain with the Union as the ex- clusive bargaining representative of the employees in the following appropriate unit concerning terms and conditions of employment and, if an under- standing is reached, embody the understanding in a signed agreement: All full-time and regular part-time employees of Michigan Ladder Company, but excluding all confidential salaried employees and all guards and supervisors as defined by the Act. (d) Offer all employees laid off, terminated, or otherwise denied work opportunities as a result of the unlawful contracting out of bargaining unit work immediate and full reinstatement to their former positions or, if such positions no longer exist, to substantially equivalent positions without prejudice to their seniority or other rights and privileges. (e) Make whole all employees who were laid off, terminated, or otherwise denied work opportunities for any loss of earnings as a result of the unlawful contracting out of unit work., in the manner set forth in this decision. (f) Preserve and, on request, make available to the Board or its agents for examination and copy- ing, all payroll records, social security payment records, timecards, personnel records and reports, and all other records necessary to analyze the amount of backpay due under the terms of this Order. (g) Post at its facility in Ypsilanti, Michigan, copies of the attached notice marked "Appendix."6 Copies of the notice, on forms provided by the Re- gional Director for Region 7, after being signed by the Respondent's authorized representative, shall be posted by the Respondent immediately upon re- ceipt and maintained for 60 consecutive days in conspicuous places including all places where no- tices to employees are customarily posted. Reason- able steps shall be taken by the Respondent to ensure that the notices are not altered, defaced, or covered by any other material. (h) Notify the Regional Director in writing within 20 days from the date of this Order what steps the Respondent has taken to comply. APPENDIX NOTICE To EMPLOYEES POSTED BY ORDER OF THE NATIONAL LABOR RELATIONS BOARD An Agency of the United States Government 23 The National Labor Relations Board has found that we violated the National Labor Relations Act and has ordered us to post and abide by this notice. WE WILL NOT contract out bargaining unit work without good-faith bargaining with International Union, United Automobile, Aerospace and Agri- cultural Implement Workers of America, and its Local Union No. 769. WE WILL NOT in any like or related manner interfere with, restrain, or coerce you in the exer- cise of the rights guaranteed you by Section 7 of the Act. WE WILL immediately cancel our subcontracting agreement with Custom Woodcrafts, Inc. and resume the production and maintenance work in the plant with our bargaining unit employees. WE WILL, on their unconditional application, re- instate the striking employees to their former jobs, without prejudice to their seniority or any other rights or privileges, dismissing if necessary persons hired on or after 8 May 1985, and give them back- pay with interest if not timely reinstated. WE WILL offer all employees laid off, terminat- ed, or otherwise denied work opportunities as a result of the unlawful contracting out of bargaining unit work immediate and full reinstatement to their former positions or, if they are not available, to substantially equivalent ones, without prejudice to their seniority or other rights and privileges. WE WILL make whole all employees who were laid off, terminated, or otherwise denied work op- portunities as a result of our unlawful contracting out of unit work. WE WILL, on request, bargain with the Union and put in writing and sign any agreement reached on terms and conditions of employment for our employees in the following bargaining unit: All full-time and regular part-time employees of Michigan Ladder Company, but excluding all confidential salaried employees and all guards and supervisors as defined in the Act. MICHIGAN LADDER COMPANY 6 If this Order is enforced by a judgment of a United States court of appeals, the words in the notice reading "Posted by Order of the Nation- al 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 " Dennis R. Boren, Esq., for the General Counsel. John L. Cerretani and Karl D. Johnston, Esqs., of Troy, Michigan, for the Respondent. Edward J. Plawecki Jr., Esq., of Detroit, Michigan, for the Charging Party. 24 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD DECISION STATEMENT OF THE CASE MARION C. LADWIG, Administrative Law Judge. This case was tried at Detroit, Michigan, on 28-29 April 1986. The charge was filed by the Union 23 August 19851 and the complaint was issued 31 October. The Company manufactured wooden ladders and table tennis tables. Under its collective-bargaining agreement with the Union, its average labor cost (wages and bene- fits) was $11.08 an hour. For several weeks, without any notice to the Union, the Company negotiated for a non- union subcontractor to perform most of the production work in the plant, based on a labor factor of $7.50 an hour for the ladder production and $6.48 for the table production. The primary issues are (a) whether the Company, the Respondent, permanently subcontracted (or contracted out) bargaining unit work without affording the Union a meaningful opportunity to bargain in violation of Section 8(a)(5) and (1) of the National Labor Relations Act and (b), if so, whether an appropriate remedy should include restoring the work to the bargaining unit employees and reinstating unfair labor practice strikers. On the entire record,2 including my observation of the demeanor of the witnesses, and after considering the briefs filed by the General Counsel, the Company, and the Union, I make the following FINDINGS OF FACT I. JURISDICTION The Company, a Michigan corporation, manufactures ladders at its facility in Ypsilanti, Michigan, where it an- nually ships goods valued over $50,000 directly outside the State. The Company admits and I find that it is an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act and that the Union (the International and Local 769) is a labor organization within the meaning of Section 2(5) of the Act. II. ALLEGED UNFAIR LABOR PRACTICES A. Subcontracting of Production Work 1. Efforts to cut labor costs In the 1982 negotiation the Union agreed to a freeze in wage rates and benefits in its 3-year collective-bargaining agreement expiring 30 April 1985 (G.C. Exh. 2, Tr. 22). In the 1985 negotiations, which began 26 March, the Company sought a wage cut (Tr. 342). It took the posi- tion that although its business was profitable (Tr. 140), its wages were still "high for our industry" and "non-com- petitive with our competitors" (R. Exh. 1). It pointed out that many of its competitors are nonunion and that a 1984 wage survey (G.C. Exh. 10) showed that the aver- age wage rate in the wooden ladder industry was $6.26 ' All dates are in 1985 unless otherwise indicated 2 The General Counsel's unopposed motion to correct the transcript, dated 27 June 1986, is granted and received in evidence as G.C. Exh 14. as compared to the Company's average hourly rate of $8.36, $2.10 an hour more (Tr. 144-145). Meanwhile, without any notice to the Union, the Company was making plans to subcontract the produc- tion of its table tennis tables and most of the production of its wooden ladders, to be done in the plant with non- union employees at lower labor costs. 2. Secret arrangements to cut production labor costs In the late summer of 1984, Company President Robert Nissly orally leased some of the excess factory space to Roy Gourley, president of Custom Wood- crafters, Inc. (Woodcrafters), a small nonunion firm em- ploying about three or four employees (Tr. 91, 299) to do custom woodwork. Nissly leased Gourley 2091 square feet for an annual rent of $7440, which amounted to $620 a month or $20.38 a day. Four and one-half months later on 31 January they signed a written lease incorporating these terms (G.C. Exh. 5), effective from 16 September 1984 until 15 September 1985. Presumably on this date, 31 January (Gourley recalled it occurring in late January (Tr. 287)), Gourley proposed to Company President Nissly that Woodcrafters take over the production of the table tennis tables at the Company's plant. This would give Woodcrafters' em- ployees greater access to the Company's spray painting area (which they had been using in furniture finishing when the Company was not using it to paint tables) and enable Woodcrafters to use the table assembly area for producing additional products "without great additional cost" (Tr. 286-288). About a week or two later, after President Nissly checked on the "ramifications" of the Company's sub- contracting this production work, Nissly (in Gourley's words) "got back with me" and asked "would I be inter- ested in the hill operation" (Tr. 288). Nissly was refer- ring to leasing the mill room and other areas where the rough lumber is graded, run through a rip saw and molder, and made into ladder legs, tops, shelves, etc., ready for the Company to inspect, machine, and assem- ble into ladders (Tr. 78-79, 106, 114-115; G.C. Exh. 4, par. 3, p. 4). Nissly admitted that although it was Gour- ley who proposed that Woodcrafters take over the pro- duction, assembly, and cartoning of the tables (Tr. 113), Nissly himself proposed-after consulting with legal counsel (Gilbert Cox)-that Woodcrafters also take over this additional area and equipment and furnish the Com- pany with "whatever products that we needed for the ladder company's operation." Nissly admitted that "This was something that really had not occurred" to Gourly. (Tr. 114-115.) Over the next several weeks-without any notice to the Union-Nissly, his legal counsel (Cox or a member of his law firm (Tr. 118)), and Gourley worked out the details of the subcontracting arrangement. As Gourley credibly testified, Nissly "gave me a list of parts they needed" and "I did the cost analysis on it and projected what I felt we would be able to do" (Tr. 290.) As pro- vided in the subcontracting agreement drafted by the counsel (G.C. Exh. 13, par. 3, p. 7), the price of the ladder parts and the table tennis tables that Woodcrafters MICHIGAN LADDER CO would produce in the plant for the Company (using the Company's equipment and Woodcrafters' nonunion em- ployees) would "be the combination of the material cost and Subcontractor's labor factor." The materials would be priced at cost, with any sav- ings divided equally between the Company and Wood- crafters (G.C. Exh. 13, par 3, p. 2). Nissly and Gourly further agreed that Woodcrafters' labor factor would be figured at $7.50 an hour on the ladder work and $6.48 on the table work. These figures were sharply lower than the Company's average labor cost of $11.08 an hour ($8.36 in wages and $2 72 in benefits (Tr. 144, 318). Thus the Company was arranging to reduce the labor costs in producing wooden ladder parts at $3.58 an hour and tables at $4.60 an hour. The labor and material costs are shown on a nine-page tabulation of ladder parts and a one-page tabulation of tables and parts, attached to schedule A of the executed subcontracting agreement (G.C. Exh. 4) An