Litton Business Systems, Inc.

LITTON BUSINESS SYSTEMS 817 Litton Financial Printing Division, a Division of Litton Business Systems, Inc. and Printing Spe- cialties and Paper Products Union, District Council No. 1, International Printing and Graphic Communications Union. Case 32-CA- 3160 6 November 11987 DECISION AND ORDER BY CHAIRMAN DOTSON AND MEMBERS BABSON AND STEPHENS On 4 September 1981 Administrative Law Judge Burton Litvack issued the attached decision. The Respondent filed exceptions and a supporting brief, the General Counsel and the Charging Party filed cross-exceptions and supporting briefs,' and the Respondent filed an answering brief. 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 and briefs2 and has decided to affirm the judge's rulings, findings, and conclusions only to the extent consistent with this Decision and Order.3 The judge concluded that the Respondent did not violate Section 8(a)(5) and (1) of the Act by failing to bargain over a decision to lay off certain employees in August and September 1980 without bargaining with the Union. We reverse this dismis- sal for the reasons set forth below. The judge did find that the Respondent violated Section 8(a)(5) and (1) of the Act by refusing to process pursuant to the grievance and arbitration procedure set forth in its expired collective-bargaining agreement cer- tain employee grievances filed over the layoff. We agree with the judge that the Respondent's conduct in failing and refusing to process the grievances violated Section 8(a)(5), but we do so for the fol- lowing reasons.4 ' On the following dates the Board received letters from counsel for the parties calling the Board's attention to various cases: 9 August 1982 (the Charging Party), 8 November 1982 (the Charging Party), 18 July 1983 (the Respondent); 7 January 1986 (the Respondent) The Respond- ent has requested that the letter received 9 August 1982 from counsel for the Charging Party be stricken from the i ecord This request is denied 2 The Charging Party has requested oral argument . The request is denied as the record , exceptions, and beefs adequately present the issues and the positions of the parties. s The Charging Party has excepted to the judge 's refusal to award at- torney's fees We conclude that the defenses that the Respondent has raised are debatable rather than frivolous, and we find that an award of such expenses is unwarranted Heck's Inc, 215 NLRB 765 (1974), Tudee Products, 194 NLRB 1234 (1972) * The judge also found that the Respondent violated Sec. 8(a)(5) and (1) of the Act by dealing directly with employees by granting severance pay benefits to laid-off employees without prior notice to or consultation with the Union The parties have not excepted to this finding The Respondent and the Union were parties to collective-bargaining agreements covering the pro- duction and maintenance employees at the Re- spondent's facility in Santa Clara, California, since 1974. At the time of the events recounted here, the parties were operating without a contract, their last agreement having expired on 5 October 1979. That expired contract required the parties to arbitrate "differences that may arise between the parties hereto regarding this Agreement and any violation of the Agreement, and the construction to be placed on any clause or clauses of the Agreement." Moreover, that contract's introductory section specified that the "stipulations set forth shall be in effect for the time hereinafter specified." Prior to August 1980,5 the Santa Clara plant was the only one of the Respondent's facilities at which both cold- and hot-type printing processes were em- ployed, all of its other plants using only the hot- type process. In July the Respondent decided to discontinue its cold-type printing process and to convert the Santa Clara plant to an entirely hot- type operation. Four factors motivated the Re- spondent's decision: dissatisfaction with the cold- type process' product and a consequent loss of orders, including the loss of 30 percent of the cold- type business of one of its largest customers; the greater economy of the hot-type format; the expec- tation that in an emergency the Respondent's other hot-type plants would be able to do the Santa Clara plant's work; and the expectation that a strictly hot-type operation would reduce training and equipment costs. Pursuant to this decision, the Respondent transferred cold-type work to its other plants and began to acquire additional hot-type equipment and to sell its cold-type equipment. On 29 August and 2 September the Respondent laid off 10 of the plant's 42 unit employees, 7 of whom had worked exclusively on the cold-type equip- ment and 3 of whom had worked primarily on it. Although the expired agreement required the Re- spondent to afford the Union certain notice of lay- offs and provided that "in case of layoffs, lengths of continuous service will be the determining factor if other things such as aptitude and ability are equal," the Union received no advance notice of the layoffs and the employees were not laid off in accord with their seniority. The affected employees notified the Union of the layoffs, whereupon individual grievances were filed for each laid-off employee under the expired agree- ment, charging "unjust layoff . . . out of seniori- ty." Union Business Agent Marilyn Major testified that the Respondent refused to accept the griev- 5 Unless otherwise noted, all dates refer to 1980 286 NLRB No. 79 818 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD ances. On 24 September Major wrote the Respond- ent's plant manager, Mary Arnold, that the griev- ances had been filed and requested both a meeting with the Respondent "to discuss this layoff and its impact on these senior people" and reinstatement of the laid-off employees pending resolution of the matter. As the judge found, the Respondent admit- ted that it failed and refused, and continues to fail and refuse, to process the employee grievances pursuant to the grievance and arbitration procedure in the expired contract. On 3 November the Re- spondent's counsel reiterated to Major in pertinent part: Your letter of September 24 . . . appears to me to be ambiguous. When I first replied to it on October 3, I viewed it as a request to uti- lize the grievance-arbitration provisions of the expired contract. Upon reading it again, I can see where you might have also been requesting a meeting to discuss the effects of the layoffs mentioned in your letter. If that was your intent, I have no objection to such a meeting. Please call me if you wanted to arrange such a discussion. On 10 November the Union's attorney renewed its request for bargaining over both the decision to lay off the employees and the effects. Since then, the Respondent, although expressing its willingness to bargain over the "effects" of the layoffs, has re- fused to bargain over the "decision" to lay off the employees, and the parties have not bargained over either subject. 1. As noted above, the judge found that the Re- spondent violated Section 8(a)(5) and (1) of the Act by refusing to process the layoff grievances pursu- ant to the grievance-arbitration clause in the ex- pired collective-bargaining agreement. Board law has long held that the unilateral abandonment of a contractual grievance procedure upon expiration of the contract violates Section 8(a)(5) of the Act. See, e.g., Bethlehem Steel Co., 136 NLRB 1500, 1503 (1962), enfd. in pertinent part 320 F.2d 615 (3d Cir. 1963). Therefore, the Respondent was obli- gated to continue to process grievances during the hiatus period under its expired agreement, and we find that by failing and refusing to accept the layoff grievances, the Respondent violated Section 8(a)(5) of the Act. In the recently decided Indiana & Michigan Elec- tric Co., 284 NLRB 53 (1987), we reaffirmed our conclusion in Hilton-Davis Chemical Co., 185 NLRB 241 (1970), that "the arbitration commit- ment arises solely from mutual consent and that Congress did not intend the National Labor Rela- tions Act to operate to create a statutory duty to arbitrate." Indiana & Michigan Electric, supra at 57. Instead, we concluded that if a party to a collec- tive-bargaining agreement retains a legally enforce- able obligation to arbitrate grievances originating after expiration, that obligation must originate in the expired agreement. In Indiana & Michigan Elec- tric we found that the expired contract in that case contained a broad arbitration clause, without lan- guage sufficient to overcome the presumption that the obligation to arbitrate imposed by the contract extended to disputes arising under the contract and occurring after the contract had expired. Thus, the respondent remained "subject to a potentially viable contractual commitment to arbitrate even after the contracts expired," id. at 60, a commit- ment that it repudiated in violation of Section 8(a)(5) of the Act by an across-the-board written policy expressing a general intention not to process any grievances and routine refusals to process grievances or arbitrate postexpiration disputes. In the case at hand, we find that the language of the collective-bargaining agreement subjected the Respondent to the same "potentially viable con- tractual commitment to arbitrate" postexpiration grievances. First, the expired agreement imposes a broad arbitration requirement on the parties. Second, the judge correctly found that the lan- guage of the expired agreement does not negate "expressly or by clear implication" the presump- tions favoring the arbitration of grievances arising under the expired contract but occurring after it expired. Nolde Bros. v. Bakery Workers Local 358, 430 U.S. 243, 255 (1977). The language quoted above, giving the contract's stipulations effect for "the time herein specified," is not sufficient to rebut the Nolde presumption of arbitrability be- cause it does not reveal the parties' intentions "as to the pertinent issue, which is, whether the arbi- tration clause survives expiration and, if so, which post-contract grievances are arbitrable." Teamsters Local 703 v. Kennicott Bros. Co., 771 F.2d 300, 303 (7th Cir. 1985). In Indiana & Michigan Electric itself, relying on parallel contractual language in Nolde, we found that the Nolde presumption was not rebutted by a termination clause which read: "In the event of termination of this agreement as herein provided, it shall cease to have binding effect, and the terms and conditions herein may be altered, modified, or terminated without notice." 284 NLRB 53, 59 fn. 5. Moreover, we find that, like the respondent in Indiana & Michigan Electric, the Respondent, by the course of conduct described above, repudiated its contractual obligation to arbitrate by its refusal to arbitrate the grievances presented to it by the Union. As noted above, the Respondent has admit- LITTON BUSINESS SYSTEMS 819 ted that it failed and refused to process the 10 grievances discussed here "pursuant to the griev- ance and arbitration procedure in the expired con- tract" (emphasis added). In view of this admission and its 3 November letter to Major, noted above, we conclude that the Respondent's conduct "amounted to a wholesale repudiation of its con- tractual obligation to arbitrate." Indiana & Michi- gan Electric, supra at 59 (citations omitted). In con- cluding that the Respondent's conduct fell short of a repudiation of its contractual obligation to arbi- trate, our dissenting colleague fails to note the Re- spondent's admission and the clear implication of its 3 November letter. He also cites A. H. Belo Corp., 285 NLRB 807 (1987), in concluding that the Respondent's course of conduct did not estab- lish a "wholesale repudiation" of the arbitration procedure. We find A. H. Belo Corp., factually dis- tinguishable from the instant case. In A. H. Belo Corp., the union wrote the Federal Mediation and Conciliation Service requesting it to appoint a panel of arbitrators to resolve a grievance over the layoff of two employees. After receiving a copy of this letter, the respondent's agent replied to the union, "I believe there is no basis for your letter re- questing a panel of arbitrators, and I consider it to be of no force or effect as far as The News is con- cerned." The Board found the evidence "ambigu- ous insofar as the issue of an undifferentiated blan- ket refusal is concerned." It found that the re- spondent's letter did not identify reasons for its "no basis" assertion, and did not refer to grievance or arbitration requests other than the union's letter. The Board also referenced the respondent's brief to the judge and the argument made there, which it apparently concluded did not raise a wholesale re- pudiation argument, and found that the evidence concerning the respondent's original reply was not inconsistent with the position in its brief. It thus