Collateral Control Corp.

308 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Collateral Control Corporation and International Union, United Plant Guard Workers of America (UPGWA). Case 13-CA-20879 March 31, 1988 DECISION AND ORDER BY CHAIRMAN STEPHENS AND MEMBERS JOHANSEN AND BABSON On March 12, 1982, Administrative Law Judge Lowell Goerlich issued the attached decision. The Respondent filed exceptions and a supporting brief, The General Counsel filed a brief in response to the Respondent's exceptions, and the Charging Party filed a statement in opposition to the Re- spondent's exceptions. The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has considered the decision and the record in light of the exceptions and briefs and has decided to affirm the judge's rulings, findings,' and conclusions as modified and to adopt the recom- mended Order as modified. The issue presented here is whether, in order to establish the mandatory bargaining status of an em- ployer's decision to subcontract unit work, the General Counsel must sustain a burden of showing that the decision turned on labor costs where "all that is involved is the substitution of one group of workers for another to perform the same task in the same plant under the ultimate control of the same employer."2 We conclude, under the Su- preme Court's decision in Fibreboard Corp. v. NLRB, supra, as reaffirmed and explained in First National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981), that she does not. In the Board's decision interpreting First National Maintenance Corp.—Otis Elevator Co., 269 NLRB 891 (1984)—the plurality stated that, in evaluating the nature of a manage- ment decision, "[T]he appellation of the decision is not important. Fibreboard 'subcontracting' must be bargained not because the decision turns upon the label, but because in fact the decision turns upon a reduction of labor costs." 269 NLRB at 893. For reasons set forth below, our conclusion that the subcontracting in this case must be bargained does not "turn upon the label," but on the substance of The Respondent has excepted to some of the Judge's credibility find- ings. The Board's established policy is not to overrule an administrative law Judge's credibility resolutions unless the clear preponderance of all the relevant evidence convinces us that they are incorrect Standard Dry Wall Products, 91 NLRB 544 (1950), enfd 188 F.2d 362 (3d Cir. 1951). We have carefully exammed the record and find no basis for reversing the findings. 2 Fibreboard Corp. v. NLRB, 379 U.S. 203, 224 (1964) (Stewart, J., con- curring). the decision itself and its amenability to resolution through collective bargaining. In any event, we find nothing in any of the opinions expressed in Otis Elevator that would disturb the principles of the Supreme Court's decision in Fibreboard. The judge found, and we agree, that the Re- spondent violated Section 8(a)(5) and (1) of the Act by failing to bargain with the Union regarding its decisions to subcontract unit work and to lay off employees, and the effects of that subcontracting and layoff. We base our decision, however, not on the judge's conclusions that the Respondent repudi- ated the parties' collective-bargaining agreement midterm or that the Respondent failed to comply with the conditions required by Section 8(d) before terminating the contract. Rather, we rely on the theory on which the complaint was litigated, that under the Supreme Court's decision in Fibreboard an employer must give notice to and, on request, bargain with the exclusive bargaining representa- tive of its employees over a decision and the effects of the decision to subcontract unit work, a manda- tory subject of bargaining.3 In its exceptions, the Respondent contends that its decision to subcontract was not subject to man- datory bargaining. We disagree. In Fibreboard, as summarized in the Supreme Court's 1981 decision in First National Maintenance Corp. v. NLRB, supra, an employer's decision to subcontract unit work was held to be a mandatory subject of bar- gaining for three reasons: First, no alteration oc- curred in the company's "basic operation." The maintenance work still had to be per- formed in the plant. No capital investment was contemplated; the Company merely replaced existing employees with those of an independ- ent contractor to do the same work under similar conditions of employment. Therefore, to require the employer to bargain about the 3 We note that the original charge included an allegation that the Re- spondent violated Secs 8(a)(5) and (1) and 8(d) of the Act by, inter aim, violating the terms of the collective-bargaming agreement. The com- plaint, however, alleged only that the Respondent violated Sec, 8(a)(5) and (1) by laying off the bargaining unit employees and subcontracting their work withobt giving the Union notice and an opportunity to bar- gain over these acts Such an allegation is distinct from a midterm modifi- cation of a contract, which can be done only with the other party's con- sent and thus may be unlawful even if notice and an opportunity to bar- gain was given C & S Industries, 158 NLRB 454, 457-458 (1966) The General Counsel exclusively pursued the change-without-bargaining theory throughout the hearing before the Judge, and thus the litigation regarding the collective-bargaining agreement and the negotiations that preceded it focused simply on whether the Union had waived the right to bargain over subcontracting and layoffs and not on whether the Re- spondent had affirmatively promised not to subcontract out the unit work and lay off the employees, except under certain specified conditions, and whether it then did so without the Umon's consent We shall modify the Judge's Order and remedy to reflect the violation actually alleged and litigated. 288 NLRB No. 41 COLLATERAL CONTROL CORP. 304 matter would not significantly abridge his free- dom to manage the business. [379 U.S. at 213.] Correspondingly, in this case, the Respondent continued to perform the same security functions after it enlisted the Wackenhut Corporation as its subcontractor as it had when it had employed the unit guards. Although Collateral Control manage- ment and personnel from the Economic Develop- ment Corporation (EDA) played a greater role at the facility after the February 21, 1981 layoff, this fact does not compel any other, conclusion than that the subcontracting decision merely substituted one work force performing guard services for 'an- other. Thus, the postlayofT management contribu- tion to work previously performed by guards, so far as the record shows, was limited to one man- agement official's duties in weighing two categories of inventory when they were hauled off from the plant. As to the FDA, the only contention regard- ing a relationship between its presence at the facili- ty and the Respondent's decision to subcontract the work to Wackenhut is that EDA had issued a letter to the Respondent on February 6, 198 14, that it would offer four or five Collateral Control guards supervisory positions with EDA, and that Collateral Control responded to that development by subcontracting the guard work to Wackenhut.4 The guard services that were contracted out are an integral part of the Respondent's business and were performed under the subcontract as before.5 Moreover, the record indicates that the Respond- ent retained some control over the subcontractor's employees in issuing written instructions to Wack- enhut about the performance of guard duties under the subcontract. In addition, although the impor- tance of "significant investment or withdrawal of capital" was deemphasized by the Court in First National Maintenance Colp., 6 the absence of such capital investment is a further factual parallel be- tween this case and Fibreboard.7 4 Thus, this is not a situation in which control over the employer's de- cision rested with a third party. Cf First National Maintenance Corp. v. NLRB, 452 U.S. at 687-688, where the Court illustrated the limits of its holding in part by noting that the employer's dispute with the nursing home for which it provided maintenance services was over the manage- ment fee the latter was willing to pay and that the union had no control or authority over that fee. 5 Compare Century Air Freight, 284 NLRB 730 (1987), with Adams Daily, 137 NLRB 815 (1962), enf. denied in relevant part 350 F 2d 108 (8th Cir. 1965), cert. denied 382 U.S 1011 (1966), as the cases are con- ; rasted in Century Air Freight, supra, fn 9. 6 452 US. at 688. 7 Significantly, the cardinal principle shared by both the maionty opin- ion in Fibreboard, 379 U.S. at 215, and the concurring opimon by Justice Stewart, 379 U.S. at 217-226, which was emphasized by the Court in First National Maintenance Corp, is that subcontracting is within the mandatory bargaining definitions of Sec. 8(d) when "all that is involved is the substitution of one group of workers for another to perform the same task in the same plant under the ultimate control of the same em- ployer." 379 U.S. at 224 (Stewart, J., concurring). The second Fibreboard principle reaffirmed in First National Maintenance Corp. was that the basis for the employer's decision—there the desire to reduce labor costs—was a matter "peculiarly suita- ble for resolution within the collective bargaining framework." The Respondent contends that, in contrast, the basis of its decision here is its choice of supervisory personnel, a nonmandatory bargain- ing subject. Although is true that an employer does not have a statutory duty to bargain with a union over nondiscriminatory selection of supervisory personne1, 8 the Respondent's decision to contract out the entire 21-man unit's work clearly went beyond the scope of its need to replace the 4 or 5 guard supervisors who had been offered employ- ment with the EDA. As the judge observed in re- jecting the Respondent's contention, the subject of bargaining here is subcontracting, not the choice of supervisors. The situation is analogous to one where promotion or reclassification of bargaining unit employees as supervisors has a significant impact on the composition of the bargaining unit and on bargaining unit work.