United Chrome Products, Inc. And United Saw Service

1176 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD United Chrome Products, Inc. and United Saw Serv- ice and United Steelworkers of America, Dis- trict 38, AFL-CIO. Case 36-CA-4163 May 31, 1988 DECISION AND ORDER BY CHAIRMAN STEPHENS AND MEMBERS JOHANSEN AND BABSON On April 25, 1984, Administrative Law Judge Earldean V.S. Robbins issued the attached deci- sion. The Respondent filed exceptions and a sup- porting 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 brief and has decided to affirm the judge's rulings, 1 fmdings,2 The Respondent contends that the judge erred in requiring the Re- spondent's general manager, Marsh, to disclose information protected by the attorney-client privilege in response to a question by the General Counsel. We find, however, that the information that was disclosed merely relates to the date of employee Frisk's offer of reinstatement and therefore does not materially affect our decision that the Respondent's lockout and unilateral implementation of changes in seniority rights were unlawful The Respondent also contends that the judge's order directing Marsh not to discuss his testimony with the Respondent's counsel during a 10- minute recess deprived the Respondent of its right to effective counsel. In this regard, we note that the judge emphasized that she made the ruling because of the interruption of the General Counsel's direct exami- nation of Marsh as a hostile witness; that during the recess Marsh could talk with his counsel about anything except "what he testified and how to change it", and that on completion of the direct examination Marsh could be prepared for questioning by his counsel We do not consider this limited restriction an erroneous ruling. In any event, our decision in this case is not dependent on testimony by Marsh elicited by the General Counsel in questioning Marsh as a hostile witness after the recess Thus, even assuming, arguendo, the ruling was in error, there is no prejudice. 2 In adoptmg the judge's fmding that the Respondent's lockout violat- ed Sec 8(a)(5), (3), and (1) of the Act, we find that Harter Equipment, 280 NLRB 597 (1986), enfd. sub nom. Operating Engineers Local 825 v. NLRB, 829 F.2d 458 (3d Or. 1987), is distinguishable. In Harter Equip- ment the Board held that, absent specific proof of antiunion motivation, an employer does not violate Sec 8(a)(3) and (1) by using temporary em- ployees in order to engage in business operations during an otherwise lawful lockout. In the instant case, however, the Respondent did not use temporary or nonunit employees during the lockout, but rehired its own unit employees as new probationary hires. Further, as the judge found, the lockout here, unlike that in Harter Equipment, was not intended for the sole purpose of exerting economic pressure in support of the Re- spondent's legitimate bargairung position. Rather, the lockout was a device to unilaterally implement a change in seniority rights that was not encompassed by the Respondent's preimpasse offer to the Union. There- fore, we agree with the judge that the Respondent's lockout was unlaw- ful Cf Union Terminal Warehouse, 286 NLRB 851 (1987) (respondent violated Sec. 8(a)(3) of the Act by laying off employees or foreclosing their access to the plant in order to support a unilateral change that was unlawful due to the absence of impasse). See also Martin A Gleason, Inc., 233 NLRB 1307, 1309 (1977), in which the Board stated that although an employer might prefer that its work be done by its own employees in- stead of by inexperienced outsiders, an employer's inability to do so is "simply the consequence of its having chosen to exercise its lockout pre- rogative, in the same way that strikers forgo their current working bene- fits." Chairman Stephens, who did not participate in Harter Equipment, above, agrees that it does not support the Respondent's position regard- ing the lockout. and conclusions as modified and to adopt the rec- ommended Order as modified.3 The judge concluded that the Respondent violat- ed Section 8(a)(5) and (1) of the Act by failing to honor the grievance-arbitration procedures of the expired contract and refusing to arbitrate griev- ances that arose under that contract concerning the Respondent's failure to return employees to work on the basis of seniority. In so concluding, the judge specifically rejected the Respondent's con- tention that it was not obligated to arbitrate the recall grievances because the lockout that gave rise to the grievances occurred after the expiration of the contract. Rather, the judge found, citing Nolde Bros. v. Bakery Workers Local 358, 430 U.S. 243 (1977), and American Sink Top, 242 NLRB 408 (1979), that the grievances concerned a seniority obligation created by the expired contract, and that there was nothing in the agreement to negate, either expressly or by clear implication, the pre- sumption that the parties intended to arbitrate all grievances arising out of the contractual relation- ship. We agree with the judge's conclusion, but we do so on the basis of the analysis set forth in Indiana & Michigan Electric Co., 284 NLRB 53 (1987), in which the Board clarified the scope of the postex- piration duty to arbitrate grievances in light of the presumption of arbitrability set forth in Nolde, above. In so doing, the Board initially reaffirmed the principle that the obligation to arbitrate cannot be created or maintained solely by operation of the Act and therefore held that the obligation to arbi- trate postexpiration grievances must arise from the provisions of the expired collective-bargaining agreement itself. Turning to the specific facts in that case, the Board found that the respondent's unqualified refusal to arbitrate any postexpiration grievance—which encompassed grievances arbitra- ble under No/de—constituted an unlawful whole- sale repudiation of its contractual obligation to ar- bitrate in violation of Section 8(a)(5) and (1). See also Litton Business Systems, 286 NLRB 817 (1987); American Gypsum Co., 285 NLRB 100 (1987). Regarding the individual grievances in Indiana & Michigan Electric, the Board held that a dispute based on postexpiration events "arises under" the contract within the meaning of Nolde, and is there- fore arbitrable, only if it concerns contract rights 3 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). 