example (p. 7) shows the listing of a ladder leg, located at "210," identified as product "C LPT 014170," described as "1- 1/16 x 2-3/4 x 24FT HEM FIP" (a 24-ft. hemlock or fir ladder leg), 1.640 "Labor Stm." (1.64 minuses of standard time in minutes of labor), a "Labor Unit Cost" of .205 ($.205 or 20.5 cents), a "Mat'! Unit Cost" of 17.901 ($17.90 in material cost for the ladder leg), with blanks to be filled in for "Total Labor," "Total Mat'l," and "Units Shipped." Thus, if 10 of the 24-foot ladder legs were produced by Woodcrafters in the plant for the Company to inspect, machine, and assemble, the blanks would be filled in $2.05 for "Total Labor," $171.01 for "Total Mat'l," and 10 for the "Units Shipped." The amount of Woodcrafters' hourly "labor factor" is re- vealed by dividing the unit labor cost of 20.5 cents by the 1.64 minutes calculated for producing the ladder leg, arriving at 12.5 cents a minute, $7.50 an hour. The labor unit cost of each of the 200 ladder parts listed on the nine pages is computed to the nearest fraction of a cent when multiplying 12.5 cents times the standard number of minutes expended in performing the production work. The labor factor for all the table tennis tables and table parts is figured at $6.48 an hour, or 10.8 cents a minute (to the nearest fraction of a cent in labor unit cost). An example is the first table listed (p. 10), showing 110 min- utes at 10.8 cents a minute equaling $11.88, the amount written in as the "Labor Unit Cost." The "Mat'l Unit Cost" is $71.42, the amount that is typed in 3. Plans to implement subcontracting During the weeks of secret discussions (between 31 January and 26 March, when the Company first in- formed the Union of its plans), Company President Nissly and Woodcrafters President Gourley negotiated various details to implement the subcontracting. They agreed that Woodcrafters would employ John Osborn, the Company's skilled maintenance man, for Wood- crafters to perform the Company's machine maintenance at an undisclosed flat rate. (Osborn was already doing some work for Gourley (Tr 296). The Company had only a limited amount of machinist work for Osborn to do, and he was seeking more skilled work and higher income. Instead of keeping him on the company payroll 25 and letting him use the machine shop equipment to per- form skilled work for outsiders, Nissly agreed to lease the machine shop and its tools and equipment to Wood- crafters. Nissly and Gourley agreed in the subcontracting agreement (p. 5) that the Company "shall utilize Subcon- tractor's maintenance employee for not less than 60 hours a month, payable on a monthly basis, at an agreed upon hourly rate." They solved the problem of furnish- ing Osborn more skilled work and increasing his income by including in the 1 April lease addendum (G.C. Exh. 6) a provision that Woodcrafters "will pay lessor a utility charge of $2 a man hour for all outside machine shop work performed." This provision was authorization for Woodcrafters to permit Osborn to increase his income by using the machine shop equipment to do skilled work for outsiders. Around 18 March (8 days before the Com- pany first mentioned anything to the Union about the subcontracting) Gourley talked to Osborn and asked if he would "be interested in this sort of thing" (Tr. 296). Meanwhile Richard Wheeler, the Company's skilled molder operator who quit the previous September, had been laid off from an interim job and was "actively look- ing for employment" (Tr. 291). During the slow winter season Plant Superintendent David Korzik had been set- ting up the molder, but now this setup work and oper- ation of the mill room were taking too much time from Korzik's supervision and other duties in the plant as the busy spring season approached (Tr 116, 124). (Nissly had been unsuccessful in finding a replacement for Wheeler (Tr. 116); wood molder operators "are very dif- ficult to find in this area" (Tr. 293).) Nissly did not take advantage of this opportunity to rehire Wheeler to set up the molder and to lead or supervise the mill area. In- stead, about 15 March (Tr. 296) Gourley talked to Wheeler about being employed by Woodcrafters as molder operator and foreman of the area. Because the Company was not rehiring Wheeler and keeping him em- ployed between then and the proposed 1 April date for the subcontracting to begin, Wheeler remained unem- ployed during that 2-week waiting period. As Gourley credibly testified, "I was concerned that . . I might lose him to some other manufacturing place" (Tr. 291); "I was getting very anxious from the standpoint that the key person in this entire operation was a molder opera- tor" (Tr. 293). "We had set up a date, I had suggested an April 1 date . . and I told [Nissly that] time was of the essence and I wanted to get rolling on this" (Tr. 294). Gourley was also seeking other employees to perform the subcontracted work (Tr. 291) and "started laying the groundwork to find people . . . through the University of Eastern Michigan . . to work on a part-time basis or otherwise" (Tr. 297). The only company employees he contacted, besides Osborn, were the graders. He talked to them 27 or 28 March (following the Company's 26 March notice to the Union about the subcontracting). (Tr. 296-297.) Gourley revealed Nissly's assurances to him that Nissly would subcontract the work and lease the addi- tional plant space and the equipment to him. He had a backlog of products to be painted, and he was waiting until 1 April instead of using the spray painting area in 26 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD the evenings and on the weekends to finish them, as he had done previously (Tr. 112). He was also considering producing hardwood-type moldings in the mill room and testified that "if we were going to go [into] the housing market, it would be booming in the spring and I could see that if we dillydallied with this thing into May, that I wouldn't be able to put moldings out until July or August" (Tr 291-292). Building Equipment Total Area 1-Table production $1,325 $400 $1,725 Area 2-Ladder production 1,420 3,000 4,420 Area 3-Machine shop 175 300 475 $6,620 4. Terms of the subcontracting and leasing On 25 March (the day before the first notice to the Union) a member of Cox's law firm presented a complet- ed draft of the subcontracting agreement, with a 1 April effective date (G.C. Exh. 13). Company President Nissly, the legal counsel, and Woodcrafters President Gourley met, discussed the draft, and agreed to make certain changes (Tr. 118-119, 122). The only significant changes (Tr. 153-154) were the following: (1) To provide that the Company shall "be responsible for inspecting" both the raw materials used by Woodcrafters and all the prod- ucts manufactured by Woodcrafters for quality (pars. 2 & 3, p. 4). (2) To add a product liability provision ("Contractor agrees to defend Subcontractor in any claims filed against Subcontractor as a result of alleged defects in the products produced" (par. 5, p. 4). (3) To delete a damages provision ("Contractor retains the right to recover from Subcontractor for replacement costs and profits . . . as a result of any breach . . . of this Agree- ment") (par. 2, p. 5). The agreement was for a term of 5 years, with one possible reopening (p 6). Among many provisions, the subcontracting agree- ment provides (par. 4, p. 2) that Woodcrafters has the right "to establish and direct the method of production of the products"-but only on condition that the "prod- ucts are at least equal in quality to the products previ- ously manufactured" by the Company. Then the agree- ment in effect requires the Company to oversee and retain responsibility for the production, as shown above, by (a) requiring the Company to inspect both the raw materials used and all products manufactured by Wood- crafters in the plant, (b) holding the Company financially responsible for any product liabilities resulting from "al- leged defects in the products produced" by Wood- crafters, and (c) omitting any contractual right for the Company to recover damages from Woodcrafters for breach of contract. The subcontracting agreement refers to a 1 April lease addendum (G.C. Exh. 6), which provides for the leasing of three additional plant areas, including the equipment, machinery, and tools. The addendum recites that area 1 contains 2449 square feet for "the manufacture of table tennis tables," that area 2 contains 3,789 square feet for use in "the milling & grading of parts," and that area 3 contains 544 square feet for use in "the maintenance and repair" of the leased assets. The addendum provides that: Additional monthly rent for these areas is as fol- lows: It further provides that: The landlord shall pay to the tenant a monthly contract fee [emphasis added] as follows: For table tennis table assembly $1,850.00 For wood parts, milling, grading, & 7,450.00 cutting For maintenance services 500.00 $9,800.00 Thus, the addendum to the lease provides that the Com- pany (the landlord) shall pay Woodcrafters (the tenant) a "monthly contract fee" that completely offsets the amount of the rent, plus $3180-which presumably is Woodcrafters' overhead and profit for performing the subcontracting work with nonunion employees. Neither the subcontracting agreement nor the lease ad- dendum specifically provides whether the Company or Woodcrafters has the responsibility for maintaining the leased production equipment. I note, however , that Com- pany President Nissly testified (Tr. 135) that before 1 April the Company had only about 15 hours a week of machine maintenance for Osborn to do and the subcon- tracting agreement provides that the Company "shall uti- lize Subcontractor's maintenance employee [Osborn] for not less than 60 hours a month at an agreed hourly rate." The agreement also provides (G.C. Exh. 4, par. 1, p. 5) that the Company retains the right to use Osborn's serv- ices "when and as required" and that all his work on the Company's behalf "must be authorized" by a company supervisor. I infer that the Company retains the responsi- bility for maintaining the leased equipment. Otherwise Nissly undoubtedly would not have obligated the Com- pany to pay for a minimum of 60 hours a month of Os- born's work after most of the production equipment was leased. The subcontracting agreement does not leave to Woodcrafters' discretion how and when the leased pro- duction equipment is maintained By providing in the agreement that this maintenance work "must be author- ized" by a company supervisor, the Company has re- tained further control over both the production and maintenance. 5. Oral agreement after union protests On 26 March, after the Union presented its proposals for a renewed collective-bargaining agreement, the Com- pany notified the Union about the subcontracting plans, as discussed later. The Union vigorously protested at that meeting and again at a meeting on Friday, 29 March. Later that Friday afternoon Nissly and Gourley met and, with a handshake, orally agreed to proceed MICHIGAN LADDER CO. with the subcontracting under the terms of the previous- ly negotiated subcontracting agreement. Nissly admitted at the trial that he and Gourley "had agreed at our meet- ing earlier that week [on 25 March with the legal coun- sel] to modify the original draft, which was being done." (Tr. 122, 293.) The written agreement, effective 1 April, was signed 17 April after the agreed modifications were made and after the 10-page puce list was completed and attached (Tr. 125). 