° Whether an employ- er chooses to appoint supervisors from within the unit, as in that situation, or from outside the unit, as here, the issue is whether the resultant change or reclassification "impair[s], significantly, tenure, se- curity, or work opportunities for those in the bar- gaining unit."" As the guard unit was eliminated by the subcontracting and accompanying layoff, such impairment has undisputedly been demonstrat- ed. The Respondent also contends that a "profit" it had derived from a payroll surcharge obtained from Wisconsin Steel prior to the bankruptcy and from Wisconsin Steel creditors thereafter was eliminated when it subcontracted the work to Wackenhut, that that circumstance eliminated labor costs from among the considerations that could have influenced its decision to subcontract, and that consequently its decision was unamenable to resolution through collective bargaining. While this argument has surface appeal, we find it unavailing to the Respondent in these circumstances. In Fibre- board, the Court found that the employer's decision to subcontract was influenced "by assurances from independent contractors that economies could be derived by reducing the work force, decreasing fringe benefits, and eliminating overtime pay- ments." 11 The record indicates here that the Re- KONO-TV-Mission Telecasting Corp., 163 NLRB 1005, 1008 (1967) 9 See, e g, Tesoro Petroleum Corp, 192 , NLRB 354, 359-360 (1971), Kendall College, 228 NLRB 1083, 1087-1084 (1977); Central Cartage, 236 NLRB 1232, 1258 (1978). 19 Wincharger Carp, 172 NLRB 83, 87 (1968); see also Westinghouse Electric Corp., 150 NLRB 1574, 1576 (1965). 11 379 U.S. at 213. 310 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD spondent also had made inquiries of Chicago area guard services 5 months before it actually subcon- tracted out the work, and that at least part of its motivation to conduct this search was a concern over labor costs. 12 In the months intervening before its subcontract to Wackenhut, no other cir- cumstances are presented on which the Respondent claims to have based its decision besides its need to replace supervisors in February 1981, which, as discussed above, did not affect the bargainability of a decision to replace the unit. Further, the Re- spondent's assertion in its brief that under its sub- contract with Wackenhut fewer guards were needed indicates that the economies of a reduced work force, emphasized as contributing to bargain- ing amenability by the Court in Fibreboard,13 enured to the Respondent and ultimately the Wis- consin Steel creditors to which it was accountable. Moreover, focusing solely on the narrower issue confronting the Respondent of how it could re- place its supervisors, the Union would have been able, without encroaching on management preroga- tive, to offer some "alternatives that might be help- ful to management or forestall or prevent the ter- mination of jobs." 14 Thus, as noted by the judge, the parties could have explored, for example, the use of rank-and-file employees, who had previously filled in for supervisors on leave, to fill the guard lieutenant positions until supervisors could be lo- cated, or establishment of the "plant guard leader" classification that the collective-bargaining agree- ment authorized. Thus, we conclude that, like the decision to subcontract in Fibreboard, the Respond- ent's concerns were ones suitable for resolution through collective bargaining. The third element of the Fibreboard rationale specifically reaffirmed in First National Mainte- nance Corp. is that the amenability of subcontract- ing to negotiation is at least to some extent a func- tion of this type of management decision itself. Thus, the Court noted:15 The prevalence of bargaining over "contract- ing out" as a matter of industrial practice gen- 12 The other consideration that the Respondent's vice president, Robert Deason, testified was weighed m September 1980 before the Re- spondent initially rejected subcontracting the work was a fear that unit employees would honor the picket hne established- by the Steelworkers Union at the Wisconsin Steel plant It is clear from Deason's own testi- mony, however, that any such fear had no basis in fact in terms of the unit employees' conduct even at that time, much less 5 months later when the Respondent did subcontract Deason testified that none of the unit guards engaged in picketing or demonstrations at the plant. Thus, even assuming the legitimacy of such basis for subcontracting the work, it is clear that fear of job action played no part in the February 1981 de- cision. 13 379 U.S. at 213, 14 First National Maintenance Corp., 452 U.S at 681. 13 First National Maintenance Corp., 452 U S. at 680, quoting Fibre- board, 379 U.S. at 211. erally was taken as further proof of the "ame- nability of such subjects to the collective bar- gaining process." Additionally, the Respondent argues that the terms of the collective-bargaining agreement nego- tiated by the parties authorizes the action that the Respondent took and that, by these terms, the Union waived its right to bargaining. Specifically, the Respondent cites language in: (1) Article I of the agreement, which states: To assist it in performing this [field warehous- ing] function, Collateral Control has been using and desires, at its option, to continue to use for temporary periods of time some of the Plant Guards employed by Wisconsin Steel and represented by the Union. . . . The parties hereto understand and agree that [the Respondent] has no obligation to use such personnel for any purpose. . . . [It is] the intent of the parties . . . to separately define the sole and only obligations Collateral Con- trol has with regard to any Wisconsin Steel Plant Guards it has been using or may contin- ue to use during its continued involvement at Wisconsin Steel. (2) Article VI, section 3, which provides, in part, that the Respondent has complete discretion as to the number of guards it must employ and will endeavor to use Wisconsin Steel Plant Guards where possi- ble . . . [and] reserves the right to discontinue use of any Wisconsin Steel Plant Guard being utilized. (3) Article VII, which contains provisions for termination of the agreement and a zipper clause and states in section 2: This agreement shall remain in full force and effect until such time as [the Respondent] no longer has need . . of Wisconsin Steel Plant Guards, or until August 31, 1983, which [sic] occurs sooner. In the event [the Respondent] no longer has need to utilize the services of Wisconsin Steel Plant Guards prior to August 31, 1983, it shall advise the Union in writing of the effective date of termination of this Agree- ment, which date shall coincide with the last day the Wisconsin Steel Plant Guard is uti- lized by [the Respondent]. On reviewing these provisions, we agree with the judge that there is no express mention in the agreement of an intention by the Union to waive bargaining on subcontracting guard work. To es- tablish waiver of a statutory right, that right must COLLATERAL CONTROL CORP. 311 be clearly and unmistakeably relinquished. 16 What- ever merit there may be to the Respondent's con- tention that express language in the agreement au- thorized unilateral termination of the agreement midterm—an issue that we find unnecessary to ad- dress 17—it is clear that subcontracting was not clearly and unmistakeably included in the manage- ment-rights and other provisions cited above." Accordingly, we find no merit to the Respondent's contention in this regard. Accordingly, we find, contrary to the Respond- ent's contention, that its decisions to lay off unit employees and subcontract the guard work were subject to mandatory bargaining within the mean- ing of Section 8(d). As found by the judge, when the Union learned of this "fait accompli" and con- fronted the Respondent with a request to bargain over the matter, the Respondent resisted the re- quest. We find that by failing to bargain over both the decisions and their effects, the Respondent vio- lated Section 8(a)(5) and (1) of the Act." AMENDED REMEDY We agree with the judge that the Respondent's failure to bargain prior to the layoffs can be fully remedied only by restoration of the status quo ante. Therefore, we shall order the Respondent to abro- gate its subcontract, offer to restore its employees to the positions that they held before its unlawful action, and make those employees whole for any loss of wages resulting from the Respondent's un- lawful conduct. The Respondent alleges in its brief that it ceased its operations at the Wisconsin Steel warehouse on December 31, 1981. Were it not for the Respond- ent's unlawful subcontracting and laying off of its employees in February 1981, those employees, or other employees represented by the Union, would have been employed by the Respondent at the Wis- consin Steel warehouse at the time of the alleged December 1981 cessation of the Respondent's oper- ations at that location. Under such circumstances, the Respondent would have been obligated to bar- gain with the Union over the effects of such cessa- tion of operations on the Respondent's employees represented by the Union. The Respondent also 16 Metropolitan Edison Co. v. NLRB, 460 U.S 693, 708 (1983). 11 See fn 3 supra. 