concluded that it could not "say that a preponder- ance of the record evidence weighs in favor of finding the kind of wholesale repudiation of the ar- bitration procedure" that was found in Indiana & Michigan Electric. By contrast, here, the Respond- ent's admission, the language of its 3 November letter, and also its brief to the Board (which argues, e.g., that the parties' contract establishes that "the parties clearly indicated that they did not intend the arbitration provision to survive the term of the contract") are all consistent with a conclusion that the Respondent's refusal to process the grievances through the grievance-arbitration procedure amounted to a "wholesale repudiation" under Indi- ana & Michigan Electric. We also note that in Indi- ana & Michigan Electric, as here, none of the indi- vidual grievances at issue were found to "arise under" the expired contract within the meaning of Nolde. Therefore, contrary to the implication of the dissent, the Board's ultimate determination of arbitrability for remedial purposes does not defeat the finding of a violation where the respondent's generalized refusal to arbitrate is based on the expi- ration of the contract rather than the arbitrability of specific grievances. Accordingly, we find that the Respondent violated Section 8(a)(5) and (1) of the Act.6 2. The General Counsel and the Union have ex- cepted to the judge's dismissal of the allegation that the Respondent violated Section 8(a)(5) and (1) of the Act by refusing to bargain over the deci- sion to lay off the 10 unit employees. The judge found that the decision was "inextricably inter- twined" with the decision to convert the plant's machinery, which he found was not a mandatory subject of bargaining under First National Mainte- nance v. NLRB, 452 U.S. 666 (1981). Although the General Counsel does not contend that the decision to convert the plant's machinery was a mandatory subject of bargaining, she does contend that the layoffs were subject to mandatory bargaining as an effect of the decision to convert the plant's machin- ery. We find merit in this exception under the facts of this case. Both First National Maintenance, supra, and Otis Elevator Co., 269 NLRB 891 (1984), reaffirm that employers are obligated to bargain over the effects on unit employees of management decisions that are not themselves subject to the ob- ligation to bargain. Under the facts of this case, it is clear that the Respondent's decision to lay off employees is not so inextricably intertwined with the conversion decision as to render impossible bar- gaining over the layoff decision, as distinct from the conversion decision, as the judge believed it to be. In concluding otherwise, the judge stated that: It is not mere speculation that the Union's ar- guments against, and suggestions in place of, layoffs would be countered by Respondent's insistence that such action was necessary and that any alternative would not be cost effec- tive. These arguments would undoubtedly, de- spite the Union's protestations to the contrary, call into question the rationale underlying the plant conversion plan itself. 6 The Respondent also appears to argue that the grievances involved in this case are not arbitrable because the layoffs occurred nearly 1 year after the contract expired Compare Nolde, supra, 430 U S at 255 fn 8; Teamsters Local 238 Y. C R S. T, 795 F 2d 1400, 1404 (8th Cir 1986); Teamsters Local 703 v Kennuott Bros, supra, 771 F 2d 300, 303 In view of our finding here that the grievances did not arise under the expired collective-bargaining agreement, we find it unnecessary to determine whether time alone, without reference to the nature of the grievance, is sufficient to overcome the presumption of arbitrability 820 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD JD sec. III,B,3. We disagree with the judge that the course of bargaining would inevitably lead to questioning the decision to convert the plant. Laying off 10 employees is not the inevitable or, as our dissenting colleague would have it, the "natu- ral" outcome of the conversion decision. It is one of a number of responses to changed circum- stances, e.g., the 10 employees could have been re- trained to work the hot-type equipment or trans- ferred to other plants or positions within the Santa Clara plant. Moreover, 3 of the 10 employees laid off had not worked exclusively on the cold-type machinery; surely their layoff was not an inevitable or a "natural" consequence of the decision to con- vert the plant's operations. Plainly, then, the judge's forecast of fruitless negotiations will not support a finding that the layoff and conversion de- cision were inseparable for bargaining purposes. The nature of the layoff in this case was as the General Counsel contends: it was an effect of the conversion decision and, accordingly, the Respond- ent violated Section 8(a)(5) and (1) of the Act by failing and refusing to bargain with the Union over it. Morco Industries, 279 NLRB 762 (1986). Al- though the Respondent was willing to bargain over the effects of the layoff, it was not willing to bar- gain over the layoff as such. We emphasize that the Respondent has not excepted to the judge's finding that it failed and refused to bargain over the deci- sion to lay off.7 Our dissenting colleague contends that "regard- less of whether the layoff decision is characterized as `decision' bargaining or `effects' bargaining, it is subject to the proscriptions of Section 8(a)(5) only if it is a mandatory subject of bargaining." He then directs us back, inter alia, to the plurality opinion in Otis Elevator, supra, and maintains that because the layoff was motivated solely by the lawful deci- sion to convert operations and not motivated by a desire to reduce labor costs it was nonmandatory subject of bargaining. This is a unique view of the plurality Otis Elevator opinion, which itself indicat- ed that it was addressed to analyzing "Section 8(d) as it impacts upon management decisions, other than partial closings, to change the nature of the enterprise." 269 NLRB at 893. The plurality opin- ion nowhere indicated that it was also addressed to the effects of such management decisions. Indeed the plurality opinion in Otis remanded the effects ' Although the complaint alleges a failure to bargain over the decision to lay off employees, the General Counsel and the Charging Party clear- ly argued effects bargaining in their exceptions and brief in support of exceptions and the Respondent filed a reply brief The Respondent does not contend that it was not put on notice of the issues presented or that any additional evidence would have been relevant to the effects bargain- ing issue Consequently, we find that this pre-Otis Elevator, supra, com- plaint was more than adequate to satisfy due process requirements. bargaining allegations in that case for further analy- sis. It did not simply dismiss those allegations as outgrowths of the larger nonbargainable decision to transfer work. In fact, not one of the views ex- pressed in Otis would apply its analysis to effects bargaining. Member Dennis concurred in remand- ing the effects bargaining violation, while Member Zimmerman would have allowed the finding of an effects bargaining violation to stand without fur- ther hearing. Id. at 895, 901 . Here, we find the layoff was an effect of the decision to convert and hence was bargainable on that basis . More impor- tantly, we also note that the continuation or termi- nation of employment is certainly a term or condi- tion of employment, Fibreboard Corp. v. NLRB, 379 U.S. 203 , 210 (1964), so that the subject matter of the decision at issue here-of the 10 employ- ees-falls within the limits dictated by Section 8(a)(5) of the Act. It is therefore appropriate to order bargaining over the layoff decision in this case. Our colleague further charges that our decision ignores the Supreme Court's mandate in First Na- tional Maintenance, supra, that management's "need for unencumbered decisionmaking " must not be denied by undue bargaining constraints . He thereby ignores other remarks of the Court in First Nation- al Maintenance. By placing this limit on "decision- bargaining," the Court was not by extension limit- ing bargaining on the "impact" or effects of such a decision on the employees , as its underscoring of the continued viability of effects bargaining demon- strates. 452 U.S. at 677 fn. 15. Here we are finding the layoff bargainable as an effect of the conver- sion decision.8 6 A brief description of what bargaining over the layoffs would likely entail may help to clarify our reason for rejecting our dissenting col- league's view that requiring such bargaining impermissibly encumbers the entrepreneurial decision to eliminate jobs for technological reasons The likely scope of such bargaining is illuminated by the submissions of both the Respondent and the Union in this case The Union, in its brief, agrees that it had no right to bargain over the decision to make a technological change that would eliminate certain types of unit work, but it submits that it should have had a right to bar- gain, for example, over the timing of any attendant layoffs, the order in which employees should be laid off, the possibilities of avoiding the ne- cessity of some or all of the layoffs by retraining senior employees who had performed the eliminated work so that they could take other avail- able jobs, or by going to a short workweek or a system of rotating lay- offs that would divide the remaining amount of work among the work force The Respondent counters in its brief that the Union had the opportuni- ty to bargain about retraining workers, transferring them to other plants, or changing to a system of rotating layoffs In fact it now submits that it offered the Union the opportunity to engage in such bargaining when it offered to bargain over the "effects" (but not the decision) to lay employ- ees off We do not think that the Respondent's offer to bargain about the "effects" of layoffs gave the Union notice that the Respondent was will- ing to bargain about whether layoffs could be avoided through transfer, retraining, or the like. Thus, whether or not the Respondent was willing then to engage in the scope of bargaining it now describes is immaterial to our conclusion that the Respondent did not make the offer to bargain that it was required to under our Act LITTON BUSINESS SYSTEMS 821 In this case, as in Morco, bargaining over the lay- offs as an effect of the business decision will not compromise the employer's interest in "unencum- bered decision making," First National Mainte- nance, supra at 679, which the Supreme Court in First National Maintenance and the Board in Otis Elevator, supra, sought to protect. Our dissenting colleague disputes our reliance on Morco, but his analysis of the case is in error. In Morco, the re- spondent transferred work from its plant in Las Pinellas, Florida, to a new plant in Mississippi to facilitate the performance of more sophisticated work by its unionized employees at Las Pinellas. When the contract that was to have generated the more sophisticated work was delayed, the respond- ent commenced layoffs at the Las Pinellas plant and refused to bargain over them. The Board ruled that the respondent had no duty to bargain over the decision to transfer the work but specifically held that it was obligated "to bargain with the Union about the effects of [the] decision . . . includ- ing the layoffs." 