6. Replacement of bargaining unit employees At 7 a.m., 1 April, eight of the nine company employ- ees on the subcontracted production work were removed from their jobs and replaced with woodcrafters' employ- ees (Tr. 13, 90, 124). The ninth production employee, grader Scott Bruno, as well as maintenance man Osborn, was transferred to the Woodcrafters payroll. The Com- pany reassigned the eight replaced bargaining unit em- ployees to work-with the approximately six remaining unit employees-on other jobs and continued them on the Company payroll, at the same rates of pay, until the 8 May strike (Tr. 98, 125, 366-367). The Union was still on strike over a year later at the time of trial. Woodcrafters' labor costs on the subcontracted pro- duction work were much lower than 1 he Company's labor costs. The actual wages that Woodcrafters paid the production employees demonstrate how Company Presi- dent Nissly and Woodcrafter President Gourley had been able to agree on a labor factor of $7.50 an hour for the ladder production and $6.48 for the table production. On the ladder production, the Company had paid four graders $ 11.40 an hour (8.68 in wages and $2 .72 in bene- fits), one stockhandler (now called a sorter) $11.10 ($8.38 and $2.72), and two molder operators (Wheeler and Henry Harris) $11.19 ($8.47 and $2.72) (Tr. 316-318), to- taling $79.08 an hour for the work of seven employees and averaging $11.30 an hour. Woodcraft ers (which ad- mittedly provided no benefits (Tr. 313)) paid one grader (Bruno) $ 11 an hour, three graders $4.50, one starter $4.50, one molder-foreman (Wheeler) $15, and one molder operator $4.50 (Tr. 309-310, 315-316), totaling $48.50 an hour ($30.58 below the Company's total hourly labor costs) and averaging $6.93 an hour ($4.37 below the Company's average hourly labor cost). This amount- ed to a reduction in labor costs of nearly 39 percent. On the table production, the Company had paid one painter $11 . 16 an hour (8.44 in wages and $2 .72 in bene- fits) and one operator $11.09 ($8.37 and $2.72) (Tr. 317- 318), totaling $22.25 an hour for the work of the two employees and averaging nearly $11.13 an hour. Wood- crafters paid one group leader $5 an hour and two help- ers $4.50 (Tr. 311), totaling $14 an hour ($8.25 below the Company's total hourly labor costs) and a veraging $4.67 an hour ($6.46 below the Company's average hourly labor costs). This amounted to a reduction in total costs of 37 percent. For the ladder and table production com- bined, the reduction in labor costs amounted to 38 per- cent. Thus, Woodcrafters' actual average hourly labor cost of $6.93 for producing the subcontracted ladder parts was 57 cents below the contractual $7.50 labor factor on which the price of the ladder parts was based in the 27 price list attached to the subcontracting agreement, and the actual average hourly labor cost of $4.67 for produc- ing the tables was $1.81 below the $6.48 labor factor. Be- cause the Company paid Woodcrafters an hourly rate for Osborn's maintenance of the leased production equip- ment, I infer that none of the cost of machine mainte- nance was included in Woodcrafters' labor factor. The Company had paid Osborn $13.64 an hour ($10.92 in wages and $2.72 in benefits) (Tr. 317). Woodcrafters paid him $15 an hour (Tr. 312). I note that if the $38.83 reduction in the total hourly labor costs (30.58 in the production of the ladder parts and $8.25 in the production of the tables) is figured on an annual basis for 2080 hours (40 hours times 52 weeks), the reduction would amount to $80,776.40 a year. This is nearly 11 times the $7440 in annual rent that Wood- crafters was paying before the Company subcontracted the production work. B. The Company's Defenses 1. That it had no obligation to bargain a. In order not to reduce wages The complaint alleges that the Company permanently subcontracted the work unilaterally without affording the Union a meaningful opportunity to bargain over the decision. The Company's first defense is that it "had no duty to negotiate regarding the decision to permanently subcontract bargaining unit work" (company brief at 27). Citing Otis Elevator Co., 269 NLRB 891 (1984), the Company states in its brief (at 33) that it is necessary to determine whether the Company's decision to subcon- tract certain (production and maintenance) work affected "the scope, direction, or nature of the business" or "whether the decision turned upon a reduction in labor costs." The Company's brief overlooks, or ignores, (1) the amount of Woodcrafters' labor factor, (2) the 38-percent actual reduction in production labor costs, and (3) the $9000 "monthly contract fee" the Company pays Wood- crafters to do the work with the low nonunion labor costs. Relying primarily on President Nissly's fabricated testimony, the Company contends in its brief (at 35) that "the subcontracting decision was not entered into to reduce labor costs." It further contends (at 36) that "the Company's desire to become more competitive in terms of its manufacturing of ladders did not have any impact on its dealings with Custom Woodcrafters or the subcon- tracting of work." Nissly testified (Tr. 123, 126, 137, 158): Q. Now, during your discussions with Mr. Gour- ley regarding the possibility of subcontracting, did you, at any time, discuss the wages that he intended to pay employees of Custom Woodcrafters? A. No, sir. A. The wooden ladder business is a very highly material-intensive product. And about 70 percent of our selling price is represented by our cost of mate- 28 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD rial. Something yea to 4 to 5 percent is our labor costs . . . . Q. Had any of those costs changed at all since the subcontracting? A. In total, there is a slight reduction, because our overhead expenses have gone down . The subcon- tracting decision was not based upon economics. And as it turned out, there was a slight economic advan- tage; but that was not our reason for doing what we did. Q. Now . . . . you didn't discuss wages at all? A. No, sir. Q. Yet, as part of that subcontracting agreement, there is a provision that deals with labor costs, is that not correct? A. That is true. A. This Schedule A . . . referred to in the Sub- contracting Agreement, is the price list which we prepared for Custom Woodcrafters , and we said, "This is what we will pay you for labor, and this is what we will pay you for material ." It has nothing to with what he is paying his people. Q. What, if any, effect did your labor costs, in regard to the subcontracted work, have on your deci- sion? A. That was not a consideration. So it had none. [Emphasis added.] Whether the Company or Woodcrafters President Gourley prepared the price list, figuring the labor factor at $7.50 an hour on the ladder production work and at $6.48 on the table work ($3.58 and $4.60 an hour below the Company's average labor cost of $11.08 an hour), Nissly and Gourley undoubtedly discussed the differen- tial in the wages before Nissly agreed to pay Gourley a "monthly contract fee" of $9800 to perform the subcon- tracted work, paying the low nonunion wages . (As indi- cated above, the monthly contract fee Nissly pays Gour- ley exceeds the monthly rent Nissly charges him on the additional building space and leased equipment by $3180.) Because Gourley's actual labor costs are 38 per- cent less to perform the same production work , I consid- er it inconceivable that Nissly 's labor costs were not a consideration and that they played no part in his decision to subcontract the work . Furthermore , Nissly and Gour- ley undoubtedly discussed the wage rate Gourley would pay maintenance man Osborn before the Company's legal counsel provided in the subcontracting agreement that the Company would pay Woodcrafters "on a monthly basis, an agreed upon hourly rate for each" of not less than 60 hours of his work a month. (By his de- meanor on the stand, Nissly impressed me most unfavor- ably as a witness, appearing less than candid.) I discredit, as fabrications, Nissly's claims (a) that he did not discuss wages at all with Gourley, (b) that the subcontracting decision was not based on economics, (c) that the price list had nothing to do with Gourley 's wages, and (d) that Nissly's labor costs had no effect on his decision to sub- contract the work. I find no merit in the Company's contention in its brief (at 37) that the subcontracting "was entered into primari- ly to retain a valued tenant." Woodcrafters was paying in rent only $7440 a year-$20.38 a day-as compared to reduction in labor costs of over $80,000 a year, nearly 11 times that amount. I do agree with the statement in the Company's brief (at 35) that "The Tenant wanted to con- trol the paint spraying area and sought to do this by con- trolling the manufacture of ping-pong tables." But I reject the argument that "the Company was willing to subcontract this work" to keep the tenant from leaving the premises. At the time Gourley was proposing to perform the table production (4-1/2 months after he orally leased some unused space in the factory buildings) he was sign- ing a 1 -year lease, obligating himself to continue paying the $20.38-a-day rent through 15 September. Instead of Company President Nissly accepting Gourley's proposal (to keep the tenant satisfied by subcontracting the work of two bargaining unit employees performing the table production), Nissly made as a counterproposal "some- thing that really had not occurred" to Gourley. After consulting with Attorney Cox, Nissly proposed to sub- contract also the work of seven additional unit employ- ees who were performing most of the ladder production. Eventually, Nissly and Gourley reached an agreement on Nissly's proposal, after Gourley did a cost analysis and they agreed on a labor factor far below the Company's labor costs. The Company next argues in its brief (at 35) that "It should also be noted that the subcontracting arrangement resolved other problems facing the Company." It then cites two problems: (1) "The Company had been unable to hire an experienced operator to set up and operate the molding department." (2) "In addition, the maintenance man has experienced discontent over the fact that he was being under-utilized by the Company." In making the first argument, the Company ignores the undisputed evidence that molder operator Wheeler, the "experienced operator" who quit the previous Septem- ber, had been laid off from an interim job and was "ac- tively looking for employment." Nissly undoubtedly would have rehired him in the absence of the plans to subcontract the work. In making the second argument, the Company ignores the manner in which Nissly and Gourley arranged to solve the problem of giving the "under-utilized" maintenance man Osborn more skilled work. Instead of Nissly retaining Osbor on the Compa- ny's payroll and permitting him to increase his income by using the machine shop to perform outside work, Nissly leased the