18 Thus, those provisions could be read as addressing circumstances in which there simply would be no further need for guard services and not as establishing that the Respondent had the nght, without notice to and bargaining with the Union, to continue to provide guard services using a different set of employees The Respondent's asserted reading of the pro- visions as waiving the Union's bargaining rights is also plausible, but a merely plausible reading does not meet the clear and unmistakeable standard 19 We shall modify the judge's recommended Order to reflect our theory of violation states in its brief that, because of the incremental diminution of inventory at the Wisconsin Steel Plant, even if it had not enlisted the services of a subcontractor it would have lawfully terminated certain of the guards before the actual cessation of operations. Therefore, in the event that it is estab- lished at the compliance stage of these proceedings that the Respondent's operations at the Wisconsin Steel warehouse, or any segment thereof, would have ceased for legitimate reasons 2° and in order to remedy fully the Respondent's unlawful con- duct, we shall (1) not require the Respondent to re- instate the unlawfully terminated employees; (2) still require the Respondent to make whole those employees for any loss of wages resulting from the Respondent's unlawful conduct, from February 22, 1981, through the date of the Respondent's legiti- mate cessation of operations at the Wisconsin Steel warehouse or relevant segment of such cessation of operations; and (3) require the Respondent to bar- gain with the Union over the effects of such cessa- tion of operations on the Respondent's employees represented by the Union.21 Regarding the requirement that the Respondent bargain with the Union over the effects of a prior cessation of the Respondent's operations at the Wisconsin Steel warehouse, and in order to create circumstances under which that obligation to bar- gain will be accompanied by economic conse- quences, we shall order the Respondent to pay its unlawfully terminated employees, in addition to the backpay owed for the period from February 22, 1981, until the date the Respondent's operations lawfully ceased, amounts 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 per- taining to the effects of the Respondent's cessation of operations; (2) a bona fide impasse in bargaining; ,(3) the failure 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 this additional sum paid to any of these employees exceed the amount each would have 20 McLoughhn Mfg. Corp, 164 NLRB 140 (1967), enfd. as modified sub nom. Ladies Garment Workers v. NLRB, 463 F 2d 907 (D.0 Cir. 1972). 21 In requiring the Respondent to bargain over the effects of its cessa- tion of operations on employees, we recognize that the record does not establish that the Union made an additional request for bargaining when the operations ceased We also recognize, however, that because of the prior layoff on February 22, 1981, resulting from the Respondent's un- lawful subcontracting of work, such a request would have been futile. See Rase Arbor Manor, 242 NLRB 795 (1979); Holiday Inn of Benton, 237 NLRB 1042 (1978). 312 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD earned as wages from the time the Respondent dis- continued its operations to the time each secured equivalent employment elsewhere, or the date on which the Respondent offers to bargain, whichever occurs first, provided, however, in no eyent will this sum be less than such employees would have earned for a 2-week period at the rate of their normal wages when last in the Respondent's employ. Backpay shall be based on earnings that the discharged employees would normally have re- ceived during the applicable period, less any net in- terim earnings, and shall be computed on a quarter- ly basis in the manner set forth in F. W. Woolworth Co., 90 NLRB 289 (1950), with interest thereon computed in the manner provided in New Horizons for the Retarded.22 ORDER The National Labor Relations Board adopts the recommended Order of the administrative law judge as modified below and orders that the Re- spondent, Collateral Control Corporation, Chicago, Illinois, its officers, agents, successors, and assigns, shall take the action set forth in the Order as modi- fied. 1.Substitute the following for paragraph 1(a). "(a) Refusing to bargain collectively with Inter- national Union, United Plant Guard Workers of America (UPGWA), the bargaining representative of the employees in the appropriate unit described below, regarding subcontracting and layoffs and the effects of subcontracting and layoffs. The bar- gaining unit is: All full-time and regular part-time guards em- ployed by the Employer at the facility located at Wisconsin Steel Plant, 2800 East 106th Street, Chicago, Illinois, excluding all other employees and supervisors as defmed in the Act." 2. Delete paragraph 2(a) and reletter the subse- quent paragraphs. 3. Substitute the attached notice for that of the administrative law judge. "(a) Offer each employee in the bargaining unit who has been laid off reinstatement and make him whole for any loss of wages he may have suffered by reason of the Respondent's refusal and failure to bargain over the decisions to subcontract work and 22 In accordance with our decision in New Horizons for the Retarded, 283 NLRB 1173 (1987), interest on and after January 1, 1987, shall be computed at the "short-term Federal rate" for the underpayment of taxes as set out in the 1986 amendment to 26 U S.C. § 6621 Interest on amounts accrued prior to January 1, 1987 (the effective date of the 1986 amendment to 26 U.S.C. § 6621), shall be computed in accordance with Florida Steel Corp., 231 NLRB 651 (1977). lay off employees. Backpay shall be made in the manner set forth in the 'Amended Remedy." 4. Substitute the attached notice for that of the administrative law judge. 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 refuse to bargain collectively with International Union, United Plant Guard Workers of America (UPGWA) about subcontracting and layoffs and the effects of subcontracting and lay- offs. 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 offer each laid-off employee in the bar- gaining unit reinstatement in accordance with the terms of the agreement and WE WILL make him whole, with interest, for any loss of wages ot bene- fits they may have suffered as a result of our failure to bargain over the decisions to subcontract wit work and lay off employees. COLLATERAL CONTROL CORPORA- TION Craig P. Wilson, Esq. and William A. Kocol, Esq., for the General Counsel. Robert E. Cronin, Esq., Edward W. Malstrom, Esq., and Nancy .1. Conison, Esq., of Chicago, Illinois, for the Re- spondent. W. Glenn Jeakle II, Esq., of Detroit, Michigan, for the Charging Party. DECISION STATEMENT OF THE CASE LOWELL GOERLICH, Administrative Law Judge. The charge filed by International Union, United Plant Guard Workers of America (UPGWA) (the Union), on Febru- ary 27, 1981, was served on Collateral Control Corpora- tion (Respondent) by certified mail on March 3, 1981. A complaint and notice of hearing was issued on April 24, 1981. In the complaint it is alleged that Respondent sub- contracted unit work and laid off employees without prior notice to the Union and without having afforded the Union an opportunity to negotiate and bargain as ex- clusive representative of Respondent's employees regard- ing the decision to subcontract and to lay off, and the ef- COLLATERAL CONTROL CORP. 313 fects on employees of such subcontracting and layoff, in violation of Section 8(a)(5) and (1) of the National Labor Relations Act (the Act). Respondent filed a timely answer denying that it had engaged in or was engaging in the unfair labor practices alleged. The case came on for hearing in Chicago, Illinois, on October 29 and 30 and November 17, 1981. Each party was afforded full opportunity to be heard, to call, exam- ine, and cross-examine witnesses, to argue orally on the record, to submit proposed findings of fact and conclu- sions, and to file briefs. All briefs have been carefully considered. I. THE BUSINESS OF RESPONDENT At all times material, Respondent, a Delaware corpo7 ration with its headquarters located in St. Paul, Minneso- ta, has been engaged in the business of field warehousing throughout the United States, including the State of Illi- nois. At all times material, Respondent has maintained an office located at 9801 W. Higgins Road, Suite 406, Rose- mont, Illinois, and a field warehouse located at the Wis- consin Steel plant, 2800 E. 106th Street, Chicago, Illi- nois, the only facilities involved in this proceeding. During the past calendar years, a representaiike period, Respondent, in the course and conduct of its business operations, described above, performed services valued in excess of $50,000 for customers located outside the State of Illinois. During the past calendar year, a representative period, in the course and conduct of its business operations, de- scribed above, Respondent had gross revenues for serv- ices performed throughout the United States valued in excess of $1 million. Respondent is, and at all times material has been, an employer engaged in commerce within the meaning of Section 2(6) and (7) of the Act. H. THE LABOR ORGANIZATION INVOLVED The Union (the term "Union" also includes Local No. 229) is now, and at all times material has been, a labor organization within the meaning of Section 2(5) of the Act. III. THE UNFAIR LABOR PRACTICES A. Facts At all times mentioned Darryl Horsman was the presi- dent and Robert J. Deason was the vice president of Re- spondent Collateral Control Corporation. Deason super- vised the operations of Respondent at the premises of the Wisconsin Steel Corporation in Chicago, Illinois. Ac- cording to Deason, Respondent is "a third party guaran- tor, basically securing loans where money is loaned against inventory or other paper accepted as collateral for that loan." Respondent's function at Wisconsin Steel was described by Deason as follows: . basically what Collateral Control did was create, in effect, a public warehouse on the premises of Wisconsin Steel. Wisconsin Steel tendered cer- Min inventories to Collateral Control for storage. When Collateral Control accepted those inventories they issued warehouse receipts which showed the identity and declared value of that inventory. Those receipts were forwarded to the holder, in this particular instance Chase Manhattan Bank. Chase used those warehouse receipts as their securi- ty and they loaned money back to Wisconsin Steel. Respondent commenced providing the above-de- scribed services about August 1, 1977. The services, ac- cording to Deason, were to "continue until the lender no longer required the use of third party control." In performing its functions Respondent utilized Wis- consin Steel guards and their supervisor lieutenants to monitor and control all materials coming and going in and out of Wisconsin Steel that pertained to its third- party agreement. Although Wisconsin Steel administra- tively prepared the payroll checks