288 NLRB No. 130 UNITED CHROME PRODUCTS 1177 I capable of accruing or vesting to some degree during the life of the contract and ripening or re- maining enforceable after the contract expires.4 Specifically, the Board found that none of the grievances were arbitrable because they were trig- gered by events or conduct that occurred after the expiration of the contracts; the rights involved were not worked for or accumulated over time; and there was no indication that the parties con- templated that such rights could ripen or remain enforceable even after the contract expired. 284 NLRB 61 (1987) (citing Teamsters Local 238 v. CR.S.T., 795 F.2d 1400 (8th Cir. 1986)). Similarly, in Litton, above, the Board noted that none of the individual grievances charging "unjust layoffs . . . out of seniority" arose under the expired contract, which 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." See also American Gypsum Co., above (disputes concerning postexpiration employee discharges did not arise under the expired contract). In the instant case, the expired collective-bar- gaining agreement contained a broad arbitration clause.5 Additionally, article XX of that agreement provided that employees shall be recalled in ac- cordance with their seniority, and that "an employ- ee's seniority shall be computed from the time of his employment by the company in any capacity within the bargaining unit." After the agreement had expired, the Respondent's employees filed grievances concerning the Respondent's failure to recall them on the basis of seniority at the time of the lockout.6 By letter dated February 23, 1983, the Respond- ent's counsel advised the Union that because the grievances involved actions by the Respondent that occurred after the date of impasse and after the ex- piration of the parties' collective-bargaining agree- ment, he had advised the Respondent that it had no legal obligation to arbitrate the recall grievances. The letter further indicated that the Respondent would not appear at the March 1, 1983 arbitration hearing. Regarding the contract's expiration, we agree with the judge that there is no language in the expired collective-bargaining agreement that negates the Nolde presumption of arbitrability. We fmd that the Respondent's February 23 letter 4 In view of its construction of grievances that "arise under" the ex- pired agreement, the Board in Indiana & Michigan Electric declined to adhere to American Sink Top, above, to the extent that it stands for the proposition that the mere invocation of any term of the expired contract triggers the postexpiratiora duty to arbitrate under Nolde, 284 NLRB 53 at fn. 9 (1987). We therefore disavow, the judge's reliance in this case on American Sink Top. 5 The agreement provided that "arbitration shall be initiated for all grievances unresolved in Step 3." 6 The grievances are not part of the record in this case. amounted to a refusal to arbitrate any grievance based on a postexpiration event and that, therefore, under Indiana & Michigan Electric, the Respond- ent's action constituted an unlawful wholesale re- pudiation of its contractual obligation to arbitrate.7 See also Litton Business Systems, above. We further find that the rights invoked in each recall grievance "arise under" the expired contract pursuant to Indiana & Michigan Electric. Unlike the expired contract in Litton, above, the expired con- tract here provides for recall solely in terms of se- niority and does not include more subjective fac- tors such as "aptitude" and "ability" that remain within the control of an employer. Under the cir- cumstances, we find that the seniority rights here were worked for and accumulated over time, and that the rights thus arguably remained enforceable after the contract expired. In fact, the Respondent's postexpiration conduct in implementing a lockout in order to rehire its own employees as new hires, and thereby deprive them of seniority, indicates that the Respondent believed that its employees' se- niority rights survived the contract's expiration. Therefore, there was at least a, question whether the expired contract had conferred on the employ- ees rights that would survive the contract's expira- tion. and under Nolde and Indiana & Michigan Electric, we may presume that the parties intended their broad arbitration provision to apply to such a question concerning the meaning of the expired contract. Accordingly, we shall order that the Re- spondent, on the Union's request, process the indi- vidual recall grievances to arbitration. ORDER The National Labor Relations Board adopts the recommended Order of the administrative law judge as modified below and orders that the Re- spondent, United Chrome Products, Inc. and United Saw Service, Corvallis, Oregon, its officers, agents, successors, and assigns, shall take the action set forth in the Order as modified. 1. Insert the following as paragraph 2(e) and re- letter the subsequent paragraphs. "(e) On the Union's request, process the recall grievances pursuant to the arbitration procedure es- tablished in the collective-bargaining agreement that expired on April 30, 1982." 7 The General Counsel conceded that the parties reached an impasse in negotiations prior to the lockout. We note that although the Respondent could therefore implement unilateral changes in working conditions that were encompassed in or consistent with its last rejected offer to the Union the Respondent's final offer did not contain any modifications to the grievance-arbitration procedure of the expired contract. In any event, the Respondent admitted that it recalled employees not in accordance with the departmental seniority provision in its final offer, but based on ability. 