279 NLRB 763 (emphasis added). Moreover, in addition to its explicit characteriza- tion of the layoff as an effect of the decision to transfer work, the Board also expressly adopted the judge's conclusion that the respondent had violated Section 8(a)(5) by refusing to bargain over the "ef- fects (including the layoffs)" of the respondent's decision to transfer work. Id. at 769. Thus, the plain language of Morco indicates that our col- league is in error in averring that the Board's order in Morco goes only to the effects of the layoff rather than to the layoff itself as an effect of the decision to transfer work out of the bargaining unit. In Drummond Coal Co., 277 NLRB 1618 (1986), the Board found that the respondent had no obliga- tion to bargain over its decision to close its central repair shop, transfer the work, and lay off the em- ployees. It does not appear that the legal theory before us here-that the layoff of the Respondent's employees was an effect of a nonbargainable man- agement decision and thus was subject to an effects bargaining obligation-was before the Board in Drummond. In this case, the General Counsel con- ceded that the business decision resulting in the layoff was nonbargainable and sought to have the layoff considered separately as an effect of that nonbargainable decision. On examination of this issue, we find that the approach urged by the Gen- eral Counsel in Morco is a better treatment of the issue of the Respondent's obligation to bargain over the layoffs that resulted from its decision to convert its plant's operations. We further find no merit in the Respondent's contention, which the judge found it unnecessary to reach, that the Union waived its right to bar- gaining over the layoff, whether by failing to re- quest bargaining, by contractual waiver, or by prior practice. The record shows that the Union repeatedly requested bargaining over the layoff de- cision and that the Respondent refused to bargain over it. Nothing in the collective-bargaining agree- ment expressly waives the Union's right to bargain over the layoff decision, and the provision for notice to the Union of contemplated layoff does not provide a basis for an implied waiver. Section 12(A) of the collective-bargaining agreement pro- vides, in part: "[w]henever an Employer intends to lay off all or part of his employees, he shall give notice of such intention not later than quitting time of the previous working day." It is clear that this provision, although requiring notice of a decision to lay off, is silent as to the Union's right to bar- gain over such a decision. We also reject, as did the judge, the Respondent's contention that Busi- ness Agent Major's interpretation of the meaning of this provision is an admission . As Major had no knowledge what the parties intended by the provi- sion, her testimony about its meaning is mere opin- ion. Finally, the record does not establish that the Respondent previously laid off employees without consulting or bargaining with the Union, or that the Union acquiesced in such acts. REMEDY Having found that the Respondent violated Sec- tion 8(a)(5) and (1) of the Act, we shall order it to cease and desist, to take certain affirmative action, and to post the appropriate notice. We shall remedy the Respondent 's unilateral abandonment of its grievance procedure by ordering it to process the grievances through its contractual grievance procedure. In accord with our analysis in Indiana & Michigan Electric, supra at 59-60, however, we will remedy a repudiation of the contractual com- mitment to arbitrate by ordering arbitration of the grievances only when the grievances at issue "arise under" the expired contract. Nolde Bros. v. Bakery Workers Local 358, 430 U.S. 243 (1977). The grievances at hand rely on the contractual provisions governing the order of layoff. As in In- diana & Michigan Electric, we conclude that the right invoked by the grievances does not "arise under" the expired contract under Nolde. The con- duct that triggered the grievances-the layoff of the 10 employees-occurred after the contract had expired. The right to layoff by seniority if other factors such as ability and experience are equal is not "a right worked for or accumulated over time." Indiana & Michigan, supra at 61. And, as in Indiana & Michigan Electric, there is no indication 822 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD here that "the parties contemplated that such rights could ripen or remain enforceable even after the contract expired." Id. (citation omitted). Therefore, the Respondent had no contractual obligation to arbitrate the grievances and we shall not order the arbitration of the grievances.9 Having found that the Respondent, by failing to bargain with the Union over the 31 August and 2 September layoffs as effects of its decision to con- vert its Santa Clara, California plant to an exclu- sively hot-type operation, has engaged in unfair labor practices within the meaning of Section 8(a)(5) and (1) of the Act, we shall accompany our order to bargain with a limited backpay require- ment designed both to make whole the employees for losses suffered as a result of the violation and to recreate in some practicable manner a situation in which the parties' bargaining position is not entire- ly devoid of economic consequences for the Re- spondent. We shall do so in this case by requiring the Respondent to pay backpay to its employees in a manner analogous to that required in Transmarine Navigation Corp., 170 NLRB 389 (1968), and Inter- state Tool Co., 177 NLRB 686 (1969). Thus, the Re- spondent shall pay all affected employees backpay at the rate of their normal wages when last in the Respondent's employ from 5 days after the date of this Decision and Order until the occurrence of the earliest of the following conditions: (1) the date the Respondent bargains to agreement with the Union on those subjects pertaining to the layoffs of 31 August and 2 September 1980 as effects of the plant conversion on its employees; (2) a bona fide impasse in bargaining; (3) the failure of the Union to request bargaining within 5 days of this Decision and Order or to commence negotiations within 5 days of the Respondent's notice of its desire to bar- gain with the Union; or (4) the subsequent failure of the Union to bargain in good faith; but in no event shall the sum paid to any of these employees exceed the amount he would have earned as wages from the dates on which he was laid off or termi- nated to the time he was recalled or secured equiv- alent employment elsewhere, or the date on which the Respondent shall have offered to bargain, whichever occurs sooner; provided, however, that in no event shall this sum be less than these em- ployees would have earned for a 2-week period at the rate of their normal wages when last in the Re- spondent's employ. ORDER The National Labor Relations Board orders that the Respondent, Litton Financial Printing Division, a Division of Litton Business Systems, Inc., Santa Clara, California, its officers, agents, successors, and assigns, shall 1. Cease and desist from (a) Without prior notice to or consultation with Printing Specialties and Paper Products Union, District Council No. 1, International Printing and Graphic Communications Union, as the exclusive collective-bargaining representative of the employ- ees in the appropriate unit, dealing directly with the employees by granting severance pay benefits to employees who have been laid off. (b) Refusing to bargain collectively, within the meaning of the Act, with the Union by unilaterally repudiating the arbitration provisions of the parties' 1974-1977 collective-bargaining agreement (the 1974-1977 Agreement) after the agreement expired. (c) Refusing to bargain collectively with the Union by unilaterally abandoning the grievance procedure in the 1974-1977 Agreement after the agreement expired. (d) Refusing to bargain collectively, within the meaning of the Act, with the Union over its layoffs of 31 August and 2 September 1980 as effects on its employees in the unit of its decision to convert its Santa Clara plant to a hot-type plant. (e) 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) On the Union's request, process the 10 layoff grievances filed by the Union about 5 September 1980 pursuant to the grievance procedure estab- lished in the 1974-1977 Agreement. (b) On the Union's request, bargain with it over its layoffs of 31 August and 2 September 1980 as effects on its employees in the unit of the decision to convert the Santa Clara, California plant to a hot-type plant. (c) Pay the laid-off employees their normal wages for the period set forth in the remedy por- tion of the Decision and Order. (d) Post at its facility in Santa Clara, California, copies of the attached notice marked "Appen- dix." 10 Copies of the notice, on forms provided by 9 Whether the conduct grieved in the layoff grievances constituted an unlawful unilateral change in terms and conditions of employment is not before us The manner of the layoff was not alleged as a unilateral change 10 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 " LITTON BUSINESS SYSTEMS 823 the Regional Director for Region 32, after being signed by the Respondent's authorized representa- tive, shall be posted by the Respondent immediate- ly upon receipt and maintained for 60 consecutive days in conspicuous places including all places where notices to employees are customarily posted. Reasonable steps shall be taken by the Respondent to ensure that the notices are not altered, defaced, or covered by any other material. (e) Notify the Regional Director in writing within 20 days from the date of this Order what steps the Respondent has taken to comply. CHAIRMAN DOTSON, dissenting. I dissent from my colleagues' finding that the Respondent violated Section 8(a)(5) and (1) of the Act by abandoning the arbitration procedure of the expired contract and by refusing to bargain with the Union over the "effects" of its decision to con- vert the plant's machinery. The facts are not in dispute. Briefly stated, the Union has represented the Respondent's production and maintenance employees since 1974, and the Re- spondent and the Union were parties to successive collective-bargaining agreements, the last of which expired on 5 October 1979. In July 1980 the Re- spondent decided to discontinue its cold-type print- ing process at its Santa Clara plant and convert to a strictly hot-type process. As a result, the Re- spondent transferred its cold-type work to other plants, sold its cold-type equipment, and laid off 10 employees. Of these 10 employees, 7 had worked exclusively on the cold-type equipment and 3 had worked primarily on it. The Respondent failed to give the Union notice of the layoffs, nor did it choose the employees for layoff in accord with se- niority. I The Union filed grievances on behalf of each of the laid-off employees alleging "unjust layoff, out of seniority," and the Respondent refused to accept them. On 24 September Union Business Agent Marilyn Major sent the Respondent' s plant manag- er, Mary Arnold, a letter requesting "that the Company meet with our representatives to discuss this layoff and its impact on these senior people." By letter dated 3 November, the Respondent's at- torney responded: In going through some old mail today, I came across your letter of September 24 and read it again. It appears to me to be ambiguous. When I first replied to it on October 3, I viewed it as The expired contract contained a provision which stated Whenever an Employer intends to layoff all or part of his employ- ees, he shall give notice of such intention not later than quitting time of the previous working day It is also understood that in case of lay- offs, lengths of continuous service will be the determining factor if other things such as aptitude and ability are equal a request to utilize the grievance-arbitration provisions of the expired contract. Upon reading it again, I can see where you might have also been requesting a meeting to discuss the effects of the layoffs mentioned in your letter. If that was your intent, I have no objection to such a meeting. Please call me if you wanted to arrange such a discussion. It is undisputed that the Respondent continued to refuse to bargain over the layoff decision but ex- pressed willingness to bargain over the effects of that decision; that the Union never requested to meet with the Respondent to discuss the effects of the layoff decision; and that the Respondent re- fused to process the 10 layoff grievances. My colleagues conclude on these facts that the Respondent's conduct "amounted to a wholesale repudiation of its contractual obligation to arbi- trate," citing Indiana & Michigan Electric Co., 284 NLRB 53, 59 (1987). I disagree. Although I joined my colleagues in that portion of the decision cited, the facts on which we based our finding of a wholesale repudiation of the arbitration provisions are far different from those in the present case. In Indiana & Michigan, supra at 59, as Members Babson and Stephens stated: [T]he Respondent took the position that upon contract expiration it was no longer bound by the arbitration provisions. The Respondent fol- lowed through on its initial declaration that it would not apply the arbitration provisions during the contractual hiatus by routinely re- fusing to arbitrate any hiatus grievance. It ex- pressly grounded its refusal to arbitrate in each case on its general intention not to arbitrate any grievances arising while the parties were without a contract. The Respondent did not limit its refusal to arbitrate to a particular grievance or class of grievances. Such is not the case here. All the record indi- cates is that the Union presented 10 grievances to the Respondent, all of which arose outside the ex- pired contract, and the Respondent refused to process them. The Union never mentioned the issue of arbitrating these or any other grievances, and the Respondent, unlike in Indiana & Michigan, never expressly or implicitly rejected the idea of arbitrating any grievances, except possibly the 10 grievances involved here, which my colleagues agree the Respondent was under no duty to arbi- trate. Under