for the guards, Re- spondent signed the checks and carried the guards on its payroll. Respondent was reimbursed for the guards' wages by Wisconsin Steel. All guards were bonded by Respondent. The lieutenants who reported to the chief of plant pro- tection and who were also on Respondent's payroll "were responsible for the day to day supervision of the guards." The guards were instructed by Respondent to "give their keys only to Collateral Control persons" and were given directions "with respect to inventory and in- ventory movement, seven specific categories of invento- ry."2 Deason explained to the guards that their "duties would be the same" as before Respondent "came into the picture, with one exception, that in case of bankruptcy, Collateral Control Will have the final say when we should close the gates in case of bankruptcy and that we would be issued keys for all gates at Wisconsin Steel and at no time are we to turn these keys over to anyone other than Collateral Control personnel, subject to disci- pline."3 In addition to the above-mentioned guards, Respond- ent employed a field representative who was stationed full time on the Wisconsin steel premises. His duties were to maintain records concerning the items of inventory for which Respondent was accountable and to ensure Originally, Respondent operated the field warehouse under two stor- age agreements. One storage agreement, dated July 31, 1977, was a two- party agreement between Respondent and Wisconsin Steel. The other storage agreement, also dated July 31, 1977, was a three-party agreement between Respondent, Wisconsin Steel, and Chase Manhattan Bank Included m a modification dated March 19, 1979, and titled "Agree- ment of Amendment To Storage Agreement" (G.C. Exh. 3(d)) was the following language: COMPANY (Wisconsin Steel) agrees that all employees referred to in paragraph 5 hereto and/or agents appointed by Collateral Control, including but not limited to those Agents set forth on Exhibit A hereto, are to take instructions solely from Collateral Control in regard to receiving and delivery of all goods for which Collateral Control has issued its documents or has otherwise assumed liability 2 These seven categories of inventory were coal, coke, iron ore pellets, ingots, billets, hot rolled bars, and cold finished bars. ' The credited testimony of Herbert D. Gimes, president of Local 229. 314 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD that this inventory was being used in accordance with the instructions of the holder of the warehouse receipts. On March 28, 1980, Wisconsin Steel closed and went into bankruptcy. 4 Respondent immediately issued in- structions to the guards "not to permit any material to move in or out of the facility." Guards were instructed by Respondent to give the keys only on Collateral Con- trol personnel and to "open locks" only on the instruc- tions of Collateral Control personne1. 6 All guards re- mained on Respondent's payroll. Additionally, Robert DeSanto, 7 chief of plant protection, was placed on Re- spondent's payroll. According to Deason, "the chief of plant protection was responsible for the duties of the lieutenants who, in term, were responsible for the duties of the guards." Respondent commenced performing the administrative payroll work itself and Wisconsin Steel discontinued the payroll reimbursements, which were then assumed by Chase Manhattan Bank. 4 Wisconsin Steel remained as debtor-in-possession of the Wisconsin Steel facility until sometime in January 1981, at which time Economic Development Authority took over management of the Wisconsm Steel facility 5 On August 4, 1977, the following letter was addressed to Ghnes: To: Herbert D Gimes 1. We hereby appoint you WATCHMAN of COLLATERAL CONTROL CORPORATION, Account No. 2338 at 2800 E. 106th St., Chicago, IL. 2 You are notified that this account is operated in accordance with the laws of the State of Illinois and the Rules and Regulations of this Company. 3 Under no circumstances are you to remove or to permit anyone to remove any of the property stored at this account unless author- ized by COLLATERAL CONTROL CORPORATION 4, You are to see that all gates and other means of access and entry are secured and locked where required. You are to notify your turn Lieutenant immediately in the event the lock on any gate or other entry is not in proper working condition 5 You are hereby instructed and directed that the key to the COL- LATERAL CONTROL CORPORATION locks which have been placed on all gates and other means ef entry are [sic] to remain in the gate houses at all times. Under no circumstances is it to be surrendered to anyone but a COLLATERAL CONTROL CORPORATION representative or employee. 6 For your services you will receive from COLLATERAL CONTROL CORPORATION a salary to be paid in accordance with the terms of the Labor Agreement entered mto on January 10, 1975, and as changed or amended m future contract negotiations. COLLATERAL CONTROL CORPORATION By /s/ George F. Cole I accept this appointment as Watchman on the terms stated. I agree to faithfully carry out the duties of this position m strict ac- cordance with the laws of the State and the requirements of COLLAT- ERAL CONTROL CORPORATION. Witness. Watchman: /s,/ Herbert D. (limes On March 28, 1980, Respondent addressed a letter to "The Guard Force of Wisconsin Steel". . . . as of 3 PM, March 28, 1980, all outside shipments of coal coke, iron ore pellets, ingots, billets, hot rolled bars, and cold finished bars are to be stopped. UNDER NO CIRCUMSTANCES WILL YOU RELEASE ANY OUTSIDE SHIPMENTS OF COAL, COKE, IRON ORE PELLETS, INGOTS BILLETS, HOT ROLLED BARS AND COLD FINISHED BARS UNTIL YOU HAVE RECEIVED A RELEASE AUTHORIZATION FROM COLLATERAL CONGROL CORPORATION. . . Each guard signed the letter mdicatmg thereby that he understood and accepted the above instructions 7 On May 9, 1980, Respondent directed a letter to DeSanto in which this paragraph was included While a guard is on Collateral Control payroll he is not to relieve a WSC employee nor is he to do any other job except which Collater- al Control specifies. After an exchange of letter s between Respondent and the Union at the request of Respondent, representatives of the Union and Respondent met on September 8, 1980. Horsman, Deason, and Emery Bartle, an attorney, and DeSanto, captain of the guards, were present for Re- spondent. Herbert Glines, president of Local 229, Harry E. Applen, vice president of International Union, United Plant Guards of America; Donald Edward Bray, Direc- tor for Region 4; and Doug Korney, an attorney, repre- sented the Union. According to Deason, Horsman, among other things, said that "Collateral Control exam- ined the costs involved in subcontracting the guard work but Collateral Control would like to keep the work with the same guards if they could reach agreement with the Union because those guards were familiar with the work." Thereafter, Horsman distributed a contract pro- posal to the union representatives. The Union caucused. After the caucus, according to Horsman, the Union raised questions about three areas, the term of the agree- ment ("They felt that [a 3-year term] was a long term, since there were no salary increases specified."), seniori- ty, and cost-of-living adjustments. According to Glines, Horsman also said, ". . . as long as they needed guards, they would use Local 229." A second meeting was held on September 26, 1980. Present for Respondent were Horsman and Bartle, for the Union appeared Korney, Applen, Glines, Bray, and Michael Harrington, secretary of Local 229. The Union submitted a counterproposal. Respondent's proposal was amended to the satisfaction of the Union and the amend- ed agreement was executed by the parties. Applen testified that Horsman stated that "as long as they were utilizing guards, the guards at Wisconsin Steel, if they were available and could physically perform the work, referring to article 7, section 2, 9 if he understood the agreement to read that Respondent could "terminate this contract anytime." Horsman responded that . . . the reason he had this stipulation, in the con- tract is that they don't know how long they're going to be at Wisconsin Steel, they don't know how long its going to take them to get their materi- al out of the plant. It may take them a month. It may take them six months. It may take them a year. But they had to have this agreement in there be- cause they don't know when and how long they're going to be at Wisconsin Steel, and as long as they 8 Horsman wrote Glines on August 22, 1980: We would like to continue using certain members of the Wisconsin Steel guard force due to their knowledge of operations and our pre- vious experience with them. If, however, a satisfactory agreement cannot be arranged, we may have no alternative but to look else- where for the services required. I would like to meet with you to reach an agreement on this matter as soon as possible. Would you please call me at your earliest convenience to arrange a date for us to get together 9 This section read: In the event Collateral Control no longer has need to utilize the services of Wisconsin Steel plant guards prior to August 31, 1983, it shall advise the union in writmg of the effective date of the termina- tion of this agreement, which date shall coincide with the last day the Wisconsm Steel plant guard is utilized by Collateral Control. COLLATERAL CONTROL CORP. 315 were at Wisconsin Steel, the United Plant Guard Workers would be there, Local 229. Harrington testified that Horsman said that "Collateral Control would use the United Plant Guard Workers as long as Collateral Control was in the black, and that they could not give a specific cutoff date when we would be removed but, as long as they were there, the guards would be there." Bray testified that the statement was made: "As long as Collateral Control was there Local No. 229 UPGW Guards would be used."" At the September 26, 1980 meeting, Bartle testified that the Union's concerns were seniority, wage increaseS, and that the Union did not "want to do anything which would negate or otherwise upset the claims which the union had in the bankruptcy proceedings." Regarding