1178 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 2. Substitute the attached notice for that of the administrative law judge. MEMBER JOHANSEN, concurring in the result. I concur in the majority's findings of unfair labor practices and, more particularly, that the Respond- ent violated Section 8(a)(5) of the Act by failing to honor the grievance-arbitration procedures of the expired contract and refusing to arbitrate griev- ances that arose under the contract, and I agree with the remedy given. I do so because specific contract rights were invoked by the grievances, and they therefore "arose under" the contract within the meaning of NoIde Bros. v. Bakery Work- ers Local 358, 430 U.S. 243 (1977). I do not sub- scribe to all the rationale given by the majority. See my concurrence and dissent in Indiana & Michigan Electric Co., 284 NLRB 53 (1987). 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. Section 7 of the Act gives employees these rights. To organize To form, join, or assist any union To bargain collectively through representa- tives of their own choice To act together for other mutual aid or pro- tection To choose not to engage in any of these protected concerted activities. WE WILL NOT bypass the Union and deal direct- ly with our employees in the appropriate unit de- scribed below concerning vacation pay, an incen- tive bonus program, or any other terms and condi- tion of employment. WE WILL NOT fail to honor and continue in full force and effect the grievance and arbitration pro- cedures of our expired contract with the Union re- garding grievances that arose under that contract. WE WILL NOT lock out our employees in retalia- tion for the Union's refusal to acquiesce in our eco- nomic demands and the employees' refusal to accept our last offer, nor will we implement terms and conditions of employment not encompassed by our preimpasse offer to the Union, which deprives employees of seniority rights theretofore enjoyed. WE WILL NOT in any other manner interfere with, restrain, or coerce you in the exercise of the rights guaranteed you by Section 7 of the Act. WE WILL offer those locked-out employees, who have not yet been reinstated, reinstatement to their old positions or, if those positions are no longer available, to substantially equivalent positions, dis- missing or laying off, if necessary, any new or less senior employees hired as replacements, and WE WILL place the remaining employees for whom jobs are not available on a preferential hiring list, by seniority. WE WILL credit the locked-out employees with seniority from their original date of hire by us and pay them the amount, with interest thereon, to which they would have been entitled for sick leave, vacation, and other benefits in accordance with their restored seniority. WE WILL make whole the locked-out employees for loss of pay each may have suffered by reason of our unlawful lockout, with interest. WE WILL, on request, bargain collectively with the Union as the exclusive collective-bargaining representative of the employees in the appropriate unit described as follows: All production, maintenance and shipping- receiving employees, excluding office clerical employees, guards, professional employees, and supervisors as defmed in the Act. WE WILL, on request, process the grievances concerning our failure to recall employees based on seniority pursuant to the arbitration procedure es- tablished in the collective-bargaining agreement that expired on April 30, 1982. UNITED CHROME PRODUCTS, INC. AND UNITED SAW SERVICE Dale B. Cubbison, Esq., for the General Counsel. James R. B. Salter and Arthur Hayashi, Esqs. (Salter, McKeehan & Rabine), of Eugene, Oregon, for the Re- spondent. DECISION STATEMENT OF THE CASE EARLDEAN V.S. ROBBINS, Administrative Law Judge. This matter was heard before me in Albany, Oregon, on November 8-9, 1983. The charge was filed by United Steelworkers of America, District 38, AFL-CIO (the Union), on June 1, 1982, and served on United Chrome Products, Inc. and United Saw Service (the Respondent), on June 7, 1982. The amended complaint, which issued on March 22, 1983, alleges that Respondent violated Sec- tion 8(a)(1), (3), and (5) and Section 8(d) of the National Labor Relations Act (the Act). The basic issues are: UNITED CHROME PRODUCTS 1179 1.Whether Respondent unlawfully modified and abro- gated the health and welfare provisions of its collective- bargaining agreement with the Union by ceasing to make the prescribed monetary contributions; and failing to pay required benefit claims. 2. Whether Respondent, following a negotiating im- passe, unlawfully implemented all the terms of its last offer to the Union except for the health and welfare and seniority provisions of the last offer. 3. Whether Respondent unlawfully "locked out" all of its employees in the appropriate unit required them to apply for employment as new temporary employees to work during the "lock out," and refused to grant them seniority regarding their recall and employment in ac- cordance with Respondent's last offer to the Union. 4. Whether Respondent unlawfully bypassed the Union and dealt directly with the employees by bargaining with them concerning vacation pay and an incentive bonus program. 5. Whether Respondent unlawfully withdrew recogni- tion from the Union as the exclusive collective-bargain- ing representative of its employees. 