machine shop to Gourley and charged Gourley a $2-an-hour "utility charge" for "all machine shop work performed" by Osborn. Osborn was already doing some work for Nissly. There was no necessity to subcontract the Company's maintenance work to permit Osborn to do the outside skilled work to increase his income. I agree with the General Counsel that these and other purported reasons, including the first reason President Nissly advanced at the trial (that "we had been unsuc- cessful for over two years to sell our [85-year-old] facili- MICHIGAN LADDER CO ty" (Tr. 123)) are "pretextual . . . to disguise Respond- ent's desire to reduce labor cost." b. Because of change in scope and d erection The Company's brief also contends (at 34) that the subcontracting decision "clearly affected the scope, di- rection and nature of the Company 's business." It argues that it is "no longer engaged" in the particular business of manufacturing tables, is "no longer engaged" in the particular business of performing milling and grading work on lumber , and has "ceased providing" its own maintenance work, and that "These facts clearly establish that the scope and direction of the Company's business drastically changed." I disagree. The Company remains in both the table tennis table business and in the wooden (and other) ladder business, with no change in the capital investment . The Company continues to market and distribute the tables and ladders, which are still manufactured in the Company's plant on the Company's equipment (much of it leased to the sub- contractor). Although employees performing most of the production work are now on the subcontractor 's payroll, they are performing the same work , in the same manner, and under the same working conditions except for lower nonunion wages and no benefits . Moreover, the work is being done under the Company's control. The overhead has not been reduced by the receipt of rent because the $9800 monthly contract fee that 1he Company pays the subcontractor for doing the subcontracted work (with materials at cost and with 38 percent lower production labor costs) exceeds both the monthly rent of $6620 re- ceived on this plant space and equipment and the month- ly rent of $620 received on the previously rented excess space in the factory buildings. I agree with the Union that the facts are somewhat similar to those in Fibreboard Corp. v. NLRB, 379 U.S. 203, 206, 209 (1964), in which an employer was required to bargain about contracting out plant maintenance work to reduce maintenance costs. The Court held (179 U.S. at 213): The Company's decision to contract out the maintenance work did not alter the Company 's basic operation. The maintenance work still had to be per- formed in the plant. No capital investment was con- templated ; the Company merely replaced existing employees with those of an independent contractor to do the same work under similar conditions of em- ployment. Therefore, to require the employer to bar- gain about the matter would not significantly abridge his freedom to manage the business. [Em- phasis added.] Justice Stewart observed in his concurring opinion (379 U.S. at 223) that nothing in the Court's decision imposed a duty to bargain regarding managerial decisions that "lie at the core of entrepreneurial control." He wrote that he would exclude from the duty to bargain those manage- ment decisions that are "fundamental to the basic direc- tion of a corporate enterprise." He stated however (379 U.S. at 224) that: 29 On the facts of this case, I join the Court's judg- ment, because all that is involved is the substitution of one group of workers for another to perform the task in the same plant under the ultimate control of the same employer. [Emphasis added.] I find that that is much the same as what occurred here. I find that the Company's decision to subcontract (or contract out) the table tennis table production , most of the wooden ladder production , and all the maintenance work to be done by largely a different group of employ- ees in the same plant under similar conditions and under the control of the Company did not alter its basic oper- ation. c. Concluding findings The Board in Otis Elevator Co., 269 NLRB 891, 893 (1984), citing First National Maintenance v. NLRB, 452 U.S. 666 (1981), held that management decisions that "affect the scope, direction , or nature of the business" are not subject to mandatory bargaining under Section 8(d) of the Act, but that in accordance with Fibreboard all decisions that "turn upon a reduction of labor costs" are included within Section 8(d). After weighing all the evidence , I find it clear that the Company's decision to subcontract the work turned on a reduction of labor costs and did not affect the scope, di- rection, or nature of the business. I therefore find that the decision was a mandatory subject of bargaining. 2. That the Union waived any right to bargain a. Claimed company attempt to bargain (1) The Company's version Company Attorney Gilbert Cox testified that when Company President Nissly asked him what would be Nissly's obligations to the Union regarding the subcon- tracting part of the business , "I concluded after research that there was a high degree of probability that we would not have to . . . necessarily negotiate with the Union. My advice was it would be better if we did in fact offer it to them, the opportunity to give us their ideas on the subcontracting proposal before he entered into the agreement." (Emphasis added.) What occurred at the 26 and 29 March meetings with the Union is in great dispute . The Company contends in its brief (at 38) that it "did in fact make every attempt to negotiate with the Union" regarding the decision to per- manently subcontract the bargaining unit work . I find, however, that assumming the testimony of the company witnesses is accurate, the testimony reveals that Attorney Cox was not bargaining in good faith. Cox testified that after the Union presented its con- tract proposals at the 26 March meeting and the Compa- ny caucused, Plant Manager Scott Kemp and Vice Presi- dent Mark Lippencott returned with him to the meeting and (Tr. 327-331) I then suggested that each of the members of the Union get a pad of paper and pencil and write down what I was about to say because I felt it was 30 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD important. I then said that the company was consid- ering a proposal that had been made by Custom Woodcrafters, which would involve subcontracting parts of the facility. I explained that it was a pro- posal, that we were considering it, that the proposal date would be the following Monday. I described ... what additional parts of the facility would be leased out . . . and then what they would be per- forming. I said that the plant . . . had been up for sale for over two years without much success. That . . . the company had leased out part of the facility to Custom Woodcrafters [which] was not entirely happy with the arrangement because they were having trouble using the molding machine and more importantly they were having difficulty in the paint department ... . and if they leased additional parts of the facil- ity, [they] would then take over parts of our busi- ness. We also indicated there were some other reasons although they were not the critical reasons. The Company had lost a key employee and . . . they were having trouble with keeping the maintenance man happy and that this new arrangement might furnish an opportunity for the parties to figure out a way to keep him happy and keep him on board [be- cause] he was critical. Those are the two primary reasons I can think of that I indicated at that time. We . . . would probably shift some of the overhead and . . . there was the prospect that by Custom Woodcrafters taking over the management of that part of the business that it could be more efficiently managed, and more effectively produced. I went through the specific list that described the areas that would be leased our and the parts of the operation that would end up being subcontracted if .. . they could successfully reach an agreement. I believe those were the only reasons that I indi- cated and I know those were the most important. The most important being the problem we had with Custom Woodcrafters. That was the emphasis. Mr. [Arthur] Morgan [the International represent- ative] asked how long the company had known about this subcontracting issue . . . . I did not re- spond. [Mark Lippencott] said he knew about it only two days . . . and Scott [Kemp] said two and a half days. [Emphasis added.] Cox further testified that at the 29 March meeting (Tr. 335-338) I told [Morgan] we had to discuss it because time was running short, Custom Woodcrafters was to start right away . . . . I said, well, we are going to put it into effect on Monday, hoping to get their at- tention. I said . . . it was important that we discuss this be- cause if we didn't it was going to go into effect . . . and employees in the bargaining unit would be af- fected. It was our hope that they wouldn 't lose jobs but under the proposal they would end up working for Custom Woodcrafters, which meant they would have no employer. . . . We were not looking for any kind of labor trouble, we were looking for an opportunity to have a smooth transition. I fully thought that the Union might discuss other ways to handle the paint operation, which might satisfy Custom Woodcrafters' problem. [Emphasis added.] Plant Manager Kemp and Vice President Lippencott gave very similar testimony to Cox's, except that they testified that Cox paid even greater deference to Wood- crafters' desires as reasons for the subcontracting. Kemp testified that Cox told the Union that Woodcrafters "was wanting to expand their business and the only way they could expand their business was to employ these other areas of the plant" (Tr. 356). Lippencott testified that Cox said that Woodcrafters "had the possibility of ex- panding their business rather significantly," that Gourley "wanted to take advantage of that opportunity," and "because of his inability to use our paint booth and mill- room," the expansion of his business as he hoped "would lead to further difficulties" (Tr. 383). Kemp testified that Cox said, "We were just bringing up the subcontracting issue for general discussion with the Union" (Tr. 356), and Lippencott testified that Cox said he wished to present it to the Union "for their reaction" (Tr. 344). Lippencott disputed Cox's testimony that Cox did not re- spond when Morgan asked how long the Company had known about the subcontracting issue. Lippencott credi- bly testified to the contrary (Tr. 330-331) that when Art Morgan asked Gil [Cox] how long has this been going on," Cox "explained that this had just come up, that this was a situation that had developed rather quickly" (in- stead of admitting the discussions with Gourley since 31 January). The company trial counsel asked Cox, Kemp, and Lip- pencott three virtually identical questions about both the 26 and 29 March meetings: whether any company repre- sentative (not whether anybody) mentioned anything about "being non-competitive," about "labor costs," or about "concessions." They each answered