the following section, which was agreed to by the par- ties, Bartle testified that the Union was told that Re- spondent could not commit itself to use Wisconsin Steel Plant Guards "because circumstances could come up that were unforeseen to us." Collateral Control has complete discretion as to the number of guards it must employ and will endeavor to use Wisconsin Steel Plant Guards where possible and will make a request from Wisconsin Steel for that quantity it desires and the period of time for which it desires to utilize any such Wisconsin Steel Plant Guard. Collateral Control reserves the right to determine the manpower needed and reserves the right to discontinue use of any Wisconsin Steel Plant Guard being utilized, however, upon request by the union, Collateral Control will inform the Union why the Wisconsin Steel Plant Guard was being removed from performing dutips for Collater- al Control. Horsman gave an example, "one of the creditors could . . . demand that a different guard service be used." As did Horsman, Bartle denied that a company representa- tive had said that "as long as Collateral Control was at Wisconsin Steel, the Wisconsin plant guard people would be used there." On February 20, 1981, Respondent addressed a letter to Glines in which it notified Glines that it would "no longer need to utilize the services of the Wisconsin Steel Plant Guards, effective as of the end of the current work week ending 7:30 a.m. Sunday, 22 February 1981." In the letter was also expressed the "intent to terminate said agreement as of 7:30 a.m. Sunday, 22 February, 1981" in conformity with article VII, section 2, of the agreement. The foregoing letter was handed to Glines at the plant gate on February 21, 1980. There were 21 guards sepa- rated from employment on February 22, 1981. Prior to the notice Respondent had engaged in no discussions with the Union regarding the discharges or the termina- tion of the contract. Deason testified that at the September 8, 1980 meeting he did not hear any Respondent representative state that "as long as Collateral Con- trol was at Wisconsin Steel they would use Wisconsin Steel guards." Horsman testified that he did not say or hear the foregoing statement made at either the September 8 or 26, 1980 meeting On February 17, 1981, Respondent had received a letter from George J. Harper, plant manager, that four management personnel, J. Dananay, J. Berry, D. Cull, and E. Czajka would be employed by the Wisconsin Steel Land Trust, Sunday, February 22, 1981. The letter noted, "Initial Notification of our intent to employ these personnel was dated February 6, 1981.11 On learning of the above circumstances Deason con- tacted Horsman and advised him that "our management employees 12 were being removed five days later." In re- viewing what action should be taken Deason testified that Respondent "considered the possibility of approach- ing the guard union to see if any of the membership would want to come into management and act as lieuten- ants"; however, according to Deason, this idea was dis- regarded because he had a "feeling" that the guards "would not want to go into the management area." 13 An outside guard service was considered and Wackenhut was chosen. Referring to a conversation with Horsman, Deason testified, "I discussed with him my interpretation of the contract . . . I guess it was a joint decision that we had the right to terminate the contract and that's what we would do." Deason testified that the notice to the Union was de- layed because "we were concerned that if we told the union prior to you, know, three or four days prior that possibly they would walk off and we would be stranded without any security because Wackenhut could not be in place until Sunday." Deason agreed that there was no way Respondent "could have fulfilled [its] contract with Chase Manhattan . . . without employing guards or some kind of guard agency." According to Deason, "the Wackenhut guards bid a roving patrol and manned the main gate and they were responsible for seven categories of inventory as stipulated and nothing else." The following letter dated February 23, 1981, was addressed to the Wackenhut Corporation: With reference to subject, and your company fur- nishing security services, the following instructions will apply: 1. Your primary concern will be to insure that absolutely none of the seven categories of inventory listed below are removed from the premises, as out- lined on the attached drawing, WITHOUT SPECIFIC WRI I MN INSTRUCTIONS OF COLLATERAL CONTROL CORPORATION. 2. The seven categories of inventory being con- trolled are: 1. COAL, in bulk 2. COKE, in bulk 3. IRON ORE PELLETS, in bulk 11 On February 6, 1981, EDA had directed a letter to Respondent stat- ing that it would offer four of the five guard supervisors positions with EDA Respondent did nothing " The employees named in the letter were all the guard lieutenants except one la The evidence disclosed that Lieutenant Guziar did not leave Re- spondent's payroll. Lieutenants Dananay, Cull, and Czajka had been pro- moted from the guards' ranks; and, in the absence of the lieutenants, their jobs had been filled by rank-and-file guards. 316 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 4. STEEL INGOTS 5. STEEL BILLETS 6. STEEL, hot rolled 7. STEEL, cold finished 3. You will man the main gate around the clock, seven days per week. You are not to restrict ingress of EDA personnel that may enter the main prem- ises, nor the egress of these personnel, provided that none of the listed inventory is being removed. 4. You have been furnished a vehicle for rolling patrol, which will be maintained around the clock, seven days per week. The rolling patrol should make an absolute minimum of twelve (12) rounds per turn, or shift. In the event of mechanical prob- lems, rounds will be made on foot, as many rounds per turn as practical. There should be no personnel in the "Y" yard. Anyone observed in this are[a] should be detained, and questioned as to their pres- ence there. The services descibed in the letter prior to February 22, 1981, were performed by the guards covered by the contract. Up to this stage of these proceedings Respondent has stood on its action taken and has continued to supply guard services at the Wisconsin Steel facility by substi- tuting the guards employed by Wackenhut for the guards it had employed under its contract with the Union. CONCLUSIONS AND REASONS THEREFOR First: Having carefully examined all the provisions of the agreement of September 26, 1980, 14 and in the light 14 The following provisions of the agreement were referenced by the parties in their briefs: ARTICLE I PURPOSE OF AGREEMENT The Union and WSC Corporation, doing busmess as Wisconsm Steel, an Envirodyne company, (hereinafter "Wisconsin Steel"), are parties to a collective bargaining agreement which was effective September 1, 1977, covering a bargaining unit consisting of Wiscon- sin Steel Plant Guards employed at its plant located at 2800 East 106th Street, Chicago, Illinois. Collateral Control operates a field warehouse on the premises of Wisconsin Steel and as such, Collater- al Control is responsible for warehousing certain inventories of Wis- consin Steel located at the above mentioned plant. To assist it in per- forming this function, Collateral Control has been using and desires, at its option, to continue to use for temporary periods of time some of the Plant Guards employed by Wisconsin Steel and represented by the Union. It is the intention of the parties to this agreement to recite the terms and conditions of employment under which Collat- eral Control has utilized and will continue to utilize Wisconsin Steel Plant Guards. The parties hereto understand and agree that Collater- al Control has no obligation to use such personnel for any purpose. The parties hereto further understand and agree that Collateral Con- trol is not a party to any collective bargainmg contract m existence between Wisconsin Steel and the Union, and has no obligations whatsoever under any collective bargaining agreements entered into or existing between Wisconsin Steel and the Union. It is not the intent of the parties to modify or extinguish any obligations under any collective bargaining agreement, past or existing, between Wis- consin Steel and the Union, but to separately define the sole and only obligations Collateral Control has with regard to any Wisconsin Steel Plant Guards it has been using or may continue to use during its continued involvement at Wisconsin Steel. The parties further agree that Collateral Control has no responsibility for any benefits of the record as a whole, I am in agreement with Re- spondent that the "agreement is clear and unambig- uous." 15 (R. Br. at 39) Respondent maintains that "the agreement between Respondent and the Union permits Respondent to terminate the Wisconsin Steel Guards without further bargaining with the Union over the deci- sion to terminate or its effects." Such assertion, among other things, contemplates that Respondent lawfully acted within the terms of the agreement of September 26, 1980, when it terminated the agreement and dis- charged the guards covered under the terms of the agreement. Hence, it becomes pertinent to determine accruing to the Plant Guards under the terms of any collective bar- gaining agreement and that Collateral Control shall have no obliga- tions to the Union or the Plant Guards other than those stated herein. This Agreement shall not be construed or interpreted as having any effect whatsoever upon the obligations of debtor Wiscon- sin Steel in Bankruptcy Case Numbers 80B3766 through 80B3773. ARTICLE VI Section 3. Collateral Control has complete discretion as to the number of guards it must employ and will endeavor to use Wisconsin Steel Plant Guards where possible and will make a request from Wiscon- sin Steel for that quantity It desires and the period of time for which It desires to utilize any such Wisconsin Steel Plant Guards. Collateral 5 Control reserves the right to determine the manpower needed and reserves the right to discontinue use of any Wisconsm Steel Plant Guards being utilized; however, upon request by the Union, Collat- eral