6. Whether Respondent unlawfully failed to honor the grievance and arbitration procedures of the expired con- tract. On the entire record, including my observation of the demeanor of the witnesses, and after consideration of the briefs filed by the parties, I make the following FINDINGS OF FACT I. JURISDICTION Respondent, an Oregon corporation with a principal office and place of business in Corvallis, Oregon, has been engaged in the manufacture of sawmill equipment. During the year preceding the issuance of the complaint, which period is representative of all times material, Re- spondent, in the course and conduct of its business oper- ations, purchased goods and materials valued in excess of $50,000, which were delivered to its Corvallis, Oregon location directly from points outside the State of Oregon. The complaint alleges, Respondent admits, and I find that it is an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act. II. LABOR ORGANIZATION The complaint alleges, Respondent admits, and I fmd that the Union is a labor organization within the meaning of Section 2(5) of the Act. III. THE ALLEGED UNFAIR LABOR PRACTICES A. Background United Chrome Products is a machine shop and chrome-plating plant that rebuilds, repairs, and manufac- tures sawmill plywood pulp and paper equipment that is sold through its distributive arm, United Saw Service. Respondent and the Union were parties to a collective- bargaining agreement with an expiration date of mid- night, April 30, 1982. According to Raymond Marsh, Respondent's general manager prior to October 1981 and the son of Respondent's owner, Lee Marsh, 1 Respondent suffered financial reverses during the term of the collec- tive-bargaining agreement. During the fiscal year ending Apri 30, 1981, Respondent suffered a loss of approxi- mately $150,000 and also suffered a loss for the fiscal year ending April 30, 1982. By letter to the Union dated October 22, 1981, signed by President Lee Marsh, Respondent notified the Union that due to the present economic condition, effective Oc- tober 26, 1981, it was reducing the work hours of the chrome-plating department and shipping and receiving department employees to 6 hours per day in an effort to reduce "some of the financial stress we are incurring at the present time." By letter to the Union dated October 26, 1981, 2 Respondent informed the Union that it faced bankruptcy unless it could obtain immediate relief from creditors and employees and requested a 20-percent de- crease in pay effective November 1, that employees forgo any contractually required wage and benefit in- creases during the remainder of the contract term, and that the Union agree that, during the remainder of the contract term, wages and benefits be negotiable "if the economy down trend continues and/or the work avail- able decreases." On November 19, Respondent issued a notice to its employees informing them that, due to the slump in the economy and an estimated 25-percent reduction in sales, four employees would be laid off for an indefinite period effective November 20, and that effective November 23 all employees would be scheduled on a 6-hour workday. On November 30, Respondent sent the Union a letter denying the Union's request for certain financial informa- tion, and stating, inter alia: The woods products and related industries, which furnish 99% of our work orders, are in finan- cial disaster areas. A 20% reduction in wages is the common denominator currently used in order to try to keep the employees working and continue their fringe benefits. (See enclosed clippings). If this 20% cut is not in force as of November 1, 1981, and ac- cordingly computed in our November payroll, without the November cost of living raise, due De- cember 10, 1981 we will be forced to shut down our operations. On December 9, in response to the Union's request for financial information to support Respondent's request for financial relief, Respondent sent the Union certain of its financial statements along with a cover letter that claimed Respondent's officers had received no salaries for 3 months and that Respondent had suffered a loss of $27,000 monthly since May 1, 1981. B. The Negotiations No agreement was reached on modification of the col- lective-bargaining agreement during its term and, on 1 Sometime in October 1981 Raymond Marsh became a salesman for Respondent. 2 All dates from October through December will be in 1981, and from January through September will be m 1982 unless otherwise indicated. 1180 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD April 20, negotiations for a new agreement commenced. At this meeting, Lee Marsh was the spokesman for Re- spondent and Sid Lampley was spokesman for the Union. Sheron Hill, one of Respondent's clerical employ- ees, took notes for Respondent. According to Hill, Lee Marsh stated he did not want an arbitration provision in the contract because Respondent always lost and he had no control over the employees. Respondent also request- ed a 25-percent reduction in wages and considerable re- ductions in fringe benefits. On April 20, the Union asked to see Respondent's books. Respondent refused. The Union said it would be willing to continue the existing contract with no changes. Respondent would not agree to that. The Union requested that Respondent set forth its proposal in writing. On April 23, Lee Marsh, Respondent's president and co-owner, sent the Union a letter reaffirming its refusal of the Union's proposal to extend the present contact in its entirety for 1 year and stating that the stockholders and board of directors had voted to liquidate the Corpo- ration and had filed the necessary documents of intent with the proper Government agencies. The letter further stated that this action was taken with consideration given to the present state of the economy, Respondent's fman- cial condition, and the inability to negotiate a wage re- duction, plus other ,contractual differences with the Union. On April 27, Lee Marsh sent the Union a letter, the body of which reads: In regard to your telephone call on Monday morning, April 26, 1982, following are some of the contents we expect in a possible new contract be- tween the bargaining unit and United Chrome Prod- ucts, Inc., that the stockholders would consider if they are asked to retract their action to liquidate the company's assets: 1. A 25% cut in the hourly wage rate, or a 20% cut in the hourly rate and all fringe benefits, which includes holiday, vacation and call-back pay, as is medical plan and Sunday pay. 2. No deductions from employees pay check for any reason other than garnishment or the judgement of a civil court or money owed to the employer. 