these circumstances, I find the evi- dence insufficient to establish a "wholesale repudi- 824 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD ation" of the arbitration procedure.2 See A. H. Belo, 285 NLRB 807 (1987). Further, for the rea- sons stated in my partial dissent in Indiana & Michigan, I would hold that the postexpiration duty to follow the contractual grievance procedure exists only to the extent of the duty to arbitrate grievances "arising under" the contract. As these grievances did not "arise under" the contract, I would find that the Respondent had no obligation so to process them. Accordingly, I would dismiss these complaint allegations. My colleagues also find that the Respondent had an obligation to bargain with the Union over its de- cision to lay off the 10 cold-type employees. They achieve this result by characterizing the layoff as an "effect" of the decision to convert from cold- type to hot-type printing and, as such, encom- passed within the Respondent's bargaining obliga- tion. I take no issue with my colleagues over the well- settled proposition that an employer must engage in effects bargaining. What I do take issue with them is that, under all the circumstances presented in this case, the layoff may not properly be classi- fied as an effect of the conversion decision. The General Counsel did not allege, nor do my col- leagues find, that the Respondent had any obliga- tion to bargain with the Union over its decision to convert from cold-type to hot-type printing.3 Nev- ertheless, the General Counsel and my colleagues view the layoff decision as a separate and distinct decision from the conversion decision, thereby trig- gering the Respondent's obligation to bargain. Such a distinction is strained in light of the facts of this case. Once the Respondent decided to con- vert from cold-type to hot-type printing, it laid off the 10 employees involved exclusively or primarily with the cold-type process. Thus, the Respondent's layoff decision was totally dependent on and a nat- ural result of its conversion decision or, as the judge found, the layoff decision was "inextricably intertwined" with the conversion decision. Once the General Counsel in effect conceded that the Respondent could lawfully implement the conver- sion decision without bargaining with the Union, it follows that the Respondent could lawfully lay off the cold-type employees-the natural and logical method of implementation of its conversion deci- sion. 2 My colleagues base their finding of wholesale repudiation on the Re- spondent's 3 November letter to the Union and its admission at the hear- ing that it failed and refused to process the 10 grievances "pursuant to the gnevance-arbitration procedure in the expired contract " Contrary to my colleagues' assertion , these two pieces of evidence establish only that the Respondent refused to process these grievances , not an across-the- board refusal to arbitrate the postexpiration disputes 2 Under Otis Elevator, 269 NLRB 891 (1984), the Respondent's conver- sion decision is clearly a nonmandatory subject of bargaining Even assuming, however, that my colleagues are correct in stating that "the Respondent's decision to lay off employees is not so inextricably inter- twined with the conversion decision to render im- possible bargaining over the layoff decision, as dis- tinct from the conversion decision, as the judge be- lieved it would be," their refusal to analyze the layoff decision under Otis Elevator is erroneous. It is axiomatic that an employer's duty to bargain encompasses only mandatory subjects of bargain- ing. NLRB v. Borg-Warner Corp., 356 U.S. 342 (1958). Regardless of whether the layoff decision is characterized as "decision" bargaining or "effects" bargaining, it is subject to the proscriptions of Sec- tion 8(a)(5) only if it is a mandatory subject of bar- gaining . Thus, as a prerequisite to any order that the Respondent must bargain with the Union over the layoff decision, my colleagues must find the layoff decision to be a mandatory subject of bar- gaining. This they cannot do. Under the opinion of former Member Hunter and me in Otis Elevator, the layoff decision, motivated solely by the Re- spondent's decision to implement its lawful conver- sion decision and not by labor cost reasons, is a nonmandatory subject of bargaining. No different result would be reached under the opinions of former Members Zimmerman and Dennis as the decision was not amenable to resolution through bargaining.' Because the meaning of my colleagues' order is far from certain in this case, they may contend that the Respondent is required to bargain only over the effects of its layoff decision. Yet under the facts of this case, my colleagues are precluded from en- tering such an order. The General Counsel did not allege that the Respondent failed to bargain over the effects of the layoff decision. Nor could one be sustained in light of the Respondent's stated will- ingness to engage in effects bargaining, and the Union's failure to respond to such offers. The effect of my colleagues' decision in this case is to order the Respondent to bargain over a sub- ject that it has no legal obligation to do. My col- leagues have not expounded a legal basis for their decision nor, in my opinion, is it possible to do so.5 4 My colleagues contend that Otis Elevator is irrelevant here because Otis does not apply to effects bargaining As I explained above, in my opinion the layoff decision here cannot be classified merely as an effect of the conversion decision but rather must be analyzed, like other manage- ment decisions, under the framework set out in Otis s In support of their finding , my colleagues rely on Morco Industries, 279 NLRB 762 (1986), a case in which I participated In my opinion, the Board in that case ordered the respondent to bargain only about the ef- fects of the layoff that resulted from the lawful transfer decision, not the layoff decision itself. This interpretation is consistent with the remedy given in that case as well as with the Board's decision in Drummond Coal Continued LITTON BUSINESS SYSTEMS 825 As the Supreme Court recognized in Fibreboard Corp. v. NLRB, 379 U.S. 203 (1964), and in First National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981), certain management decisions may result in the loss of jobs and yet be outside the bargaining obligation. Indeed, as the Court stated in First Na- tional Maintenance, 452 U.S. at 678-679: Management must be free from the constraints of the bargaining process to the extent essen- tial for the running of a profitable business. It also must have some degree of certainty be- forehand as to when it may proceed to reach decisions without fear of later evaluations la- beling its conduct an unfair labor practice.. . . [I]n view of an employer's need for unencum- bered decisionmaking, bargaining over man- agement decisions that have a substantial impact on the continued availability of em- ployment should be required only if the bene- fit, for labor-management relations and the col- lective bargaining process, outweighs the burden placed on the conduct of the business. [Footnotes omitted.] My colleagues have ignored these dictates. To require the Respondent to bargain over the layoff, which was part and parcel of its decision to con- vert its machinery, would severely undermine the Respondent's "need for unencumbered decision- making." This is true regardless of whether the layoff is considered as an "effect" of the conver- sion decision or a decision to be viewed separately from the conversion decision. For these reasons, I dissent. employees by unilaterally granting severance pay benefits to employees who have been laid off. WE WILL NOT refuse to bargain with the Union, by generally repudiating any obligation to process or arbitrate grievances arising after contract expira- tion and by refusing to comply with the grievance procedure established in our 1974-1977 collective- bargaining agreement with the Union, after the agreement expired. WE WILL NOT refuse to bargain with the Union over our layoff of 31 August and 2 September 1980 as effects on our unit employees of our decision to convert our Santa Clara, California plant to a solely hot-type operation. 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, on the Union's request, process the 10 layoff grievances filed by the Union about 5 Sep- tember 1980 pursuant to the grievance procedure established in our 1974-1977 collective-bargaining agreement with the Union. WE WILL, on the Union's request, bargain with it over our layoffs of 31 August and 2 September 1980 as effects on our unit employees of our deci- sion to convert our Santa Clara plant to a hot-type operation. WE WILL pay those employees laid off as a result of our conversion of our Santa Clara plant to a hot-type operation their normal wages for the period specified by the National Labor Relations Board. Co, 277 NLRB 1618 (1986), in which I also participated , where the Board found no obligation to bargain over the decision to lay off employ- ees as a result of its lawful decision to transfer repair services and close the Jasper shop and deferred the issue of effects bargaining over the lay- offs to an arbitral award APPENDIX NOTICE To EMPLOYEES POSTED BY ORDER OF THE NATIONAL LABOR RELATIONS BOARD An Agency of the United States Government 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, without prior notice to or consul- tation with Printing Specialties and Paper Products Union, District Council No. 1, International Print- ing and Graphic Communications Union as the ex- clusive representative of the employees in the ap- propriate bargaining unit, deal directly with the LITTON FINANCIAL PRINTING DIVI- SION, A DIVISION OF LITTON BUSI- NESS SYSTEMS, INC. Patricia Milowicki, Esq., for the General Counsel. M. J. Diederich, Esq., Corporate Director of Industrial Relations, of Beverly Hills, California, appearing for the Respondent. David Rosenfeld, Esq. (Van Bourg, Allen, Weinberg & Roger), of San Francisco, California, for the Charging Party. DECISION STATEMENT OF THE CASE BURTON LITVACK, Administrative Law Judge. This matter was heard before me in Oakland, California, on March 19, 1981. On November 24, 1980,1 the Regional Director for Region 32 of the National Labor Relations Board (the Board) issued a complaint , based on an unfair labor practice charge filed on Ocober 27 by Punting ` Unless otherwise stated , all events here involved occured in 1980 826 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Specialties and Paper Products Union, District Council No. 1, International Printing and Graphic Communica- tions Union (the Union) alleging that Litton Financial Printing Division, a Division of Litton Business Systems, Inc. (Respondent) engaged in acts and conduct violative of Section 8(a)(1) and (5) of the National Labor Rela- tions Act (the Act). Respondent filed an answer, denying the commission of any unfair labor practices. All parties were afforded the opportunity to offer relevant evidence, to examine and cross-examine witnesses , and to submit posthearing briefs. All parties filed such briefs, and these have been carefully considered. Based on the entire record, the posthearing briefs, and on my observation of the demeanor of the witnesses, I make the following FINDINGS OF FACT 1. JURISDICTION Respondent, a State of New York corporation, with an office and place of business in Santa Clara, California, is engaged in the wholesale printing and distribution of fi- nancial documents. During the 12-month period immedi- ately preceding issuance of the complaint, Respondent, in the normal course and conduct of its business operations, purchased and received goods or services valued in excess of $50,000 directly from suppliers located outside the State of California. The answer admits, and I find, that Respondent is an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act. II. LABOR ORGANIZATION The answer admits, and I find, that the Union is a labor organization within the meaning of Section 2(5) of the Act. III. ISSUES 1. Did Respondent violate Section 8(a)(1) and (5) of the Act by refusing to bargain with the Union concern- ing its decision to lay off 10 employees? 2. Did Respondent violate Section 8(a)(1) and (5) of the Act by refusing to abide by the terms of its expired collective-bargaining agreement with the Union by refus- ing to process grievances through, and including, arbitra- tion concerning the laid-off employees? 