Control will inform the Union why the Wisconsin Steel Plant Guard was being removed from performing duties for Collateral Control Section 4. If Collateral Control decides to reduce the number of Wisconsin Steel Plant Guards it is utilizing at any one time, such reductions ' will be made according to seniority held by the Guard on the Wis- consin Steel seniority list, providing the remaining Wisconsin Steel Plant Guards still being utilized have the qualifications and ability to perform available work ARTICLE VII TERM OF AGREEMENT Section I. The parties hereto recognize that the terms of this Agreement as set forth herein constitute the full and complete agreement between Collateral Control and the Union regarding the subjects of wages, hours, and terms and conditions of employment under which Wis- consin Steel Plant Guards have been and will continue to be utilized by Collateral Control, and establishes exclusively the rights and obli- gations of Collateral Control, the Union, and any Wisconsin Steel Plant Guards utilized by Collateral Control regarding such matters Section 2. This Agreement shall remain in full force and effect until such time as Collateral Control no longer has need to utilize the services of Wisconsin Steel Plant Guards, or until August 31, 1983, which [sic] occurs sooner In the event Collateral Control no longer has need to utilize the services of Wisconsin Steel Plant Guards prior to August 31, 1983, it shall advise the Union in writing of the effective date of termination of this Agreement, which date shall coincide with the last day the Wisconsin Steel Plant Guard is utilized by Col- lateral Control. 15 Nevertheless, an evaluation of the contractual provisions against the elucidating background of their bargaining history leads me to the same conclusions which I have drawn in this decision. COLLATERAL CONTROL CORP. 317 whether Respondent was within its rights when it termi- nated the agreement and discharged the guards covered under the agreement. In its original proposal for article VI, section 3, Re- spondent proposed "complete discretion" regarding which, if any, Wisconsin guards it would employ." The Union offered the following counterproposal: Collateral Control has complete discretion as to the number of guards it must employ and agrees to use Wisconsin Steel Plant Guards and will make a re- quest from Wisconsin Steel for that quantity it sires and the period of time for which it desires to utilize any such Wisconsin Steel Plant Guards. Col- lateral Control reserves the right to determine the manpower need and reserves the right to discontin- ue use of any Wisconsin Steel Plant Guards being utilized, however, upon request by the Union, Col- lateral Control will inform the Union why the Wis- consin Steel Plant Guard was being removed from performing duties for Collateral Control. Respondent accepted the limitation on its "complete discretion" set forth in the Union's counterproposal but in handwriting (as indicated on the face of the agree- ment) struck out the word "agrees" and wrote "will en- deavor" and "where possible" so that the first sentence reads "Collateral Control has complete discretion as to the number of guards it will employ and will endeavor to use Wisconsin Steel Plant Guards where possible . . . ." "Endeavor" and "possible" have well-known and recognized meanings. The American Dictionary of the English Language defines "endeavor" as "a conscien- tious or concerted effort toward a given end, an earnest attempt." "Possible" is defined as "capable of happen- ing." There is nothing in the credible record that estab- lishes that it would have been "impossible" for Respond- ent to have employed the guards covered by the con- tract after February 22, 1981, or that Respondent has "endeavored" to use them. The contrary is the fact. According to Respondent it discharged the guards when it was faced with the task of filling the positions of certain of its supervisory personnel who were leaving its employment. Rather than attempting to solve the prob- lem by obtaining other available supervisors among the guard complement or elsewhere, Respondent unilaterally replaced the entire guard group by subcontracting the guard services. It chose this route even though there re- mained in its employ one lieutenant out of four and other rank-and-ffie guards who were sufficiently experienced and qualified to have discharged the functions of lieuten- ants either temporarily or on a permanent basis. Indeed, five of the discharged guards had satisfactorily served as supervisors for Respondent. No valid reason has been ad- vanced why Respondent could not have continued to use 16 Respondents' proposal stated Collateral Control has complete discretion as to which, if any, Wis- consin Steel Plant Guards it desires to utilize and the period of time for which It desires to utilize any such Wisconsin Steel Plant Guard. Collateral Control reserves the right to discontinue use of any Wis- consin Steel Plant Guard being utilized at any time for any reason without notice and with no obligation to the Guard or to the Union. the guards covered by the agreement had Respondent utilized these people who were available as supervisors, even as a stop gap, as it did when the lieutenants were ill or on vacation. Moreover, not only did Respondent bypass its own employees who had been the source for supervisory jobs in the past but, in the alternative, it did not try to fmd lieutenants elsewhere. Rather, Respondent shirked its commitment to make an earnest attempt to employ the guards. Indeed, there is no credible proof that it would have been impossible for Respondent to have used the guards after Feburary 22, 1981. Thus, by not endeavoring to use the guards covered by the agree- ment, when possible, Respondent violated article VI, sec- tion 3, of the contract when it discharged them. It is ob- vious the Respondent made no conscientious or earnest attempt to use the guards after February 22, 1981. Re- spondent's weak excuse was as expressed by Deason, that he had a "feeling" that the guards "would not want to go into the management area." Additionally, article VIII, section 2, of the agreement provides that the contract "shall remain in full force and effect until such time as Collateral Control no longer has need to utilize the services of Wisconsin Steel Plant Guards, or until August 31, 1983 . . . ." I agree with Respondent that these words are not ambiguous; never- theless, Respondent has expanded the concept of "need" to encompass its theory that the word means "in a broad sense" that "when Respondent decided, for legitimate reasons," not to continue utilization of Wisconsin Steel guards," it no longer "needed" to utilize those guards. Thus, Respondent has rewritten the section to read "shall remain in full force and effect until such time as Collateral Control decides for legitimate reasons, not to continue utilization of Wisconsin Steel guards." Hence it is clear that Respondent has read into the section's lan- guage a condition for termination of the agreement that does not appertain to the unambiguous language used. In performing its function as a field warehousing agent, Respondent needed to police the Wisconsin Steel premises. Deason admitted that Respondent could not fulfill its responsibilities in this regard without utilizing the service of guard personnel. Thus, Respondent was obligated to continue its guard services or business. It is these services that are referred to in section 3 and, if Re- spondent no longer needed these services, it could termi- nate the contract. Need, as used in the section, was limit- ed to need for guards to perform the guard services on the Wisconsin Steel premises. It is obvious that a termi- nation clause with this connotation was placed in the agreement because the agreement was for a fixed term and the probabilities were that the warehousing job would be phased out before the expiration of the agree- ment. The stipulation was for Respondent's protection in the event the warehousing job was finished. This conclu- 17 It is significant because of Respondent's claim that sec. 2 is unam- biguous, that by employing a "broad" interpretation of the section Re- spondent limns its right to terminate the agreement by requiring that the exercise of the right be for "legitimate reasons," which phrase is neither found in the agreement nor defined therem Nevertheless. Respondent presented no credible proof that it did act for legitimate reasons In fact it acted arbitrarily in contradiction of the express telins of the agreement when it did not endeavor to utilize the guards covered by the agreement 318 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD sion is strengthened because Respondent agreed to en- deavor to utilize the guards covered by the agreement when possible. To adopt any other interpretation of sec- tion 2 would mean that the agreement would have con- tinued only at the whim of Respondent. By employing the language used in section 3, surely the parties did not contemplate such a lack of consensus. Apparently, Re- spondent does not differ with this concept; it would en- graft on the section the idea that it could terminate the agreement for legitimate reasons, an idea that finds no support in the language used. Moreover, legitimate rea- sons were not credibly proved. Thus, the termination of the agreement by Respondent on February 22, 1981, was not in conformity with the agreement. Respondent's failure to comply with article VI, section 3, and its discharge of the guards covered by the agree- ment constituted an unlawful midterm modification of the agreement, and its termination of the agreement on February 22, 1981, was an unlawful repudiation of the agreement and the Union as statutory representative in violation of Section 8(a)(5) and (1) of the Act. In this regard the Board has said in Burgess Mining & Construction Corp., 239 NLRB 92 fn. 2 (1978), that the refusal "to adhere to a negotiated contract" is a violation of Section 8(a)(5) and (1) of the Act (citing Ditto's Lounge, 237 NLRB 30 fn. 2 (1978). See also Better Build- ing Supply Corp., 259 NLRB 469 fn. 2 (1981); Papercraft Corp., 212 NLRB 240 (1974); F.M.L. Supply