no to the three questions about each of the meetings. (Tr. 332, 339, 357, 364, 385, 392.) This testimony (assuming its accuracy) shows that At- torney Cox had no intention of bargaining on the Com- pany's plans to subcontract the production work to sharply reduce labor costs. Cox was merely affording the Union an opportunity "to give us their ideas before it en- tered into the agreement" (in his words), "just bringing up the issue for general discussion" (in Kemp's words), or presenting the issue to the Union "for their reaction" (in Lippencott's words). MICHIGAN LADDER CO 31 It is apparent that Attorney Cox deliberately misled the Union about the subcontracting. According to this testimony, he did not even mention the reduction of labor costs. He talked about "if' the Company and Woodcrafters "could successfully reach an agreement," instead of revealing that the day before, a member of his law firm was present when agreement was reached on the subcontracting terms. Cox pretended that this had "just come up" and that the Company was considering "a proposal that had been made by Custom Wood- crafters." Yet since sometime in February, the Company and Woodcrafters had been negotiating an agreement based on the Company's proposal that it subcontract both ladder and table production involving the jobs of 9 of the approximately 15 bargaining unit production work- ers. This company proposal was admittedly "something that really had not occurred" to Woodcrafters President Gourley, whose January proposal was merely to take over the table production, involving only two bargaining unit jobs. As quoted above, Attorney Cox claimed that the most important reason for the subcontracting and what he em- phasized the most to the Union was "the problem we had with Custom Woodcrafters." (Tr. 330), because Woodcrafters was "having trouble using the molding machine and more importantly they were having difficul- ty in the paint department" (Tr. 328). (As found below, Woodcrafters had never used the molding machine.) As- suming that Cox did tell the Union about Woodcrafters' painting problem, this as found above was merely a pre- text for the subcontracting, and even if not, it would be a reason for subcontracting the two-employee table pro- duction, not the seven-employee ladder production work. This was further deceit. Cox claimed that Company President Nissly directed him to consider alternative to the subcontracting and that "I fully thought that the Union might discuss other ways to handle the paint problem, which might satisfy Custom Woodcrafters' problem" (Tr. 338). Cox made no other suggestion of anything the Union could have pro- posed to resolve the subcontracting issue. (Neither does the Company's brief, which argues (at 26) that the Com- pany was willing to negotiate about the decision and make changes in the arrangement if a viable alternative was presented.) Even if the painting problem were an actual reason for the Company's decision to subcontract the work, the Company's brief disputes Cox's claimed expectation of a possible union solution. It argues (at 37) that the "Union had no control over the problem that the Company faced in regard to the spray painting booth and possible loss of a valued tenant." Moreover, Attorney Cox revealed that the Company was not seeking any alternatives to subcontracting by telling the Union (according to his testimony) that "We are not looking for any kind of labor trouble, we were looking for an opportunity to have a smooth transition" (Tr. 337). At the trial President Nissly revealed (perhaps inad- vertently) his true attitude about Attorney Cox's dealings with the Union on the subcontracting issue. He claimed he was open to receiving the Union's input, but when he related his discussion with Cox about the two meetings with the Union, he testified : "That was the last remain- ing hurdle in terms of implementation" (Tr. 157). (2) Credibility of company witnesses Almost uniform testimony was given by Attorney Cox, Plant Manager Kent, and Vice President Lippen- cott, as well as by assembler Richard Castle Jr. (a former union steward who abandoned the strike and returned to work (Tr. 408)). I find that part of this practically uni- form testimony reflects adversely on the credibility of these four company witnesses. I refer to their claim that Cox told the Union in the 26 March meeting about Woodcrafters' problem in using the molding machine. Cox claimed that he said that "custom Woodcrafters was not entirely happy with the [leasing] arrangement because [in part] they were having trouble using the molding machine" (Tr. 32). Kent claimed that Cox stated that "there was a gentlemen's agreement" between Com- pany President Nissly and Woodcrafters President Gour- ley that Woodcrafters "would have access to the mold- ing equipment and none of this had transpired" (Tr. 354). Lippencott claimed that Cox said "Custom Woodcrafters as part of their agreement had had the right to use our millroom which would involve the molders and this had not worked out as well as Custom Woodcrafters had hoped" (Tr. 32.) Castle claimed that Cox said that "Roy Gourley, owner of Custom Woodcrafters was not get- ting enough time on the [molder] operating" (Tr. 41). To the contrary, the evidence is clear that there was no oral agreement permitting Woodcrafters to operate or have access to the molder and that Woodcrafters had never used it. As described by President Nissly, the molder "is the most sophisticated machine that we had" with "four to six knives in each one of these heads .. . all cutting" and a molder setup man has a "highly re- sponsible position" (Tr. 116.) Gourley had no one who could operate the machine. Both he and Nissly testified that there was an oral agreement that Woodcrafters could use the spray painting area when available, not the molder (Tr. 112, 285). Both of them testified that Gour- ley proposed that he take over the table production to solve his painting problem, but neither of them testified that they had any oral agreement to permit Woodcrafters to use the sophisticated molding machine that an oral agreement for its use had not worked out as well as Woodcrafters wanted, or that Gourley was not getting enough time on the machine as a reason for subcontract- ing ladder production. As discussed above, it was Niss- ly's proposal-after he consulted with his legal counsel- that the Company lease the additional area and equip- ment (including the molding machine) and have Wood- crafters begin doing ladder production. The Company is apparently aware of the untruth of this testimony. Although its brief cites much of Cox's, Kemp's, and Lippencott's testimony, it deletes their ref- erences to Woodcrafters' agreed use of the molder and completely ignores this part of their testimony. (Cox, Kemp, Lippencott, and Castle did not impress me as being entirely forthright while testifying.) The record does not explain how all four of them could have made 32 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD the same error. I discredit this part of their practically uniform testimony. its subcontracting plans. In brief, Cox gave the following reasons: (3) Concluding findings As found, the Company and Woodcrafters had been secretly negotiating several weeks to reach an agreement on subcontracting production work and replacing most of the union-represented production workers with Woodcrafters' nonunion employees, who would do the same work in the plant at lower pay and no benefits. On 25 March the two parties met and agreed on changes to be made in the Company's completed draft of the sub- contracting papers. On 26 and 29 March Company At- torney Cox discussed with the Union the subcontracting of the work but (according to the Company's version of the meetings) made no mention of the reduction in labor costs-or the "monthly contract fee" the Company had agreed to pay Woodcrafters to do the production with the low labor costs. On considering the context of the meetings and assum- ing the truth of the quoted company version of the meet- ings with the Union, I find in agreement with the Gener- al Counsel that Attorney Cox presented the Union a fait accompli, an accomplished fact. I find that Cox was en- gaging in sham bargaining and was merely going through the formality of negotiating with the Union before giving Woodcrafters the final go-ahead. I infer that he was merely "making a record" for defending a likely unfair labor practice charge rather than seeking an agreement with the Union on the subcontracting issue. b. Claimed union waiver (1) No waiver under Company's version The Company contends in its brief (at 38) that the Union waived any right it had to negotiate about the de- cision to permanently subcontract the bargaining unit work because the Union "steadfastly refused to discuss the issues." This waiver defense, however, is inapposite if the Company's subcontracting plans were already an ac- complished fact, rendering bargaining on them futile. As held in the often-cited Ladies Garment Workers v. NLRB, 463 F.2d 907, 918-919 (D.C. Cir. 1972), "It is well settled that when a union has sufficiently clear and timely notice of an employer's plan to . . subcontract and thereafter makes no protest or effort to bargain about the plan, it waives its right to complain that the employer acted in violation of Section 8(a)(5) and (1)." The court further held, however, that "Notice of a fait accompli is simply not the sort of timely notice on which the waiver defense is predicated." As similarly stated more recently in Gulf States Mfg. v. NLRB, 704 F.2d 1390, 1397 (5th Cir. 1983), "It is . . . well established that a union cannot be held to have waived bargaining over a change that is presented to it as a fait accompli." Under the version of the 26 and 29 March meetings given by the company witnesses, Attorney Cox's 26 March notice to the Union was nothing more than in- forming it of a fait accompli. The above-quoted reasons that he gave for the subcontracting decision demon- strates that the Company was determined to implement (a) That the Company had been unable to sell the plant-although the Company advances no theory for this being relevant to the decision to subcon- tract. (b) That the Company wanted to keep Wood- crafters a tenant for the rent income, lowering the Company's overhead-although the rent that Woodcrafters was paying amounted to only $20.38 a day. (c) That Woodcrafters President Gourley had been unhappy about not getting sufficient access to the spray painting area-although at the time Gour- ley proposed to take over the table production, he was signing the written lease obligating himself to pay the rent through 15 September anyway. (d) That the Company had lost a key employee, molder Wheeler-although the Company knew that Wheeler was then actively seeking employment at the plant. (e) That the Company wanted to keep mainte- nance man Osborn happy by increasing his skilled work and income-although the Company had al- ready decided to accomplish this by permitting him to do outside work in the machine shop. (f) That the subcontracting "would probably shift some of the overhead"-although the "monthly contract fee" that Company President Nissly pays Gourley for