3. Did Respondent violate Section 8(a)(1) and (5) of the Act by, without prior notice to or bargaining with the Union, bypassing the Union and paying to the afore- mentioned 10 laid-off employees severance pay benefits? A. Facts Respondent is engaged in the business of printing bank checks for utilization by customers of commercial banks. While the checks are printed in accordance with custom- er orders, Respondent's contractual relationship remains with its client banks. In performing its service, Respond- ent has plants located in Nacaville, Michigan; Munson, Massachusetts; and Fresno, Los Angeles, San Diego, and Santa Clara, California. At all times material, Mary Arnold was the plant manager at Respondent 's Santa Clara, California facility, the only one of the aforemen- tioned plants involved here. With regard to the Santa Clara facility, the record dis- closes that for several years, the Union has been the col- lective-bargaining representative of the production and maintenance employees employed therein and that, at least since 1974, Respondent and the Union have been signatory to collective-bargaining agreements covering these individuals. The most recent contract expired on October 5, 1979. Pursuant to the filing of a decertifica- tion petition, on August 17, 1979, the Regional Director for Region 32 conducted a secret-ballot election in a unit consisting of the production and maintenance employees employed at the plant; excluding all other employees, office clerical employees, guards, and supervisors as de- fined in the Act. A majority of the voting unit employ- ees cast ballots in favor of the Union, and on July 2, 1980, the Union was certified as the exclusive representa- tive for purposes of collective bargaining of the employ- ees in the aforementioned unit. Notwithstanding the cer- tification, commencing on August 1, Respondent refused to bargain with the Union. Thereafter, a charge was filed in Case 32-CA-3036, and on June 12, 1981, the Board concluded2 that by its aforementioned conduct, Re- spondent had acted in violation of Section 8(a)(1) and (5) of the Act. The record further discloses that the events, giving rise to the allegations here, had their genesis prior to the Board's certification of the Union. Mary Arnold testified that early in 1980 Respondent's upper management offi- cials commenced studying and discussing the feasibility of converting the check-printing process at the Santa Clara, California plant from utilization of both the hot- type3 and cold-type4 printing methods to solely a hot- type printing procedure. At that time, that plant was the only one of Respondent's facilities in which both printing methods were employed and, in fact, the only plant uti- lizing the cold-type process. According to Arnold, four factors influenced Respondent's contemplated elimination of this latter method: a loss of orders due to customer bank discontent with the quality of print produced by the cold-type printing method; the "twelve-on" format produced by the hot-type procedure was more economi- 2 256 NLRB 516 a In the hot-type printing process, orders are either sent directly to the Santa Clara plant by the customer bank or the latter sends a magnetic tape, containing all check information , to Respondent's main computer center in Los Angeles, from which location the check information is dis- seminated to all plants , which are participating in the bank's order In either case, the order is fed into an "intertype " machine in which a lead "personalization" of the ordered check is produced The lead is then proofread and placed in vertical printing presses , and checks are imprint- ed on a "twelve-on" format (12 checks to a sheet) 4 In the cold-type printing process, check orders would be received at the Santa Clara plant and sorted down by color and size (business checks would be printed in a "three-on" format while personal checks were printed in a "five-on" format) Next, the order would be given to an indi- vidual who operated an addressograph machine This machine contains a diecrul plate on which the bank's branch information has previously been imprinted, and the information is, during this process, printed on the "paper master" of the check order. Next, a typist transcribes the check order information onto the paper master After proofreading, the order plate is placed in an offset printing press in which process the order is photoengraved onto check stock LITTON BUSINESS SYSTEMS 827 cal; in the event of an emergency, other plants would thereafter be able to "pick up" Santa Clara's work; and, finally, training, research, and development, and equip- ment costs would be significantly reduced by use of a single printing process. Despite the foregoing considerations, as of July Re- spondent had not yet finally decided to implement the proposed conversion of the Santa Clara facility to wholly a hot-type printing operation.5 However, in that month, a major customer, Wells Fargo Bank, canceled approximately 30 percent of its cold-type print orders, and, according to Arnold, the final decision to cease uti- lizing cold-type punting "was made . .. very soon after that." Arnold further testified that implementation of Re- spondent's conversion plans was riot intended to be an overnight process but rather a gradual one: "there had to be a phase out operation . . . before there could be a phase in." Thus, Respondent required time to remove the existing cold-type printing equipment from the plant and to install additional hot-type equipment. In order to fa- cilitate this procedure, "some work that we were doing on cold type . . . was transferred to one of the other plants" with the intent that after sufficient hot-type equipment was operational, "we could then go back and pick that work up" on a hot-type basis. Arnold stated that the decision to divert the remaining cold-type print orders to this other plant was reached in mid-August and that the complete transferral of such work was not com- pleted until mid-September.6 With regard to the remain- ing cold-type printing equipment, the record reveals that as of the hearing date, of Respondent's 16 or 17 offset printing presses, 6 or 7 typewriters utilized only for this work, 2 addressograph machines, and some miscellane- ous equipment, Respondent continued performing mini- mal work on the addressograph machines, had removed from the plant and warehoused the offset printing presses and excess typewriters, had sold two printing presses, and was actively seeking buyers for the remaining mate- rial. Also, Respondent was in the process of purchasing new hot-type equipment and transferring to Santa Clara such machinery from other plants. As of the hearing date, Respondent's capital expenditures, involved in the conversion process, were approximately $20,000. The record further reveals that in the midst of trans- ferring cold-type printing work to the other plant and out of an existing employee complement of 42 individ- uals, on August 29 and September 2, Respondent laid off 10 employees: Mildred Baker, Teresa Marquez, Cather- ine Klier, Claire Lundegard, Gloria Hernandez, Eileen Moeller, Carmen Mata, Jean Ceccato, Helen Soto, and Geida Brosig. Arnold testified, "We decided to lay people off because we lost a volume of business and . . . we then make the decision to go to hot type." Elaborat- ing further on the relationship between the decision to lay off employees and the implementation of the conver- sion plan, she testified, "The work that we lost from 5 At one time, cold-type print orders constituted 60 percent of the Santa Clara plant's business By July, this percentage had decreased to approximately 30 percent of the work at that location 8 As previously noted, Arnold testified that Respondent's Santa Clara facility was the sole faciltity that maintained a cold-type printing capabil- ity She did not explain this contradiction Wells Fargo Bank and the comments that we'd been having from some other banks about our [cold type] quality were specifically involved. . .."' Specifically as to why the above individuals were selected for the layoff, Arnold next stated, "The people that were laid off were involved in cold type. As a primary job." Closely examined on this point by counsel for the Union, Arnold stated that employees Ceccato, Baker, Marquez, Klier, Lundegard, Moeller, and Soto worked solely on cold-type equipment and that the remaining laid-off indi- viduals "did other things besides but mainly their duties were involved in cold-type, but not totally." Arnold compared these employees to those who were retained, averring, without contradiction, that the latter employees all possessed dual capabilities in both printing processes.9 The record establishes that each of the laid-off em- ployees was a member of the bargaining unit for which the Union had been certified as the representative for purposes of collective bargaining and that notwithstand- ing this fact and the absence of any such provision in the expired collective-bargaining agreement between the par- ties and of any past practice to give such compensation, Respondent gave severance pay, in amounts ranging from $711.60 to $2599.80, to each laid-off individual without first notifying and giving the Union and oppor- tunity to bargain.' 0 As to the procedure for layoff, sec- tion 12(A) of the aformentioned expired contract sets forth the parties' practice in this regard: Whenever an Employer intends to lay off all or part of his employees, he shall give notice of such inten- tion not later than quitting time of the previous working day. It is also understood that in case of layoffs, lengths of continuous service will be the de- termining factor if other things such as aptitude and ability are equal. Marilyn Major, a union business agent who has been re- sponsible for the bargaining unit employees since April or May 1979, testified without contradiction, that no union representative was notified prior to the August 29 and September 2 layoffs that such would occur. Finally, a review of General Counsel's Exhibit 7, which is a se- niority list for all employees as of August 26, 1980, estab- lishes that the above-described layoffs were not consum- mated in strict accordance with seniority. Business Agent Major testified that she first became aware of the layoffs when informed by the affected em- ployees themselves. Thereupon, she instructed the shop steward, Linda Stockdale, to file grievances, pursuant to ° Under cross-examination, Arnold admitted that the transfer of work out of the Santa Clara plant was a partial reason for some of the layoffs. 8 Arnold admitted that employee Brosig worked on neither hot- nor cold-type equipment but rather was classified as an "operator" and worked on a machine called a "guillotine cutter " 9 Arnold, in response to a question posed by counsel for the Union, agreed that rather than laying off the 10 employees, Respondent might have undertaken to retrain them to perform hot-type printing work 10 Arnold testified, "Top management decided that that was a compa- ny policy and that was right to do that " There is no other record evi- dence regarding a past practice to grant severance pay, and Arnold did not elaborate on her vague testimony on this point Accordingly, I do not conclude that Respondent had any sort of past practice in this regard 828 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD the grievance and arbitration procedure set forth in sec- tion 21 of the expired collective-bargaining agreement."' Although Arnold could not recall the filing of any griev- ances, Major testified that such were filed, and General Counsel's Exhibit 4 has 10 attachments, all dated Septem- ber 5, which are grievance forms for each laid-off em- ployee, protesting the propriety of each respective layoff. Major further testified that Respondent refused to accept any of the grievances, and I specifically credit her more logical testimony in this regard. In any event, on September 24, as a "follow up to document the fact that the grievances had been filed," Major sent a letter to Arnold stating that the aforementioned grievances had been filed and requesting "that [Respondent] meet . . . to discuss this layoff and its impact on these senior people." Respondent admits that it failed and refused, and continues to fail and refuse, to process the employee grievances pursuant to the grievance and arbitration pro- cedure set forth in the expired collective-bargaining agreement. On November 3, Respondent's attorney wrote to Major agreeing to a meeting "to discuss the ef- fects of the layoffs." On November 10, the Union's attor- ney responded, renewing the Union's demand that Re- spondent bargain with regard to both the decision to lay off any employees and the effects thereof. It is uncontro- verted that since receipt of the latter letter, Respondent, although willing to bargain over the effects, has refused, and continues to refuse, to bargain over its decision to lay off the 10 affected employees. 