3. Delete truck drivers from the bargaining unit. 4. Management Rights: Company shall have the right to subcontract work if employees are unable to do the work be- cause of their technique, our lack of equipment or price related to the cost and their time in- volved to complete the job. 5. There shall be no bumping between depart- ments. 6. Foremen shall be able to perform duties as time permits in any department of the bargaining unit. 7. Delete Article X Section 4. 8. Salesmen may prepare their loads, load and unload their trucks. 9. For the purpose of seniority, foreman, in or out of the bargaining unit: shall have continuous seniority from the first date of employment. 10.Janitorial work shall be included with the shipping department. Commencing with the second negotiation session, which has held on April 30, Raymond Marsh (Marsh) was spokesman for Respondent and Wayne Anderson was spokesman for the Union. During this meeting, Marsh proposed that layoffs be by department seniority rather than plant seniority, and stated that Respondent wanted the most qualified person for a job. Respondent also submitted a more complete proposal along with a cover letter, the body of which reads: Working under the present contract in any shape or form is totally unacceptable. We must have either a new contract or the men can work without any contract. This offer is good until midnight, April 30, 1982. If contract is accepted it will be subject to sale of assets without notice, or seventy-two (72) hour notice for any other unforeseen occurrences [sic] arising. Respondent's April 30 proposal states, inter alia: ARTICLE HI—DURATION OF AGREEMENT This Agreement shall become effective the date it is signed and shall remain in effect until midnight October 31, 1982, except as provided by cover letter. ARTICLE XX—SENIORITY Section 1. An employee's seniority shall be com- puted from the time of his employment by the Company in any capacity, except that new employ- er shall be on probation for the first ninety (90) days of their employment unless the parties agree to a thirty (30) day extension. After successfully com- pleting his probationary period, a new employee shall be placed on the seniority list and given se- niority rating as of the first day he was last hired by the Company. There shall be no responsibility for re-employment of probationary employees if they are laid off during their probationary period. Section 2 la. It is the intent of the Company at its sole discretion to promote the employees that is most qualified, not one who just meets minimum require- ments. [Emphasis added.] Section 6 a. (present paragraph in its entirety) b. Decrease of working force will be attained by de- partment (Welding, Machine, Shipping and Receiving, Chrome Plating and Helper) subject to Section 2. [Emphasis added.] Section 7—First day of employment with the Company will be the determining date for seniority. UNITED CHROME PRODUCTS 1181 - -1 Following a meeting on May 1, Respondent submitted a new management-rights proposal by letter dated May 3, the body of which reads: To confirm our agreement of Saturday, May 1, 1982, during our meeting of 2:30 P.M., subject to the sale of our companies, the wages from our con- tract will remain the same until midnight Friday, May 7, 1982. During this period, the union will make a counter proposal to be delivered to us by Friday afternoon, May 7, 1982, after which we will meet at 10:00 A.M. on Monday, May 10, 1982. Following is the supplemental addition to Article VI—Management Rights, as per agreement reached during our Saturday, May 1, 1982 meeting: Except to the extent expressly abridged by the provisions of this Agreement, the Company re- serves all of its right to manage the business. These rights include among others; the right to select and to hire new employees, to select its supervision; to direct the working force, to relieve employees from duty due to lack of work, by department; to assign work to employees; to determine the product to be manufactured, including the means and processes of manufacturing and of sub-contracting out, but not limited to any part of the process, including the completed product; to determine production sched- ules and methods of work measurements; to estab- lish standards of performance; to establish, modify, or eliminate job classifications (subject to negotia- tion of wage rates) and to introduce new or im- proved production methods or facilities. [Emphasis added.] At a negotiation session on May 7, the Union submit- ted a written response to Respondent's proposal. That re- sponse stated, inter alia: ARTICLE III—DURATION OF AGREEMENT We reject the employer's proposal since it is only for a period until the employer can liquidate its assets. We feel the parties should attempt to make a go of it, not run from it. The Union proposes an agreement of at least 1 year duration. ARTICLE VI—MANAGEMENT RIGHTS We reject the employer's proposal and propose no change. The reference to department seniority properly belongs in the seniority article, not Man- agement Rights. As to Sub-contracting, the Union is unwilling at this time to waive its rights more than is required to assure continued operation of the plant without unnecessary layoff of additional em- ployees. . . . . ARTICLE XX--SENIORITY Section 1—The Union rejects the employer's pro- posal and proposes no change. The Federal Gov- ernment certification as well as the National Labor Relations Act specifically excludes certain classes of employees from the Bargaining Unit.The employer's proposal would violate that law, as well as others, and may subject the Company and the Union to legal action from the Company's employees. Section 2 la—We reject the Company's proposal on the basis that the Labor Agreement is not the proper place to state intent of either party. Section 6b—This proposal is contrary to the em- ployer's statements of his concern for the long time employee, and we reject it on that basis. Section 7—Same position as in Section 1. . . . . ARTICLE XXII—INSURANCE The Union is not agreeable to the reduction of any benefit at this time. Furthermore, we are firm in our position that all items should be agreed to before the effective date of any new Agreement. Union Representative Anderson stated that the Union could not accept Respondent's offer on a take-it-or-leave- it basis and proposed sitting down and discussing the offer. They met the following day. At a May 10 meeting, Respondent proposed a 15-per- cent wage reduction on an 8-hour-a-day basis. 