Inc., 258 NLRB 604 (1981); Nedco Construction Corp., 206 NLRB 150 (1973); Oak Cliff-Gelman Baking Co., 207 NLRB 1063, 1064 (1973); Fairfield Nursing Home, 228 NLRB 1208 (1977); Westinghouse Electric Corp., 243 NLRB 306 (1979); Papercraft Corp., supra at 241, particularly fn. 3; Liberty Cleaners, 227 NLRB 1296 (1977); Michigan Drywall Corp., 232 NLRB 120 (1977), enfd. 660 F.2d 1095 (6th Cir. 1981). In the case of Los Angeles Marine Hardware Co. v. NLRB, 602 F.2d 1302, 1307 (9th Cir. 1979), in which, as in the instant case, the employer repudiated the contract during midterm, the court said, "An employer cannot alter mandatory contractual terms during the effective period of the agreement without the consent of the union. . . . As a result, the employer's actions here amounted to a midterm repudiation of the CBA, in viola- tion of Sections 8(d) and 8(a)(1) and (5) of the Act. . . . Such a repudiation is not excused because the employer acted in good faith or was motivated solely by economic necessity." See also NLRB v. Topinka's Country House, 624 F.2d 770 (6th Cir. 1980). Moreover, Respondent failed to comply with the con- ditions required by Section 8(d) of the Act. Section 8(d) states in part that "where there is in effect a collective- bargaining contract employees in an industry affecting commerce, the duty to bargain collectively shall also mean that no party to such contract shall terminate or modify such contract, unless the party desiring such ter- mination or modification" conforms with several con- gressional mandates, such as serving a 60-day notice of the proposed termination of the contract. Because Re- spondent did not comply with Section 8(d) of the Act, for this reason, if for no other, it violated Sections 8(d) and 8(a)(5) and (1) of the Act. In Williams Enterprises, 212 NLRB 880, 887 (1974), it was said, "The Respond- ent's action in cancelling the contract without complying with the procedures of Section 8(d) was therefore con- trary to the provisions of the Act." See also Mar-Len Cabinets, 243 NLRB 523, 534 (1979); Airport 'Limousine Service, 231 NLRB 932, 933 (1977). Second: citing Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203 (1964), and Olinkraft, Inc., 252 NLRB 1329 (1980), the General Counsel asserts that "an employer must give notice to and upon request, bargain with, a union concerning the decision and effects of sub- cizintracting unit work." In the Fibreboard case, the Su- pieme Court held that "the replacement of employees in the existing bargaining unit with those of an independent contractor to do the same work under similar conditions of employment is a statutory subject of collective bar- gaining under Section 8(d)." 379 U.S. at 215. Thus, unless for some reason Respondent is excused from the teachings of this decision, it was obligated to bargain with the Union concerning its subcontracting the guards' services.18 Citing the following language from First National Maintenance Corp. v. NLRB, 452 U.S. 666, 672 (1981): . . . bargaining over management decisions that have a substantial impact on the continued availabil- ity of employment should be required only if the benefit, for labor relations and the collective bar- gaining process, outweighs the burdens Placed on the conduct of the business. Respondent first asserts that the "facts of the present case clearly indicate that the benefits for labor relations and [the] collective-bargaining process to be derived from imposing a duty to bargain over Respondent's deci- sion to terminate the Wisconsin Steel guards do not out- weigh the burdens such bargaining would have placed on the conduct of Respondent's business." Ergo, Re- spondent claims that it is excused from the obligation to bargain concerning subcontracting. According to Respondent, the burden that it anticipat- ed sprang from the fact that Respondent was "legitimate- ly worried" that the guards covered by the contract "would walk off their jobs if they knew that Respondent was considering whether to subcontract the guard work," exposing Respondent thereby to the risk of theft, if the Wisconsin Steel premises were left unguarded, which "would have created a substantial risk of econom- ic loss and irrepairable [sic] damage to Respondent and its business reputation." These burdens were at most illu- sory and smacked of a postrationalization offered in order to meet the First National Maintenance Corp. doc- ia What was said by the Supreme Court is apposite here. "The Com- pany's decision to contract out the maintenance work did not alter the Company's basic operation The maintenance work still had to be per- formed in the plant. No capital investment was contemplated; the Com- pany merely replaced existing employees with those of an independent contractor to do the same work under similar conditions of employment. Therefore, to require the employer to bargain about the matter would not significantly abridge his freedom to manage the business." 379 U.S. at 213 ' COLLATERAL CONTROL CORP. 319 trine, for, had Respondent been as concerned with the probability of strike as it now manifests, it would seem that it would have included a no-strike clause in the agreement. This it did not do. Moreover, if it were con- cluded that Respondent were excused from the obliga- tion to bargain because of the imagined or real conse- quences of strike, the obligation to bargain would be vir- tually eliminated in the guard service industry since it is obvious that the risk of theft is always a probability when guards engage in strike and no doubt employers are "legitimately worried" in this regard. Surely the Su- preme Court in First National Maintenance Corp., supra, did not intend such deprivation of workers' rights guar- anteed by the Act. It is concluded that Respondent's al- leged burdens do not come within the "burdens" antici- pated by the Supreme Court in First National Mainte- nance Corp., supra. Respondent further argues that "Respondent's lack of supervisors for the Wisconsin Steel guards is not "amendable [sic] to resolution through the bargaining process and therefore the duty to bargain over the deci- sion to terminate the Wisconsin Steel guards should not be imposed," and that any bargaining would have been "by the nature of the situation, futile and unproductive." Assuming, arguendo, that the choice of supervisory per- sonnel is not a mandatory subject of bargaining as urged by Respondent, the subject of bargaining here was sub- contracting, which is a mandatory subject of bargaining. Fibreboard Paper Products Corp., supra. Reaffirming Fi- breboard, the Supreme Court said in First National Main- tenance Corp., "The prevalence of bargaining over 'con- tracting out' as a matter of industrial practice generally was taken as further proof of the 'amenability of such subjects to the collective bargaining process." (Emphasis added.) Had Respondent chosen to assume its obligation to bargain over the contracting out of work, the Union would have been given an opportunity to suggest "alter- natives that might be helpful to management or forestall or prevent the termination of jobs." Thus, discussion could have ensued regarding the probabilities of allowing rank-and-file employees to fill the lieutenants' positions until supervisors could be local ed (which occurred while the lieutenants were on vacation or sick), the establish- ment of the "plant guard leader" classification provided in the contract," the probabilities of the guards finding work with the subcontractee, and the probabilities of severance pay to tide the guards over until they could have found other employment. The probability of a resolution of the problems arising from an employer's anticipated contracting out of work- ers' jobs is not a prerequisite to the employer's duty to bargain for, as said by the Supreme Court in the Fibre- board ease, "although it is not possible to say whether a satisfactory solution could be reached, national labor policy is founded on the congressional determination that the chances are good enough to warrant subjecting such issues to the process of collective negotiation." 379 U.S. at 214. An employer is not excused from the statutory duty to bargain because as here, the employer feels that 12 Had the job of plant guard leader been filled, it may have been that such job would have satisfied Respondent's needs. bargaining would be futile. Futility must be an estab- lished fact rather than in the mind of the bargainer. In the next to the last paragraph in the Supreme Court's decision in First National Maintenance Corp., the Court "illustrat[ed] the limits" of its decision. The Court said, "We thus are not faced with an employer's abroga- tion of ongoing negotiations or an existing bargaining agreement." Here there was an existing bargaining agree- ment when Respondent chose to subcontract the unit work. 2° The instant case does not fit in the First Nation- al Maintenance groove.' Respondent next contends that the agreement contains "no provisions restricting Respondent's power to subcon- tint." As noted above, the agreement obligates Re- spondent to "endeavor" to utilize the guards when possi- ble. Such language limits Respondent's claimed right to subcontract the guards' work without complying with this provision, which it did not do. Respondent further argues that "[t]he union, in signing the agreement, expressly waived its rights to compel fur- ther bargaining over the decision to terminate and its ef- fects." In Hearst Corp., 151 NLRB 834, 839-840 (1965), the Board held that it will not find that "contract terms of themselves confer on the employer a management right to take unilateral action on a mandatory subject of bar- gaining unless the contract expressly or by necessary im- plication confers such a right." See also Westinghouse Electric Corp. (Mansfield Plant), 150 NLRB 1574 (1965), in which clauses in the agreement similar to ones relied on by Respondent were held not to constitute a waiver of the employer's obligation to bargain concerning sub- contracting.21 There is no express mention in the agree- ment of an intention by the Union to waive bargaining on the subject of subcontracting, nor is there any neces- sary implication either in the written agreement or in the credible evidence extrinsic to the written agreement that the Union waived the subject of subcontracting. Respondent's only reservation in this regard is the right to determine the "manpower needed" and to dis- continue the services of any guard when no longer needed to perform the unit work, in accordance with that individual guard's seniority. 