his overhead and and profit increased the Company's overhead. (g) That there was a "prospect" that the subcon- tracted work would be "more efficiently man- aged"-although the only changes being made were to place a group leader (paid $5 an hour) over the table tennis area and to have molder Wheeler work as a molder-foreman, under whatever supervision Gourley might contribute, under the oversight of company supervision. (h) That Woodcrafters "wanted to expand their business"-although that fact would be relevant to the Company's decision to subcontract only if the expansion into the company production areas would result in a reduction in the Company's labor costs for the subcontracted work. I find that all these purported reasons for the subcon- tracting are clearly pretextual, given "to disguise Re- spondent's desire to reduce labor costs." Assuming this testimony about what Cox informed the Union is accurate, the Company was merely seeking the Union's comments or reaction to the Company's eight pretextual reasons for contracting out the bargaining unit work. Attorney Cox did not even mention the Compa- ny's actual reason for subcontracting the production work, to reduce the labor costs (assuming no ulterior motive on the Company's part). Thus, in contending that the Union "steadfastly refused to discuss the issues," the Company is referring to all or several of these pretexts for its subcontracting plans. Union bargaining on these "issues" could not have changed the Company's decision MICHIGAN LADDER CO. (after several weeks of planning) to contract out most of its production work in the plant, based on a labor factor of $7.50 and $6.48, far below the Company's average labor cost of $11.08 an hour. Bargaining on the pretex- tual reasons would have been irrelevant to the real issue of reducing labor costs. In fact, the Company at one place in its brief admits that it did not expect the Union to propose any alternative to the Company's subcontract- ing the work. When arguing that the Company "had no duty to bargain regarding its decision to subcontract work to Custom Woodcrafters in April," the Company's brief (at 37) asserts that The Union had no control over Customer Wood- crafters or the problem that the Company faced in regard to the spray painting booth and the possible loss of a valued tenant. The Union had no control over Custom Woodcrafters' desire to enter into new areas of business or John Osborn's desire to expand his work. Since the Union had no control or ability to resolve the major problem which led to the con- tracting, there was no duty to bargain concerning that decision. Moreover, as quoted above, Attorney Cox testified at one point (Tr. 329) that "the two primary reasons" he in- dicated to the Union for the subcontracting included the loss of the key employee (Wheeler) and the trouble "keeping the maintenance man [Osborn] happy." Of course, good-faith bargaining on these purported reasons would have required that Cox reveal that Wheeler was then seeking employment at the plant and that the Com- pany had already found a way to keep Osborn happy, by permitting him to perform outside work in the machine shop. If the Company had not been determined to imple- ment the subcontracting plans, Cox undoubtedly would have revealed these facts and would have offered to dis- cuss Osborn's outside work and to bargain on promoting Wheeler or increasing his wages to avoid the subcon- tracting. The fact that the Company's subcontracting decision was final (contrary to its contention) is further indicated by its conduct immediately after the second (29 March) meeting, "the last remaining hurdle in tei ms of imple- mentation." President Nissly and his wife (as the sole di- rectors of separate corporations owning the real property and the business) held special meetings of the boards of directors and approved the terms of the previously nego- tiated lease addendum and subcontracting agreement, ef- fective 1 April (G.C. Exhs. 7 & 8). Then Nissly met with the Woodcrafters president and gave him the go-ahead, with a handshake. The subcontracting was implemented at the beginning of the next workday. I find that the Company's subcontracting plans were a fait accompli when Attorney Cox announced them to the Union. I further find that under these circumstances, the Company was not acting in good faith and that any bar- gaining on the subcontracting decision 'was futile. I therefore reject the Company's waiver defense, based on its quoted version of the facts. 33 (2) No waiver under the General Counsel's version Three of the General Counsel's witnesses were Inter- national Representative Morgan, Local 769 President Jim Bailey, and Plant Chairman (shipping clerk) Rex North. Bailey attended the 26 March meeting. Morgan and North attended both the 26 and 29 March meetings, but North left the first meeting during the caucus (before company attorney first informed the Union of the Com- pany's subcontracting plans). According to their testimony, Cox told them that the Company had the right to subcontract the work and that the Company definitely was going to implement the sub- contracting plans the following Monday morning, 1 April. Representative Morgan and President Bailey recalled that after the caucus in the 26 March meeting, Attorney Cox told them to take their pencils and pads out and take notes because what he was going to tell them was very important. Morgan recalled that Cox said the Com- pany was contracting out work on 1 April, that they would no longer be in the business of making ping pong tables and other work that he mentioned, that they "had a right to subcontract" the work, and that the changes would be made "whether you like it or not" because "they have to be more competitive .. . with other ladder companies in the other part of the country." (Tr. 21-22, 26-28, 417, 420.) Bailey recalled that Cox said that beginning 1 April the Company was going to sub- contract ping pong tables and other work to Wood- crafters "because we have to be more competitive with other parts of the country" (Tr. 61-62). He recalled that the Company did not offer to bargain on the subcon- tracting, "they just said they were going to do it come 4/1/85" (Tr. 77). Plant Chairman North (who impressed me most favorably as an honest, forthright witness) testi- fied that at the 29 March meeting Cox said "before we go too much further let me be sure that Rex knows what we are talking about." Cox then said "we are going to subcontract the jobs on the hill, the lumber grading, the ping pong area and [some work in the extension ladder area] as of April 1, 1985." Cox explained that the Com- pany was getting out of business for those items because it was not competitive with other ladder companies that had much lower rates of pay and much less benefits. (Tr. 82, 94-96.) Cox insisted that "under the law they were going to do it on April 1st" (Tr. 426-427). (I note that, as quoted above, Cox admitted at the trial (Tr. 335) that he told the union in the 29 March meeting, "well, we are going to put it into effect on Monday.") The General Counsel's witnesses further testified that the Union vigorously protested at both meetings, taking the position that this was "our work" under the UAW agreement until its 1 May expiration and that the Com- pany did not have the right to and should not take away the work before then (Tr. 26, 54, 93, 95-96, 413-414, 418-419, 426). Although Morgan contended at the meet- ings that the work was nonnegotiable under the agree- ment until 1 May (Tr. 94, 97, 103), he proceeded at both meetings to engage in futile bargaining on the real issue before them, whether the Company would abandon its decision to contract out the bargaining unit work to a 34 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD nonunion employer. Morgan asked Attorney Cox "how could they justify subcontracting those jobs when he knew there would be a loss of jobs and wages for the employees who were under a UAW contract with Michigan Ladder Company" (Tr. 82). Morgan pointed out that the Union had agreed to a freeze in wages and benefits 3 years before, and said that if the Company could prove it was losing money, "we would be willing to take concesssions" before the union membership (Tr. 22, 27, 63, 83, 93, 97, 416). Morgan said "we have done this work for 25 years" and that he felt the subcontract- ing was unfair and violated their agreement (Tr. 28, 62, 417-419). He also talked about their good relationship, said the Company was always willing to work out prob- lems, and asked why the Company was taking the posi- tion of subcontracting "whether we liked it or not after all the employees had been through," supporting the Company (Tr. 24, 29). One difficulty in evaluating the widely different ver- sions given by the General Counsel and company wit- nesses is that none of the notes made at the meetings were produced at the trial. Company Vice President Lip- pencott took notes at the 26 March meeting (Tr. 380) and Plant Manager Kemp admittedly "took extensive notes during all meetings" (Tr. 350). Yet, without expla- nation, the Company did not produce the notes as cor- roboration of the company version. Neither did the Gen- eral Counsel request production of the notes. Under these circumstances I do not speculate whether the notes would support the Company's testimony or whether they contain references to Cox's citing the need to become more competitive and the Union's offer of possible con- cessions, as the General Counsel's witnesses recalled. (I do note that the Company's trial counsel asked the com- pany witnesses if "any company representative" men- tioned concessions, not if the Union did.) Even though, the General Counsel's witnesses Morgan, Bailey, and North all recalled Attorney Cox's stating that the subcontracting was necessary for the Company' to become more competitive and Representa- tive Morgan's referring to possible concessions, I find it unnecessary in resolving the issues in this case to rely on any of their disputed testimony about the Union's offer- ing or the Company's seeking concessions in these late March meetings. (The Company contends that the first mention of concessions, labor costs, and being competi- tive was at the 17 April negotiating session , when the Company raised the need of concessions.) I do, however, credit and rely on their testimony that Attorney Cox made it clear that the Company was going to implement the subcontracting on 1 April (showing that the subcon- tracting was presented as a fait accompli) and that, al- though Morgan stated that the work was nonnegotiable under the union agreement until 1 May, he proceeded at both the 26 and 29 March meetings to protest the sub- contracting and to engage in futile bargaining on the real issue, whether the Company would abandon its decision to contract out the bargaining unit work (not waiving the Union's bargaining rights). (The three General Coun- sel witnesses, and particularly North, impressed me by their demeanor on the stand as being honest witnesses trying to give an accurate account of what happened.) I therefore find that the credited testimony of the Gen- eral Counsel witnesses confirms the General Counsel's contention that the