3 This pro- posal was rejected. They again discussed Respondent's position that the collective-bargaining agreement should not contain an arbitration clause; and the Union's written counterproposal was discussed item by item. According to Marsh, no significant agreements were reached. Negotiation sessions were also held on Friday, May 21, and Saturday, May 22. During these sessions, Marsh informed the union negotiators that a collective-bargain- ing agreement had to be reached that weekend. At 5:45 p.m. on May 22, Respondent submitted a proposal on in- surance. Marsh testified that between 7:30 and 8:15 p.m. on May 22, Anderson indicated that the Union had a strike vote; however, he made no attempt to testify about what was said in this regard. Further, he also admits that no one from the Union advised him that the employees would engage in a work stoppage on Monday morning, May 24. Harold Westin, an employee member of the union ne- gotiation team, testified that Anderson said he had strike authorization from the International that had to be ob- tained before they could go on strike, but that the Local had not taken a strike vote, nor had a strike been ‘clis- cussed. Marsh said Respondent's outstanding proposal was its last offer. Marsh testified that Respondent's last offer was its last written proposal, as modified by its in- surance proposal. C. The Lockout and Rehire of Locked-Out Employees 1. The lockout Marsh testified that on May 24, when the unit employ- ees reported for work, they were told there was no work available until Respondent received an answer from the 3 At the time, Respondent Was operating on a 6-hour-a-day basis. 1182 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Union and that they would be rehired on a first-come, first-served basis pursuant to Respondent's last offer. However, he neither testified that he personally made this statement nor that it was made in his presence. Em- ployee Frank Frisk testified that it was Foreman Charles Jacobs who spoke to the employees. According to him, on both May 24 and 25: Jacobs said there was no work available; and it was on May 26 that Jacobs stated they were on lockout. I credit Frisk. On May 27, when the employees reported to work, they were told that they would have to telephone for an interview. Frank Frisk testified, without contradiction, that he and another employee walked in together and asked if there was any work available. Either Jacobs or Joe Matteo told them to call for an interview. They asked if they could use the telephone, and were told they could not, that they would have to telephone from else- where. The employees then went to the nearest tele- phone booth. Employee Eric Paasche dialed Respond- ent's number and, one by one, each of the employees re- quested an interview. Each of them was given a time for an interview and was told they would be hired as new employees and would have to submit a new application. Some of the employees filled out new applications at the time they went in for an interview, and some of them se- cured application forms and filled them out prior to their scheduled interviews. Employees Hurtle Fryer and Malcolm Rose were not required to telephone in for interviews. They were working on May 27 when the other employees were told they had to telephone for an interview. When Marsh was questioned as to why these two employees were given special treatment, he testified, "Hurtle Fryer is a chrome plater, and he was a non-union employee under the grandfather clause. 'Red' Rose, or Malcolm Rose, had indeed phoned in and had made application." At some point prior to May 26, the employees were told that if they were rehired, it would be pursuant to Respondent's last offer. Between May 24 and 21, when the employees reported to work, each of them presented the following statement: UNITED STEELWORKERS UNITED CHROME & SAW SERVICE It is hereby recognized that the undersigned has returned to work at on and is being afforded work under wages and working conditions unilaterally estab- lished by the employer. The Employer recognizes, but does not agree with, the Union's position that this change is unfair and that the undersigned Employee's return to work in no way binds the employee to the Employ- er's position; and that furthermore, the employee will, when agreement is reached, receive wages and benefits as determined through the course of negoti- ations. Employee Agreed To By Employer Representative Witness No representative of Respondent agreed to sign this statement. On May 26, Respondent sent a letter to the Union, the body of which reads: The company is unilaterally implementing the last company proposal of Saturday, May 22, 1982, at 8:15 P.M. at which time an impasse was reached. Those employees that wish to return to work under those conditions must notify the Company no later than 10:00 A.M. Thursday, May 27, 1982. Po- sitions' will be filled on a first come first serve basis. Telephone calls will be accepted until 5:00 P.M. Wednesday, May 26, 1982 and between 8:00 and 10:00 A.M. Thursday, May 27, 1982. The company stands ready to negotiate at reason- able times. On May 27, Marsh telephoned the Union and left the following message: Under the advise [sic] of our attorney, we are unable to deal individually with the men. We have requested that Wayne Anderson call our attorney Relan Colley, 752-7191. Any agreement must be made at this time by them (Relan Colley and Wayne Anderson) regaining the conditions of the employees returning to work. On May 31, Respondent sent a letter to the Union, the body of which reads: The Company will continue the "LOCK OUT' position precipitated by the impasse caused by your refusal to negotiate Saturday, May 23, 1982 at 8:15 PM. We are advertising for help on a temporary basis to continue the company's operation. 