22 Nothing in the agree- ment axpressly or otherwise indicates or suggests that guards are to lose their jobs before the unit work is ex- hausted. The need for guard services patently continued until Respondent's commitments as a field warehouseman phased out. Moreover, the agreement was for the most part drawn by Respondent with the aid of learned coun- sel. Thus, it is presuming too much to presume that learned counsel, had that been the intent, would not have included a waiver of subcontracting in the agreement. Indeed, had it been proposed, it is highly unlikely that any self-respecting union would have accepted it, for 20 At the time subcontracting was secretly arranged, Respondent had not yet attempted to terminate the agreement. 21 In NLRB v. Taylor Foundry Co., 338 F 2d 1003, 1004 (5th Cir. 1964), it was stud. ". . waiver of rights under the AIM must be clearly established." 22 That is to say, if 12 guards were employed and Respondent needed only 6, then 6 could be separated from employment. 320 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD such a provision would have afforded no job security to any guard. 22 To so construe the agreement would de- stroy its mutuality. I find that the Union did not waive its right to compel bargaining over the decision to sub- contract and its effects. Even in those cases where there has been a partial clo- sure, the Supreme Court in First National Maintenance Corp., supra, opines, "There is not dispute that the union must be given a significant opportunity to bargain about these matters of job security as part of the 'effects' bar- gaining mandated by Section 8(a)(5). . . . And, under Section 8(a)(5), bargaining 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." Thus, there seems little doubt that if an employer is obligated to bargain over the effects of partial closure it would also be obligated to bargain over the effects of subcontracting. Finally, Respondent maintains that "the union failed to request Respondent to bargain over the decision and ef- fects of the termination of the Wisconsin Steel guards and therefore the Respondent cannot be found to have violated Section 8(a)(5) of the Act." Assuming, ar- guendo, that the Union were required to make such re- quest, 24 such request could not have been made before Respondent subcontracted the unit work, for Respondent acted surreptitiously in this regard. Moreover, after the fait accompli, not only did Respondent refuse the Union's request to bargain, but it has resisted and is re- sisting the Union's charge that Respondent has failed and refused to bargain over subcontracting and the effects thereof. I find that the Union did request bargaining after it learned of the subcontracting because I consider the Union's witnesses in this regard to be credible, demeanor having been considered, and I deem it highly unlikely that any union that had the "rug jerked out from under it," so to speak, would not have contacted the employer. Respondent's point is not well taken. Assuming, arguendo, that Respondent did lawfully ter- minate the contract, it nevertheless engaged in unlawful misconduct in violation of Section 8(a)(5) of the Act when it unilaterally altered the contract regarding a mandatory subject of bargaining, subcontracting. "At contract expiration, an employer may not unilaterally alter . . . a contractual term that is a mandatory subject of bargaining. This result obtains because such term `by operation of statute continues even after the contract em- bodying it has terminated." NLRB v. Haberman Con- struction Co., 618 F.2d 288, 302 (5th Cir. 1980). See also NLRB v. Sac Construction Co., 603 F.2d 1155, 1157 (5th Cir. 1979). See also Ryner v. NLRB, 109 LRRM 2564, 2569 (9th Cir. 1982). 23 Because the contract does not expire until 1983, Respondent must have contemplated that its services as field warehouseman would prob- ably last that long. 24 In the case of NLRB v Carmichael Floor Covering Co., 368 F 2d 549, 551 (9th Cir. 1964), a subcontracting case, the court said: "Their fail- ure to undertake such bargaining was therefore an unfair labor practice which rendered the change in arrangements invalid." See also Ozark Trailers, 161 NLRB 561, 564 (1966) CONCLUSIONS OF LAW 1. Respondent is an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act, and it will effectuate the purposes of the Act for ju- risdiction to be exercised. 2. The Union is a labor organization within the mean- ing of Section 2(5) of the Act. 3. By terminating the agreement between Respondent and the Union, by laying off all the guards, beneficiaries of the contract, and by failing and refusing to notify the Union and afford it an opportunity to negotiate and bar- gain as the exclusive representative of the employees in the unit set out below, regarding the decision to subcon- tract and to layoff, and the effects of such subcontracting and layoff, Respondent has violated Section 8(a)(5) and (1) of the Act. - 4. All full-time and regular part-time guards employed by Respondent at the facility located at Wisconsin Steel Plant, 2800 East 106th Street, Chicago, Illinois, exclud- ing all other employees, and supervisors as defmed in the Act, constitute a unit appropriate for the purposes of col- lective bargaining within the meaning of Section 9(b) of the Act." 5 The aforesaid unfair labor practices are unfair labor practices affecting commerce within the meaning of Sec- tion 2(6) and (7) of the Act. THE REMEDY It having been found that Respondent has engaged in certain unfair labor practices, it is recommended that it cease and desist therefrom and take certain affirmative action necessary to effectuate the policies of the Act. In order to remedy Respondent's 8(a)(5) violations, Re- spondent shall reinstate the agreement dated September 26, 1980, between it and International Union, United Plant Guard Workers of America and its Local No. 229, as of February 22, 1981, and shall retroactively from the date comply in full with its terms. Further, Respondent shall offer each laid-off employee covered by the agree- ment reinstatement in accordance with the terms of the agreement and shall make him whole for any loss of wages that accrued to him by reason of Respondent's re- fusal and failure to continue him in employment under the terms of the agreement, until such time as Respond- ent has fully complied with the remedy, less net earn- ings, with interest thereon, to be computed on a quarter- ly basis in the manner established by the Board in F. W Woolworth Co., 90 NLRB 289 (1950), and Florida Steel Corp., 231 NLRB 651 (1977).26 On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed27 25 This is the unit referred to in the contract. 26 See generally Isis Plumbing Co., 138 NLRB 716 (1962). 27-If no exceptions are filed as provided by Sec. 102 46 of the Board's Rules and Regulations, the findings, conclusions, and recommended Order shall, as provided in Sec. 102.48 of the Rules, be adopted by the Board and all objections to them shall be deemed waived for all pur- poses. _ COLLATERAL CONTROL CORP. 321 ORDER The Respondent, Collateral Control Corporation, Chi- cago, Illinois, its officers, agents, successors, and assigns, shall 1. Cease and desist from (a) Refusing to bargain collectively with International Union, United Plant Guard Workers of America (UPGWA), the bargaining representative of the employ- ees in the appropriate unit described below, regarding subcontracting and layoffs, the effects of subcontracting and layoffs, and any other bargainable matters that are relevant to its contractual relationship with the Union. The bargaining unit is: All full-time and regular part-time guards employed by the Employer at the facility located at Wisconsin Steel Plant, 2800 East 106th Street, Chicago; Illi- nois, excluding all other employees and supervisors as defined in the Act. (b) In any like or related manner interfering with, re- straining, or coercing employees in the exercise of the rights guaranteed them by Section 7 of the Act. 2. Take the following affirmative action necessary to effectuate the policies of the Act. (a) Reinstate and give full force and effect as of Febru- ary 22, 1981, to the agreement with the above-naMid Union, dated September 26, 1980, and retroactively froin February 22, 1981, comply in full with its terms. (b) Offer each employee covered by the agreement who has been laid off reinstatement in accordance with the terms of the agreement and make him whole for any loss' or he may have suffered by reason of Re- spondent's refusal and failure to continue him in employ- ment under the terms of the agreement. Backpay shall be made in the manner set forth in the remedy section. (c) Preserve and, on request, make available to the Board or its agents for examination and copying, all pay- roll records, social security payment records, timecards, personnel records and reports, and all other records nec- essary to analyze the amount of backpay due under the terms of this Order. (d) Post at facilities at Chicago, Illinois, copies of the attached notice marked "Appendix." 28 Copies of the notice, on forms provided by the Regional Director for Region 13, after being signed by the Respondent's au- thorized representative, shall be posted by the Respond- ent immediately on receipt and maintained for 60 consec- utive days in conspicuous places including all places where notices to employees are customarily posted. Rea- sonable 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 Re- spondent has taken to comply. IT IS FURTHER RECOMMENDED that the complaint be dismissed insofar as it alleges violations of the Act other than those found in this decision. 28 If this Order is enforced by a judgment of a United States court of appeals, the words m 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."