112 Also, the Union has never requested to meet with Respondent to discuss the effects of the layoffs. During cross-examination by counsel for Respondent, Business Agent Major was extensively questioned with regard to the meaning of section 12(A) of the expired contract. Testifying that, on assuming her position in 1979, she had no conversations with her superiors as to the meaning of the entire contract, in general, and the layoff procedure in particular, Major was asked whether Respondent had "the right to lay off employees without first bargaining about the decision to do so provided that it complied with the provisions of Section 12(A)." She replied, "I think that that probably approximates my un- derstanding that the Company does have the right to lay off employees under the provisions in the contract." She further admitted that seniority rights-and not prior bar- gaining-were "the primary concern" when she resub- mitted the layoff grievances on September 24. Finally, she stated that the only qualifications to Respondent's right to lay off employees were "the stipulations that 11 The expired contract established a two-step grievance procedure for matters concerning "the interpretation or application of the terms of the Agreement " If such remained unresolved, the grievance could "be joint- ly submitted" to arbitration, with the parties sharing the costs of such on an equal basis 12 Arnold, who was the Santa Clara plant manager for approximately 3-1/2 years, testified that during this period there were two or three em- ployee layoffs Although recalling that no more than five employees were involved on each occasion , Arnold could recall nothing more spe- cific about each layoff, including the dates thereof, and Respondent of- fered no supporting documents Further, while recalling that on each oc- casion the Union neither demanded that Respondent bargain nor protest- ed the fact of the layoff, Arnold offered no evidence that Respondent no- tified the Union prior to the layoffs or that the Union ever became aware of same exist in the contract as to how layoffs were to take place." B. Analysis 1. The payment of severance pay to the laid-off employees Paragraph 12 of the complaint alleges that by unilater- ally paying to the laid-off employees severance pay and thereby bypassing the Union and dealing directly with the employees, Respondent engaged in conduct violative of Section 8(a)(1) and (5) of the Act. The General Coun- sel argues that severance pay is the equivalent of wages; that, accordingly, such was a mandatory subject of bar- gaining; and that, therefore, Respondent was under a duty to bargain with the Union before awarding sever- ance pay to the laid-off employees. Respondent asserts that the payment of severance pay did not constitute a violation of the Act inasmuch as there was no unilateral change in the employees' terms and conditions of em- ployment and as there existed an employer practice to grant such compensation. Initially, there can be no doubt herein that, notwith- standing the expiration of the parties' most recent collec- tive-bargaining agreement in October 1979 and, at least, since certification of the Union by the Regional Director for Region 32 on July 2, 1980, as the exclusive collec- tive-bargaining representrative of the Santa Clara, Cali- fornia plant production and maintenance employees, Re- spondent has, at all times material, been under a statutory duty to bargain with the Union with regard to the afore- mentioned employees' terms and conditions of employ- ment. Allstate Insurance Co., 234 NLRB 193 (1978); Leveld Wholesale, Inc., 218 NLRB 1344 (1975). As to the specific subject matter over which this obligation exists, Sections 8(a)(5) and 8(d) of the Act together "establish the obligation of the employer and the representative of its employees to bargain with each other in good faith with respect to `wages, hours, and other terms and con- ditions of employment. ... " NLRB v. Borg-Warner Corp., 356 U.S. 342, 349 (1958). However, "only as to those matters enumerated [above] . . . is there a manda- tory obligation to bargain .. . ." Seattle First National Bank v. NLRB, 444 F.2d 30, 32 (9th Cir. 1971). Clearly, severance pay constitutes a form of wages in- asmuch as such is a payment directly related to the em- ployment relationship, and just as wages represent com- pensation for past work, severance pay represents com- pensation for the employer's act of discharging or laying off an employee and for the trauma resulting from the discharge or layoff. As such, I believe that issue of sever- ance pay must be considered to be a mandatory subject of bargaining. Continental Insurance Co. v. NLRB, 495 F.2d 44, 49 (2d Cir. 1974). Herein, despite the Union's status as the collective-bargaining representative of the 10 laid-off employees, Respondent admittedly bypassed the Union and directly granted severance pay to each af- fected individual. I believe that Respondent's conduct constituted a per se violation of Section 8(a)(1) and (5) of the Act inasmuch as Respondent failed to notify and dis- cuss this action, a mandatory subject of bargaining, with LITTON BUSINESS SYSTEMS 829 the Union, the certified collective-bargaining representa- tive of the production and maintenance employees, before implementing it. Guerdon Industries, 218 NLRB 658, 660-661, 661 fn. 21 (1975). Moreover, as Respond- ent offered to the laid-off employees wages, in the form of severance pay, not offered to the Union, as the certi- fied bargaining representative, Respondent dealt directly with employees about terms and conditions of employ- ment in violation of Section 8(a)(]l) and (5) of the Act. Lehigh Lumber Co., 230 NLRB 1122 fn. 1 (1977). Respondent's defenses to this allegation of the com- plaint are patently without merit. With regard to an as- serted past practice of granting severance pay, I have previously concluded, and reiterate, that Arnold's testi- mony on this point is too vague a basis on which to make such a finding. In any event, "when a bargaining obligation exists, the mere existence of an established practice . . . does not automatically negate an employ- er's obligation to give the bargaining agent notice and the opportunity to bargain." Kendall College, 228 NLRB 1083, 1085 (1977). Respondent's next defense-that no unilateral charge, concerning the payment of severance pay, was either alleged or proven by the General Coun- sel-perplexes me. Thus, the allegation as stated in the complaint involves direct dealing and not a unilateral change, and the former, if proven, establishes a violation of the Act. Lehigh Lumber, supra . Further, contrary to Respondent, the very payment of such compensation, a subject of mandatory bargaining, constitutes a violation of Section 8(a)(1) and (5) of the Act. Guerdon Industries, supra. Accordingly, whether the granting of severance pay constituted a unilateral change in employees' terms and conditions of employment is an issue not before me. 2. Whether Respondent is obligated to process the layoff grievances pursuant to the contractual grievance and arbitration procedure Paragraphs 13(a) and 14(a) of the complaint together allege that Respondent acted in violation of Section 8(a)(1) and (5) of the Act by failing and refusing to proc- ess, pursuant to the terms of the expired collective-bar- gaining agreement, layoff grievances that were filed by the Union. The General Counsel and the Union argue that the Board's decision in American Sink Top Co., 242 NLRB 408 (1979), establishes that the grievance and ar- bitration provisions thereof survive the expiration of a collective-bargaining agreement and that, therefore, Re- spondent was obligated to process., through arbitration if necessary, the above-described layoff grievances. Re- spondent, although not disputing the meaning of Ameri- can Sink Top, argues that the Board's decision was an un- warranted extension of the decision of the Supreme Court in Nolde Bros. v. Bakery Workers Local 358, 430 U.S. 243 (1977), and that the instant case is factually dis- tinguishable from American Sink Top. i3 i3 At the hearing, Respondent asserted that subsequent to the expira- tion of a contract that contains a formalized grievance procedure, an em- ployer need not process grievances pursuant to that procedure Rather, the employer merely has an obligation to bargain collectively about the grievances. It is with this as background that Respondent points out that the Union has never acted on its attorney's invitation to arrange a meet- ing to engage in bargaining over the effects of the layoffs It is uncontroverted that section 21 of the parties, ex- pired collective-bargaining agreement sets forth a griev- ance and arbitration procedure for the resolution of dis- putes involving the interpretation or application of the contract; that the Union filed grievances on behalf of each of the laid-off employees; and that Respondent re- fused to process these pursuant to the aforementioned contractual provisions. The Board has long held that the grievance procedure of a collective-bargaining agree- ment survives the expiration thereof and is a term and condition of employment. Martinsburg Concrete Products Co., 248 NLRB 1352 (1980); Newspaper Printing Corp., 221 NLRB 811 (1975). Further, any unilateral changes with regard to the processing of disputes would be viola- tive of Section 8(a)(1) and (5) of the Act. As stated by the Board, "It seems clear to us that an employer may not unilaterally attempt to impose new channels for reso- lution of disputes without undercutting the Union's rep- resentative status." Hilton-Davis Co., 185 NLRB 241, 243 (1970). Accordingly, Respondent's failure to accept and process the layoff grievances pursuant to the expired contractual grievance procedure constitutes a unilateral change within the meaning of Section 8(a)(1) and (5) of the Act. Martinsburg Concrete Products, supra at fn. 3. Likewise, I believe that if the grievances remain unre- solved prior to that stage, Respondent may not lawfully, on request, refuse to submit them to arbitration. In this regard, I note that the Board had traditionally held that arbitration provisions, unlike a grievance procedure, do not survive the expiration of a collective-bargaining agreement, reasoning that arbitration represented an em- ployer's "consensual surrender" of economic power during the lifetime of an agreement-which power each contracting party is free to utilize after expiration of the contract, absent mutual consent. Hilton-Davis, supra at 242. However, outside the ambit of the Act and within the context of a civil suit to compel arbitration, the Su- preme Court considered this identical issue. In Nolde Bros., supra, a contractual dispute arose after the parties' contract had expired. The Court concluded that "noth- ing in the arbitration clause expressly excludes from its operation a dispute which arises under the contract, but which is based upon events that occur after its termina- tion," and that there existed no evidence that the parties had intended a contrary result. Nolde Bros., supra at 249, 253. Accordingly, the employer was ordered to arbitrate the dispute. In American Sink Top, 14 the Board adopted the rationale of the Supreme Court, delineating and de- fining an employer's obligation to arbitrate, after the ex- piration of a contract, within the meaning of the Act. Therein, a contract expired, and approximately 3 months later, the employer refused to process an employee grievance based on the expired agreement. As herein in- volved, the contract provided for arbitration of unre- solved grievances. The Board reasoned, "The griev- ance's basis is `arguably'-at least the contract, and there 14 Contrary to counsel for the Union, rather than expressly overruling Hilton-Davis, the Board merely adopted the Nolde Bros rationale but without disavowing its prior reasoning However, such does not detract from my finding that Hilton-Davis no longer represents the rationale of the Board on this point 830 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD is no reason to conclude that the parties had intended the arbitration provisions to end with the contract's term." American Sink Top, supra. Accordingly, the Board re- quired that the employer therein not only process the grievance but also arbitrate the matter, if necessary. 