2. The rehire of locked-out employees It is undisputed that Respondent rehired the locked- out employees as new employees. As set forth above, they were required to fill out new applications and to submit to an employment interview. Further they were considered as probationary employees and were accord- ed seniority as of the date of their rehire, which affected their vacation and insurance benefits and all other condi- tions of employment related to seniority. Marsh contends that at some point between 6 months and a year prior to the hearing, on the advice of counsel, Respondent ac- corded these employees their original seniority. Marsh admits, however, that neither the Union nor the employ- ees were informed that the original seniority dates were in effect, and there is no evidence that this original se- niority status was implemented regarding vacations or other benefits. UNITED CHROME PRODUCTS 1183 Plant Superintendent Donald Kruse testified that after the lock-out was implemented it was his responsibility to rehire the employees. He had some discussions with Jacobs regarding the selection of those to be rehired, but the decisions were made by him. A critical factor was the determination to commence operations with a re- duced workload. According to Kruse, this was necessary because of the adverse effect of the general recession in the lumber industry. Thus, in the year prior to the lock- out, there had been a gradual, but steady decline in Re- spondeat's volume of sales from approximately $200,000 per month to a point where, for approximately 2 months prior to the lockout, the volume of sales had decreased to 50 to 60 percent of this figure. Kruse admits that al- though this decline had prompted some discussion prior to the lockout regarding the need for a layoff, it had never gone beyond the discussion stage. Kruse testified that in determining the order in which employees would be rehired, he first determined how many employees would be required to maintain the nec- essary production. -Then he considered the ability and past work history of individual employees—basically, the relative qualifications of the employee to do the type of work then available in the shop. The first employees he rehired were Fryer and Rose, allegedly because they were highly qualified in their position and, at the time, he needed chrome room employees, machinists, welders, and shipping and receiving personnel. Fryer was a chrome plater who was number two in plant seniority. Rose was a machinist. He chose Rose over other ma- chinists who had more seniority because he felt Rose was better qualified and could do a better, faster, and more efficient job than anyone else. He considered Rose to be a good, all around journeyman machinist with a lot of knowledge involving sawmill equipment because he had prior experience as a millwright in a sawmill. In addition to Fryer and Rose, Respondent rehired one of the locked-out employees on June 2, two on June 4, four on June 7, one on June 8, one on June 9, and two on June 16. No other employees were rehired until Sep- tember when two were rehired on September 13, one was rehired on October 11, one on October 15, one on November 17, one on December 6, one on December 7, one on January 3, and one on January 12. As to why some employees were hired on June 2 and others not until June 4 and 7, Kruse testified that part of the reason, he thinks, is that some of them could not be contacted on a given date, and that the other reason was they did not know exactly how many people they would need to perform the work. He admits there has not a great deal of difference in the qualifications of the people rehired on those dates, but that he considered those seven em- ployees to be better qualified than those rehired at a later date. In determining who was best qualified, according to Kruse, he looked at their ability to run all the differ- ent types of equipment in the plant, the quality of their work, and also the quantity that they could produce. The principal dispute regarding these selections in- volves the failure to rehire Richard Chaney, an appren- tice, and the delay in rehiring Eric Paasche, a welder, who was number eight in plant seniority and number two in departmental seniority, and Frank Frisk, who was number three in plant seniority and number one in de- partmental seniority. Eric Paasche was not rehired until June 13, 1983, because, according to Respondent, it did not need two welders. Richard Chaney was never re- hired because, according to Respondent, it had no need for an apprentice. No new employees were hired during the first 5 or 6 months following the commencement of the lockout. At least two employees, however, who had been on layoff approximately a year—John Whipple and William Durnford—were rehired on June 4 and Septem- ber 13, respectively. Kruse testified that he decided to rehire Harold Westin instead of Paasche because Westin was very well quali- fied in the production or welding procedures of the Company and had a lot more knowledge in the area of welding than Paasche had. He does not contend that Paasche was an incompetent welder, just that Harold Westin was more competent. As to Richard Chaney, Jacobs4 testified that he made a determination not to recall him because he was an apprentice machinist, with no machine shop experience. According to Jacobs, he had no work