Company "presented a fait accompli to the Union," that the Company "was committed to im- plement subcontract effective April 1 regardless of the Union's response," and that the Union did not waive its right to bargain on the subcontracting decision. Although I assume the accuracy of much of the com- pany witnesses' testimony about the two meetings, I spe- cifically discredit another part of their almost uniform testimony. Cox, Kemp, and Lippencott claimed that the Union withdrew its objections or acquiesced in the sub- contracting plans, stating that it did not care as long as members of the bargaining unit were not hurt or affected (Tr. 333, 362, 388-389). Although the Company kept the displaced employees on the payroll at their same wages until the strike began, it was obvious that contracting out most of the production work would adversely affect the bargaining unit employees. Plant Chairman North credi- bly testified that Representative Morgan told Attorney Cox at the 29 March meeting that Cox "knew there would be a loss of jobs and wages for the employees," and Cox admitted telling the Union at the same meeting (Tr. 336) that bargaining unit employees "would end up working for [the nonunion] Custom Woodcrafters." I discredit this claim and credit the denials (Tr. 27, 30, 64, 83) that the Union agreed to the subcontracting. C. Finding of Unlawful Refusal to Bargain The Company had a profitable business, but it desired lower labor costs to become more competitive with other ladder companies. In 1985 it did more than negoti- ate a freeze in wages and benefits as it did in the 1982 negotiations with the Union. Before seeking a wage cut, President Nissly consulted Attorney Cox, who had been "involved in many negotiations relating to subcontract- ing" (Tr. 322), and decided to contract out most of the bargaining unit work. At the time, Nissly was renting some excess space in the Company's factory building to Woodcrafters Presi- dent Gourley. When Gourley, in January proposed taking over the Company's two-employee production of table tennis tables, President Nissly consulted Cox and decided to contract out also most of the ladder produc- tion work, displacing 9 of the approximately 15 produc- tion workers. Nissly retained Cox or his law firm to pre- pare the subcontracting papers, deal with the Union on the subcontracting, conduct the contract negotiations with the Union, and later defend the Company in this unfair labor practice proceeding. President Nissly and Gourley engaged in secret negoti- ations for several weeks before the negotiations with the Union began 26 March. Nissly agreed to contract out maintenance work also. In return for Gourley's perform- ing the subcontracted production and maintenance work in the plant with nonunion labor (paying the production employees wages that were 38 percent lower than the Company's labor costs), Nissly agreed to purchase the manufactured products from Gourley and pay him a "monthly contract fee" of $9800. This fee would reim- burse Gourley for the entire amount of the $6620 month- MICHIGAN LADDER CO. ly rent that Nissly charged him for the additional factory space and the equipment and tools used to perform the subcontracted work-netting Gourley $3180 a month. The drafted subcontracting papers, prepared by Attor- ney Cox's law firm, scheduled the subcontracting to begin 1 April, a month before the 30 April expiration of the collective-bargaining agreement. On 25 March a member of Attorney Cox' law firm was present when Nissly and Gourley concluded their negotiation of the subcontracting terms , agreeing on changes for the counsel to make in the drafted papers. On the next day, 26 March, Attorney Cox informed the Union of the Company's subcontracting plans. As found (assuming the quoted company testimony is accurate), Cox presented the subcontracting as a fail accompli. He deliberately misled the Union concerning the subcon- tracting, gave clearly pretextual reasons for the subcon- tracting without even mentioning the purpose of reduc- ing labor costs, and engaged in sham bargaining at both the 26 and 29 March meetings with the Union. After this "last remaining hurdle in terms of implementation," Nissly met with Gourley and, with a handshake, gave him the go-ahead. Over the Union's continuing vigorous objections, Nissly and Gourley proceeded to implement the subcontracting on schedule. Gourley hired 2 of the 10 displaced bargaining unit employees. Nissly kept the other eight on the payroll, with no change in pay, until the 8 May strike was provoked (as discussed below.) At the trial, Attorney Cox was a principal witness in the Company's defense. As found, he and two company officials gave some practically uniform testimony that is discredited as untruths. Also as found, President Nissly gave fabricated testimony about the subcontracting and his motivation. The General Counsel contends that the Company per- manently subcontracted the work unilaterally without af- fording the Union a meaningful opportunity to bargain over the decision. The Company contends that in the ab- sence of any subcontracting restrictions in the union agreement, it had no duty to bargain because the scope and direction of the Company's business "drastically changed" and because its subcontracting decision did not turn on a reduction of labor costs . It further contends that the Union "waived any right it had to negotiate." Although Attorney Cox's law firm drafted the subcon- tracting papers and participated in the negotiating with Woodcrafters President Gourley-giving the counsel firsthand knowledge of the subcontracting terms-and even though the company brief was signed by one of the trial counsel, a member of Cox's law firm, the brief argues that the subcontracting decision did not turn on a reduction of labor costs. The brief relies primarily on President Nissly's fabricated testimony. It overlooks, or ignores, the amount of Woodcrafters' labor factor. As discussed above, the price list attached to the subcon- tracting agreement is based on a labor factor of $7.50 an hour for the ladder production and $6.48 an hour for the table tennis table production, as compared to the Compa- ny's labor costs of $11.08 an hour. The brief also over- looks or ignores the actual 38-percent reduction in pro- duction labor costs and the $9800 monthly contract fee that Nissly pays Gourley (less the $6620 rent that Nissly 35 charges Gourley) for performing the subcontracted work with nonunion labor. As found, (1) the subcontracting did not affect the scope, direction, or nature of the business ; (2) the Com- pany's decision to subcontract the work turned on a re- duction of labor costs; (3) the Company presented the Union a fait accompli and engaged in sham bargaining; and (4) there was no waiver of the Union's right to bar- gain. Accordingly, I agree with the General Counsel that the Company unilaterally subcontracted (or contracted out) bargaining unit work without affording the Union a meaningful opportunity to bargain on the decision. I therefore find that the Company failed to bargain in good faith, violating Section 8(a)(5) and (1) of the Act. D. Unfair Labor Practice Strike International Representative Morgan's 29 March warn- ing to Company Attorney Cox "the subcontracting would be the main hangup in the negotiations " proved accurate. The subcontracting, along with the proposed wage cut (Tr. 342), remained a major obstacle to an agreement in the negotiations . In fact, the Company's po- sition on subcontracting became a greater threat to the existence of the bargaining unit when Cox submitted a written proposal on 17 April to grant the Company the contractual right to subcontract all the bargaining unit with the Union." Morgan credibly testified (Tr. 54) that in the 29 March meeting. We said to Mr. Cox the fact that we believe that the subcontracting would be the main hangup in the negotiations . . . . We felt that work belonged to us. I think we ought to discuss that. Cox, however, continued to maintain , both at that meet- ing and after the subcontracting was implemented 1 April, that the Company had and was exercising the right to subcontract the work. (The remaining negotia- tions before the 8 May strike were held on 2,4q7, and 25 April and 6 and 7 May, as testified by Plant Manager Kemp, who took extensive notes at all the meetings.) At the 2 April meeting the Union tried to get Presi- dent Nissly to come to the bargaining table to discuss the subcontracting, but he refused (Tr. 416). The meeting began with a discussion of what reason the Company had for the subcontracting (Tr. 84). After Attorney Cox left and Representative Morgan arrived , Plant Chairman North asked "how they could justify taking the union jobs away from union employees" and giving the jobs to nonunion workers . Plant Manager Kemp stated that the Company had "gotten out of that part of the business. (Tr. 65, 74.) It was at the next meeting on 17 April that Attorney Cox presented the written proposal giving the Company the right, without negotiations, to subcontract all the bargaining unit work on the premises . The proposal (R. Exh. 2), dated 17 April, stated that The company shall have the right to continue to subcontract, or increase and/or reduce the extent of subcontracting all or any part of the work per- 36 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD formed in the past by members of the bargaining unit without first negotiating with the Union. This right shall include, but not be limited to, the sub- contracting of work performed by another company on Michigan Ladder premises. Explaining his motivation for proposing such a far-reach- ing proposal, Cox testified (Tr. 343-344) that "we didn't want the arbitrator determining what we could do under the next contract" and the "only way we could make sure that we got it resolved for the future was to put it into the contract negotiations. . . . As I recall, frankly we asked for more than we were willing to agree to." Assistant UAW Regional Director Curtis McGuire (who had joined the union negotiating team) told Attor- ney Cox, "I have known . . . a long time that you have a reputation of busting unions" and that he felt Cox "came to the ladder company to get the Union out." Cox denied it. (Tr. 33, 86.) Cox testified, "I have been in- volved in many negotiations relating to subcontracting work," that the company approached him in early 1985 "regarding possible subcontracting work," and that the Company retained him "to represent the company in regard to its labor matters in 1985" ( Tr. 322-323). De- fending the Company's good faith in bargaining, the company brief (signed by one of the trial counsel mem- bers of Cox's law firm) observed (p. 40) that the "Com- pany retained a highly-experienced practitioner in the field of labor law to act as its spokesperson in these ne- gotiations" and that "Mr. Cox testified that he held prior discussions with Mr. Nissly regarding the subcontracting possibilities and that Nissly had sought his advice on this subject." At the next meeting on 25 April, Union Attorney Leonard Page also entered the negotiation. As Repre- sentative Morgan credibly testified (Tr. 34), Page told Attorney Cox that he felt the