15 Respondent argues that the wording of the expired collective-bargaining agreement here establishes that the parties did intend the grievance and arbitration provision to end with the contract's term. Counsel points to the following language on the first page of that agreement, "WITNESSETH: That the above parties do mutually agree that the stipulations set forth shall be in effect for the time hereinafter specified," and asserts that such must be accorded recognition as the intent of both Respondent and the Union. I do not agree. Initially, there is no lan- guage within the grievance and arbitration provision (sec. 21) of the expired contract that limits the effective- ness thereof to the explicit term of the contract. Next, it is gainsaid that on the effective date of the agreement, the provisions thereof, with certain exceptions, became the covered employees' terms and conditions of employ- ment. As such, these survived the expiration of the agreement, and Respondent could not unilaterally lawful- ly modify or eliminate the terms and conditions without first notifying and giving the Union an opportunity to bargain. NLRB v. Katz, 369 U.S. 736 (1962). Carrying Respondent's utilization of the above-quoted language to its logical extreme would permit Respondent to modify or eliminate any term or condition of employment that is incorporated in the expired agreement-a position wholly inconsistent with Section 8(a)(1) and (5) of the Act and on which I do not believe Respondent seriously advocates. Bearing the foregoing in mind, there is no record evidence as to exactly what the parties intended by the quoted language, much less that such specifically included the grievance and arbitration procedure. Rather, as the Supreme Court in Nolde Bros. emphasized, the mere existence of an arbitration provision demon- strates that "the parties clearly expressed their preference for an arbital . . . interpretation of their [contractual ob- ligations] . . . the alternative remedy of a lawsuit is the very remedy the arbitration clause was designed to avoid." Nolde Bros., supra at 253-254. Accordingly, based on the record as a whole, I do not believe that the parties intended that the arbitration provision would end when the contract expired, and I find that by refusing to arbitrate unresolved grievances, Respondent acted, and continues to act, in violation of Section 8(a)(1) and (5) of the Act. American Sink Top, supra. 3. Whether Respondent was obligated to bargain with the Union regarding its decision to lay off 10 employees Paragraphs 13(b) and 14(b) of the complaint allege that Respondent acted in violation of Section 8(a)(1) and (5) of the Act by failing and refusing to bargain with the Union regarding its decision to lay off employees as a result of converting its Santa Clara facility from a com- bined hot-type and cold-type to an entirely hot-type printing operation. The General Counsel argues that in- asmuch as any layoff constitutes a detriment to employ- ees in a bargaining unit and as the layoff here involved approximately 25 percent of the bargaining unit and had a substantial impact thereon, Respondent was obligated to bargain with the Union regarding its decision to effect such a change on the bargaining unit. In so arguing, the General Counsel does not contend either that the layoff itself violated the Act as discriminatorily motivated or that the layoff constituted a unilateral change in the em- ployees' terms and conditions of employment. Respond- ent asserts two separate and distinct defenses to this alle- gation. Initially, counsel argues that inasmuch as the plant conversion decision was of such fundamental im- portance to the basic direction of Respondent's corporate enterprise, such was not included within the area of man- datory collective bargaining . Further, as this latter deci- sion and the decision to lay off employees were "inextri- cably interwoven," Respondent was also under no duty to bargain over the layoff decision. Next, Respondent argues that a reasonable interpretation of the meaning of section 12(A) of the expired collective-bargaining agree- ment and the testimony of Business Agent Major estab- lish that the Union waived any rights to bargain over the decision by Respondent to lay off employees. Final- ly, characterizing Respondent's actions here as a diver- sion of work pending alteration of equipment and con- tending that minimal financial expenditures were in- volved, counsel for the Union asserts that Respondent was obligated to bargain prior to its decision to lay off employees. At the outset, I note that the General Counsel's theory that Respondent was obligated to bargain with the Union prior to implementing i 6 the decided-on layoffs is solely based on the number of employees who were affected and isolates the decision and resulting layoffs from, and entirely ignores, the surrounding circumstances, includ- ing the conversion of the plant to an entirely hot-type printing process and the accompanying diversion of cold-type printing work from the Santa Clara plant. As argued by the General Counsel in her posthearing brief: "[Laying off 10 out of approximately 42 bargaining unit employees] appears to constitute a reduction in the unit of . . . 25% This is [a] `significant detriment' which re- sults in a major change . . and therefore requires man- datory bargaining." While certainly correct, as general principles of Board law, that the matter of the layoff or termination of bargaining unit personnel is a mandatory subject of bargaining (Ramos Iron Works, 243 NLRB 896, 902 (1978), and Shaw College at Detroit, 232 NLRB 191, 204 (1977)) that an employer's failure to give notice and to permit a labor organization to bargain, after certi- fication, over a contemplated economic layoff is in dero- gation of the employer's statutory bargaining obligation (Keystone Casing Supply, 196 NLRB 920, 927 (1972)); and 15 Whether American Sink Top is an unwarranted interpretation of 16 There can be no question that Respondent was not under any obli- Nolde Bros is an issue on which I do not pass. Thus, I believe the former gation to bargain with the Union prior to reaching its decision to lay off represents the Board's view of the latter's viability, and I am bound by personnel Rather, if such an obligation existed, it arose prior to imple- that. mentation of the layoff decision Lange Co, 222 NLRB 558, 563 (1976) LITTON BUSINESS SYSTEMS 831 that a layoff, at least, 50 percent of bargaining unit per- sonnel without permitting prior consultation by the rep- resenting labor organization, is violative of Section 8(a)(1) and (5) of the Act (M & H Machine Co., 243 NLRB 817, 819 (1979)), the view of this matter, es- poused by the General Counsel, appears to be overly simplistic. Contrary to the aforementioned, the instant case involves substantially more than isolated, economi- cally motivated layoffs, uninfluenced by outside events. Rather, at issue here is the far more complex and trou- bling matter of an employer's obligation to collectively bargain prior to implementing a decision, which funda- mentally affects the direction of the business and which adversely impacts on the continued availability of em- ployment. First National Maintenance v. NLRB, 452 U.S. 666 (1981); Fibreboard Corp. v. NLRB, 379 U.S. 203 (1964): Brockway Motor Trucks v. NLRB, 582 F.2d 720 (3d Cir. 1978); Otis Elevator Co., 255 NLRB 235 (1981); International Harvester Co., 236 NLRB 712 (1978), revd. 618 F.2d 85 (9th Cir. 1980).17 Although not a matter of the sale, liquidation, closure, partial closure, or relocation of a business enterprise, I believe that Respondent's conversion of the production process at the Santa Clara plant from utilization of both the cold-type and hot-type printing methods to entirely a hot-type process, with the attendant diversion of work, removal and sale of cold-type equipment, and purchase and installation of additional hot-type printing equip- ment, constitutes just such a basic, profit-oriented change in the direction of a business enterprise. Recognizing that the Union never requested that Respondent bargain over implementation of the foregoing, I nevertheless conclude that a correct resolution of Respondent's obligation to bargain with regard to its decision to lay off bargaining unit personnel is dependent on whether the decision to implement the plant conversion process was itself a man- datory subject of bargaining. This is so, for analysis of the inexorable progression of decisions and actions, un- dertaken by Respondent during the spring and summer of 1980, conclusively establishes that the decision to lay off and the consequent implementation of that decision were direct results of the plant conversion decision and that both were primarily caused by the identical factor- the significant reduction in cold-type printing orders. Thus, I further believe that both decisions were, and remain, inextricably intertwined, much as the employer's decisions in First National Maintenance, supra to partially close down and to terminate a crew were inseparable. Moreover, in light of the foregoing, I fail to perceive how limiting bargaining, as counsel for the Union insist- ed was possible, to the decision to lay off would be intel- lectually feasible. It is not mere speculation that the 17 In First National Maintenance, the Supreme Court first considered whether there existed any limitations on the subjects of mandatory bar- gaining within the meaning of Secs 8(a)(5) and 8(d) of the Act and iden- tified three types of management decisions in this regard. those, such as the choice of advertising or product design, which only indirectly impact on the employment relationship, those, such as the order of succession in layoff and recall situations and work rules, which clearly involve an aspect of the employment relationship, and those that have a direct impact on continued employment but which have as a focus "the eco- nomic profitability" or "direction" of the business enterprise It is the latter that is involved here Id at 676-677 Union's arguments against, and suggestions in place of, layoffs would be countered by Respondent's insistence that such action was necessary and that any alternative would not be cost effective. These arguments would un- doubtedly, despite the Union's protestations to the con- trary, call into question the rationale underlying the plant conversion plan itself. Accordingly, I also believe that, in the first instance, analysis of Respondent's obligation to bargain over its decision to convert the plant to an en- tirely hot-type printing operation is required. The Board and the courts have concluded that certain of the managerial decisions, such as here involved, are mandatory subjects of bargaining but that others are not. In so doing, a plethora of tests and views have been ex- pressed. In analyzing such cases, the Board strictly exam- ines whether "the termination, relocation, liquidation, closure, or sale of any . . . activities" or "the sale of assets, basic capital reorganization, or significant invest- ment or withdrawal of capital" by the employer is in- volved. International Harvester Co., supra at 712. If such is the case the employer's decision is deemed "entrepre- neurial" and found not to be a mandatory subject of bar- gaining. General Motors Corp., 191 NLRB 951, 952 (1971). However, if the decision involves a mere consoli- dation of operations or a modification which does not signal any change in the direction of the employer's ac- tivities, and the decision impacts on employees' terms and conditions of employment, such becomes a mandato- ry subject of bargaining. Otis Elevator Co., supra. In con- trast, the courts of appeals have taken a far more restric- tive and conservative approach as to which managerial decisions require mandatory bargaining. For instance, the Ninth Circuit has traditionally ruled, "Management deci- sions that fundamentally alter the direction of an enter- prise or involve significant reallocation of capital gener- ally are not considered decisions concerning terms and conditions of employment and are not mandatory sub- jects of bargaining." NLRB v. International Harvester Co., 618 F.2d 85, 87 (9th Cir. 1980). In First National Mainte- nance, supra at 679, the Supreme Court formulated a less restrictive test for determining whether bargaining is re- quired over such decisions: "in view of an employer's need for unencumbered decision making, bargaining over management decisions that have a substantial impact on the continued availability of employment should be re- quired only if the benefit, for labor- management relations and [collective bargaining] outweighs the burden placed on the conduct of the business." Although the Court concluded that a managerial decision to partially close down was not particularly suited for collective bargain- ing,18 it cautioned that the Court was "intimat[ing] no view as to other, similar types of management decisions." Id. at 686 fn. 22 19 The Court reemphasized an employer's obligation to bargain regard- ing the "effects" of such managerial decisions . [u]nder 8(aX5), bar- gaining over the effects of a decision must be conducted in a meaningful manner and at a meaningful time, and the Board may impose sanctions to insure its adequacy " First National Maintenance, supra at 681-682 Here, Respondent has offered to bargain with regard to the effects to the lay- offs, and the complaint alleges no violation in this regard 832 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD In defining the aforementioned test to be utilized in de- termining which of the aforementioned managerial deci- sions are mandatory subjects of bargaining, the Court specifically concluded that its Fibreboard Paper Products decision was within the parameters of the test. Therein, the employer contracted out its plant maintenance work and subsequently terminated all employees who had been performing such work. Analysis of the facts establishes that the employer's conduct was economically motivated and that the employer did not give notice to or bargain with the union, which represented the affected employ- ees over the decision to subcontract. The Court conclud- ed that the subcontracting decision was a mandatory sub- ject of bargaining and that the subject matter was well within the employees' terms and conditions of employ- ment. Id. at 210. In so concluding, the Court emphasized the following factors: the employer's decision did not alter its basic operation; the work remained to be per- formed in the plant; no capital investment was involved; and a desire to reduce labor costs was the central factor in the subcontracting decision. Id. at 213-214. In con- trast, the instant case is distinguishable as to all the afore- mentioned factors. Thus, while the basic business of printing bank checks remains unchanged, Respondent's method of doing so has been significantly altered; inas- much as the cold-type printing machinery had been re- moved from the plant, such printing could no longer be performed at Santa Clara; capital expenditures of, at least, $20,000 were involved; and here is no record evi- dence that rising labor costs were a factor in Respond- ent's decision-making process. The latter is a most cru- cial point, for the Court, in First National Maintenance, emphasized such as "`peculiarly suitable for resolution within the collective-bargaining framework . . .."' Id. at 680. Analysis of Board decisions, in this area discloses only two that involve similar facts as here involved. In Pio- neer Club, 213 NLRB 841 (1974), enfd. 546 F.2d 828 (9th Cir. 1976), the employer, without consulting a union that represented its bartenders, converted the operations of a bar from that of a sitdown to that of a service bar. Three months later, again without consulting the Union, the employer reversed this policy. The initial change result- ed in a loss of income to the bartenders. Also, the origi- nal change required a considerable capital expenditure for installation of a new bar in a different part of the premises. The Board concluded that the employer was not obligated to bargain over the change in operations. "The Act does not require bargaining in advance over such changes in method of operation. Rather, the Act's intent was to leave business management decisions of this kind to the employer . . . ." The Board did, however, conclude that the employer was obligated to bargain over the effects of the change on the affected employees. Four years later, the Board reached a contrary result in Holiday Inn of Benton, 237 NLRB 1042 (1978), enfd. 617 F.2d 1264 (7th Cir. 1980). Therein, without prior notifi- cation to its employees or to their union, the employer closed its restaurant facility and laid off all its employees employed therein. During the next several days, some dispensing equipment was installed, and the restaurant was reopened as a self-service cafeteria. All employees, except waitresses, were recalled to work. Further, except for the purchase of trays for use by customers in carry- ing their food, no major capital investment was involved, and the decision to convert the operation to a self-serv- ice cafeteria was, in part, motivated by, and related to, the costs of labor. The Board concluded that employee's possessed an interest in bargaining over the conversion plan because the change "resulted in a radical alteration of the employment status of the . . . waitresses." The Board reached this conclusion inasmuch as, citing Fibre- board Paper Products, supra, increased labor costs were a central factor in the employer's decision and such are re- solvable through collective bargaining. Holiday Inn of Benton, supra at 1043. Significantly, both the Board and the court of appeals distinguished this factual situation from that of Pioneer Club, supra, emphasizes that in the latter, "the change in the mode of operations necessitated considerable capital expenditure and modification of the employer's facility." 237 NLRB at 1043; 617 F.2d at 1270-1271. I conclude that the instant factual situation more close- ly resembles that presented in Pioneer Club than that of Holiday Inn of Benton and, bearing in mind the guidelines of the Supreme Court, likewise conclude that the con- version of the Santa Clara plant to an entirely hot-type printing operation was not a mandatory subject of bar- gaining. Two factors influence my decision in this regard. First, unlike the situation in Holiday Inn of Benton but closely akin to that presented in Pioneer Club, Respondent has expended considerable capital resources in converting its production process. Thus, approximate- ly $20,00019 has already been spent by Respondent in purchasing and installing new hot-type equipment and renovating existing printing presses. That such a factor is of paramount importance is clear from both the Board's and the Seventh Circuit's reliance on this single factor in distinguishing Pioneer Club from Holiday Inn of Benton, the lack thereof justifying a contrary result in the latter. Next, unlike Holiday Inn of Benton, a desire to reduce in- creased labor costs was not a consideration, cited by Arnold, influencing Respondent to decide to convert the production method at the Santa Clara plant to the hot- type printing process. Thus, close scrutiny of the record establishes that the primary factor involved was the sub- stantial decrease in cold-type printed check orders, which was a direct consequence of their poor print qual- ity. Such would hardly have been a subject suitable for resolution through collective bargaining. First National Maintenance, supra at 688. Moreover, labor's typical bar- gaining initiatives in these cases (decreased hours, re- duced wages and benefits, and increased productivity) would have been irrelevant considerations in view of Re- spondent's stated reasons underlying the necessity for the instant plant conversion.20 In these circumstances, the 19 This sum does not appear to be overly exorbitant, however, the amount of capital investment is not of "crucial" importance in these cases First National Maintenance, supra at 688 20 I am not unmindful that dual training costs were cited by Arnold as one consideration in Respondent's decision to convert to one printing method Although obviously a labor cost, I do not believe such was a major consideration, and, in any event, the cost of training was not one Continued LITTON BUSINESS SYSTEMS 833 only warranted conclusion is that, notwithstanding the unfortunate, adverse impact on the continued availability of employment, Respondent's implementation of its deci- sion to convert the Santa Clara plant to an entirely hot- type printing operation was, and is, not a mandatory sub- ject for bargaining. First National Maintenance, supra Pio- neer Club, supra. Accordingly, inasmuch as I have con- cluded-and reiterate-that such implementation and the consequent decision to lay off 10 bargaining unit employ- ees are inextricably intertwined, I conclude that the latter decision likewise is not a mandatory subject of bar- gaining and that Respondent did not act in violation of Section 8(a)(1) and (5) of the Act by refusing to bargain regarding it.2 i Therefore, I shall recommend that the complaint paragraphs that pertain to the allegations be dismissed. REMEDY Having found that Respondent has engaged in certain unfair labor practices, I shall recommend that it be or- dered to cease and desist therefrom and to take certain affirmative action necessary to effectuate the policies of the Act. More specifically, having found that Respond- ent violated Section 8(a)(1) and (5) of the Act by grant- ing severance pay to the 10 laid-off employees, I shall recommend that Respondent be ordered to cease and desist from dealing directly with employees without first giving notice to the Union, as the employees exclusive bargaining representative, and, thus, permitting it to bar- gain.22 Having also found and concluded that Respond- ent violated Section 8(a)(1) and (5) of the Act by refus- ing to process grievances on behalf of the laid-off em- ployees, pursuant to the grievance and arbitration proce- initiated by the Union in collective bargaining and is thus, not suitable for resolution through that process Also, I note that inasmuch as one stated goal of bargaining would have been the retraining of the laid-off employees to perform hot-type functions, such would have been an addi- tional, rather than a reduced, expense Si In view of my findings and conclusions, I need not pass on Re- spondent's other defense that sec 12(A) of the expired agreement, in con- junction with Business Agent Major's interpretation of same, constitutes a waiver of bargaining over layoff decisions. However, I do note that in- herent in Respondent's defense is the contention that Major's testimony must be considered as an admission. I disagree, and, in,tead, view her tes- timony as a mere opinion-not binding on the Union Thus, the record discloses that she neither occupied her present position at the time the expired contract was being negotiated nor, on assuming her status as the representative for the Santa Clara plant employees, did she speak to her superiors regarding the meaning of the contractual layoff provisions Ac- cordingly, inasmuch as she apparently had no knowledge of what the parties intended by the language in sec 12(A), her testimony, as to its meaning, carries the weight of mere opinion, and I so conclude 22 Such should not be construed to authorize Respondent to, in any way, revoke or otherwise retrieve any benefits previously afforded to the laid-off employees dure that was established under the expired collective- bargaining agreement, and by refusing to arbitrate if nec- essary, I shall recommend that Respondent be ordered to cease and desist from instituting such a change and, on request, to bargain with the Union, including processing the aforementioned grievances under the prevailing grievance and arbitration procedure.23 CONCLUSIONS OF LAW 1. Respondent is an employer engaged in commerce within the meaning of Section 2(6) and (7) of the Act. 2. The Union is a labor organization within the mean- ing of Section 2(5) of the Act. 3. All production and maintenance employees, em- ployed by Respondent at its Santa Clara, California facil- ity excluding all other employees, office clerical employ- ees, guards, and supervisors as defined in the Act, consti- tute a unit appropriate for the purposes of collective bar- gaining within the meaning of Section 9(b) of the Act. 4. At all times material, the Union has been the exclu- sive collective-bargaining representative of the employ- ees in the aforementioned appropriate unit within the meaning of Section 9(a) of the Act. 5. By, without prior notice to or consultation with the Union, granting severance pay to the 10 laid-off employ- ees, Respondent dealt directly with the employees and, thereby, acted in violation of Section 8(a)(1) and (5) of the Act. 6. By refusing to process employee layoff grievances through, and including, arbitration pursuant to the pre- vailing grievance and arbitration procedure, set forth in the expired collective-bargaining agreement between itself and the Union, Respondent refused to bargain col- lectively with the Union in violation of Section 8(a)(1) and (5) of the Act. 7. The aforesaid unfair labor practices are unfair labor practices affecting commerce within he meaning of Sec- tion 2(6) and (7) of the Act. 8. Unless specifically found, Respondent engaged in no other unfair labor practices. [Recommended Order omitted from publication.] 22 Counsel for the Union, at the hearing, argued that the appropriate remedy for this allegation should include backpay and reinstatement; however, in his posthearing brief, counsel altered his position, arguing that Respondent should be ordered to directly submit the grievances to arbitration The remedy in American Sink Top, supra, 242 NLRB 408, re- quired the employer therein to process the grievance in accordance with the applicable grievance and arbitration procedure I have no authority not to order likewise Counsel for the Union also seeks, as a remedy, the awarding of attor- ney's fees pursuant to Tudee Products, 194 NLRB 1234 (1972) In view of the complexity of this case and the merit of Respondent's defense in one aspect of this case, such a remedy is hardly warranted