Company did not have a right to subcontract the work out. It is undisputed that Cox responded "we did it in Garwood and we have the right to db it here, and we are going to do it." Cox was evidently referring to the Board's decision in Garwood- Detroit Truck Equipment, 274 NLRB 113 (1985), decided 2 months earlier when the Company was consulting At- torney Cox and negotiating the subcontracting terms with Woodcrafters. Page insisted that what happened at Garwood should not be compared with what was going on at the plant (Tr. 35). I note that in Garwood-Detroit the employer was in the distribution business of selling truck equipment parts and in the garage business of mounting and servicing truck equipment. Being "unable to meet its financial obliga- tions," it decided to abandon the garage business by con- tracting out the mounting and service work and to oper- ate only as "a manufacturer's representative-type of orga- nization," selling truck equipment and "using various venders to perform the labor." The employer's "essential purpose" was to "reduce its overhead costs across-the- board . . . to remain in business." The subcontractor paid a specific percentage of the employer's rent and utility bills, plus a monthly fee to rent the garage equip- ment (in contrast to President Nissly's increasing the Company's own overhead by paying subcontractor Woodcrafters for doing the subcontracted work with lower labor costs a "monthly contract fee" of $9800- which is $3180 more than the $6620 monthly rent Nissly was charging Woodcrafters). The Board concluded that under Otis Elevator Co., 269 NLRB 891 (1984) (on which I rely above), the employer "had no duty to bargain with the Union about its subcontracting decision" be- cause its decision to contract out the work did not turn on labor costs "but rather turned on a significant change in the nature and direction of its business." I find the case is clearly distinguishable. Also in this 25 April meeting, Union Attorney Page asked Company Attorney Cox for information about the subcontracting and for a copy of the contract between the Company and Woodcrafters. It is undisputed that Cox stated some of the material may be hard to come by and that it may take a little time to get copies, but he would supply Page with the documents. (Tr. 34, 66, 88.) Despite this promise, the evidence is also undisputed that Cox failed to furnish the copies. By the time of this union request, both the subcontracting agreement and the lease addendum, showing the terms of the subcon- tracting, had been signed. The Company offers no expla- nation for continuing to conceal from the Union the sub- contracting terms that undoubtedly would have been useful for meaningful bargaining. Instead of supplying Attorney Page the subcontracting information as promised, Cox wrote him a five-page letter on 6 May (2 days before the strike began) "to clar- ify the Company's position and proposals" on the two major issues-subcontracting and economic concession- that separated the parties in the negotiations (R. Exh. 1). Cox began by stating (par. 2): First, I want to address the issue of subcontract- ing. As I stated to the committee and Mr. Art Morgan, UAW International Representative, on March 26, the Company was considering subcon- tracting at that time for a number of reasons, the most important of which was the fact that a major tenant, Custom Woodcrafters, Inc., was dissatisfied and considering leaving the premises. By continuing to assert this pretextual reason for the sub- contract, Cox demonstrated that the Company still con- sidered the subcontracting a fait accompli. Later in the letter (p. 3) Attorney Cox made a new proposal "modifying" his 17 April proposal (which would have given the Company the right, without any negotiations, to subcontract all the bargaining unit work on the premises). Purportedly as "a further attempt to re- solve this issue," he proposed language that would con- firm the Company's asserted right to subcontract most of the bargaining unit work to Woodcrafters ("the practice currently in effect"): The Company and the Union agree that the Compa- ny may continue to subcontract consistent with the practices currently in effect and the practice that has existed in the past. Before the Company makes significant changes in its subcontracting practice in the future it will first offer to discuss the subcon- MICHIGAN LADDER CO. tracting practice change with the Union and, if the Union desires, negotiate with the Union concerning these changes. Under this proposal , the subcontracting to Woodcrafter would remain a fait accompli. Furthermore, the proposal at least implied that the Company would be given the contractual right to subcontract the remainder of the bar- gaining unit work to Woodcrafters under the phrase, "consistent with the practice currently in effect." But even if the proposed language were construed to mean that further subcontracting to Woodcrafters would be a "significant" change, the proposal implied that the Com- pany would have the contractual right anyway , subject only to notice and bargaining (reminiscent of Attorney Cox's sham bargaining at the 26 and 29 March meetings). (The evidence does not reveal whether the Company planned to contract out the remainder of the production work to Woodcrafters. I note, however, that despite the 38-percent reduction in the production labor costs, Presi- dent Nissly claimed (Tr. 126), and there is no evidence to the contrary, that "as it turned out," the subcontract- ing was only a "slight economic advantage ." The sub- contracted work was being performed at a great saving in labor costs, but the Company was having to pay Woodcrafters a $9800 "monthly contract fee-less $6620 monthly rent-to do the work nonunion . I consider it unlikely that the Company would continue the subcon- tracting of only that portion of the production work for such a slight economic return . As a practical matter though there may be other alternatives lo contracting out all the production work. As e.ramples , the Company could resume the work with its own employees after the subcontracting had had the desired effect in assisting it obtain concessions from the Union, or it could resume the work if the Union were eliminated from the plant.) At the time both these subcontracting proposals were made, Woodcrafters was performing the subcontracted work and the Company was going to the expense of keeping all the displaced employees on the payroll with- out any change in pay. (Attorney Cox had conceded that there would be insufficient work remaining after the sub- contracting to give employment to the displaced bargain- ing unit employees. As quoted above, he testified (Tr. 336) that he informed the Union at the 29 March meet- ing that under the subcontracting proposal "they would end up working for Custom Woodcrafters .") If, howev- er, the employees went on strike in protest and the Com- pany succeeded in defending its unilateral subcontracting under the recent Garwood-Detroit decision, the striking union members would be outside the plant and the Union might be effectually eliminated. I find that Attorney Cox was not seeking to resolve the subcontracting issue in good -faith bargaining in making his 17 April and 6 May subcontracting proposals that would give the Company a contractual right to con- tract out the current amount of (and perhaps all) the pro- duction work to Woodcrafters. I find that he instead was demanding that the employees ratify the unlawfully im- plemented subcontracting of bargaining unit work and was seeking to provoke a strike. See Maietta Contracting, 265 NLRB 1279 fn. 1 (1982), in which an employer made 37 a proposal that "the company specifically has a unilateral right to subcontract or sell all or any portion of its busi- ness." The Board held that "it is clear that, in this case, this onerous request was part of Respondent's strategy to provoke a bargaining impasse." On the first day of trial before the Company began putting on its defense, company trial counsel argued (Tr. 103) that "The General Counsel 's stated legal theory is that the strike was caused by the Employer's refusal to bargain over the issue of subcontracting . . . . General Counsel's prima facie case has not been met." I disagree. As found, Company Attorney Cox engaged in sham bargaining at the 26 and 29 March meetings . I find that between then and the 8 May strike he continued to engage in sham bargaining on the subcontracting issue, treating the unilateral subcontracting as a fait accompli, with no intention of bargaining in good faith on the issue. I further find that this failure to bargain in good faith was a major cause of the strike . Accordingly, I agree with the General Counsel and the Union that the strike was an unfair labor practice strike. CONCLUSIONS OF LAW 1. By contracting out bargaining unit work without af- fording the Union a meaningful opportunity to bargain over the decision, the Company engaged in unfair labor practices affecting commerce within the meaning of Sec- tion 8(a)(5) and (1) and Section 2(6) and (7) of the Act. 2. The strike that began 8 May was an unfair labor practice strike from its inception. REMEDY Having found that the Respondent has engaged in cer- tain unfair labor practices, I find it necessary to order it to cease and desist and to take certain affirmative action to effectuate the policies of the Act. The Respondent, having contracted out the bargaining unit work without engaging in good-faith bargaining, must cancel its "subcontracting " agreement with Wood- crafters, resume the production and maintenance work with bargaining unit employees , and bargain with the Union. Fibreboard Corp. v. NLRB, 379 U.S. 203, 209 (1964). The record contains no evidence that resuming the work would be unduly burdensome. The Respondent must also offer the unfair labor prac- tice strikers, on their unconditional applications to return to work, immediate and full reinstatement to their former jobs or, if those jobs no longer exist , to substantially equivalent positions, without prejudice to their seniority and other rights or privileges previously enjoyed, dis- missing if necessary persons hired on or after 8 May 1985, and make the strikers whole for any loss of earn- ings and other benefits they may have suffered from any refusal by the Respondent to reinstate them in a timely fashion, by paying to each of them a sum of money equal to what would have been earned during the period be- ginning 5 days after the date on which each uncondition- ally offers or has offered to return to work to the date of the Respondent's proper offer of reinstatement , less any net interim earnings, as prescribed in F. W. Woolworth Co., 90 NLRB 289 (1950), plus interest as computed in 38 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Florida Steel Corp., 231 NLRB 651 (1977). If, however, the backpay period will begin on the date of the uncon- the Respondent did already or does reject, delay, or ditional offer to return to work. Newport News Shipbuild- ignore any unconditional offer to return to work or ing, 236 NLRB 1637 (1978). attach any unlawful conditions to its reinstatement offer, [Recommended Order omitted from publication.]