for a machinist apprentice at that time, nor has he had any since then. As to Frisk, Kruse testified he made the decision not to hire him after some discussion with Jacobs, based on Frisk's past work history and the fact that there were other employees who could do a better job than he could at the time. Regarding work history, Kruse testi- fied Frisk had a problem with carelessness. He always seemed to have a problem with machines of some kind, he would break one or tear one up; and there were a lot of continuous complaints from his fellow workers re- garding different parts on which he had worked. Basical- ly Frisk was a mill operator who had some ability to op- erate the other machines, but not to the extent of em- ployees who were rehired. Kruse testified that he was looking for employees who were qualified on all ma- chines, and they did not feel that Frisk fit into that cate- gory because he was mainly a mill operator. Employees Rose, Walder, Dooley, Scott, Soren, and Whipple, who were rehired first, were all employees who could operate all the machines. Frisk testified that he was interviewed on June 4 by Kruse; and when he gave Kruse his application, Kruse said, "we know what you can do and we will call you if and when we need you." Thereafter, Frisk telephoned or went in every week until about July 17 or 18, when he obtained temporary employment at REM Manufacturing, On or about September 28, according to Frisk, Jacobs telephoned his home and left a message for him to return the call. When Frisk returned the call, Jacobs told him' that they were working in different circumstances, that he would be hired in as a temporary employee on the swing shift at a rate of $9.09 an hour, and that he did not know how long it Would last, but it appeared that it might be until sometime in November. Frisk said he would be willing to return on the day shift with his se- 4 When Kruse left the position of superintendent and became an out- side sales representative for Respondent on July 1, 1982, he was replaced by Jacobs 1184 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD niority rights at any time. Jacobs said he was sorry, but that was not available. Jacobs testified that as nearly as he can recall he tele- phoned Frisk around September 9. When Frisk returned his telephone call, he asked Frisk if he wanted to return to work, told him his rate of pay would be $9.09 an hour plus 30 cents an hour shift differential, and told him he would have hospitalization and dental insurance, which would have $100 deductible. He further told Frisk he would be on 90 days probation and that he could not guarantee that the job would go on forever or would last any given length of time. Frisk said he would not work swing shift, he would not work for $9.09 an hour, and he would not work without a contract. He said he was working at REM Manufacturing and he was not interest- ed in returning to work at this time. He further men- tioned something about not coming back to work at this time under these conditions. On the following morning, according to Jacobs, he placed a note in Frisk's person- nel file dated September 10, which read: September 9 called Frank Frisk back to work— said- that he was working at REM and would not return to work at this time. Frisk denies that he told Jacobs he did not want to return to work because he was working at REM. Ac- cording to him, he knew that his job with REM was only temporary and he was, in fact, laid off by REM on September 30. On October 1, Respondent sent a letter to Frisk, the body of which reads: This letter is to act as a documentation of your refusal to return to work in accordance to the im- plemented working agreement initiated by the com- pany on May 22, 1982, Article XX, Seniority, Sec- tion 5 and any others that may apply. Having refused, you have lost all seniority and recall rights. Since the timing of this letter is more consistent with the date of the conversation, as testified to by Frisk, and since I find Frisk to be a credible witness in other re- gards, I find that the Frisk-Jacobs conversation occurred on September 28. Jacobs testified that Frisk operated and ran the milling machine and only worked on other machines, such as the lathe, the drill press, and the grinders, on rare occasions. He further testified that he did not feel that Frisk was proficient on any machine other than the mill. Therefore, in determining in what order to rehire Frisk, he consid- ered the work available 5 versus Frisk's ability to do the 5 According to Jacobs, he felt that Frisk was basically a milling ma- chine operator. The workload was such that they were not sure whether they had enough mill work to keep everyone working at the mill. Fur- ther, Jacobs testified that, immediately after the lockout, Respondent op- erated only one shift, and it was only after 2 or 3 weeks that they went to two shifts; however, he does not recall whether the second shift initial- ly operated with a full crew. At the time he called Fnsk on September 9, there was no work available for him on the day shift. He does not recall who was operating the milling machine on the day shift at that time. work. Specifically, he considered his versatility on sever- al different machines, his work habits, and his production relative to other employees. He felt that there were other employees who worked faster than Frisk. Also, Frisk had a history of walking and talking and of ma- chine accidents, and there was a 'history of complaints from his fellow workers on setup and procedures. When questioned specifically regarding what com- plaints from which fellow workers he was referring to, Jacobs could recall only two, made by employees Kahn- owski and Bill Durnfond. As to Kalinowski, the only thing Jacobs recalled is that he complained that Frisk had burred a part. 6 Kalinowski allegedly made these complaints about twice a week around the time of the union negotiations in April and May. Also within a year and a half before the negotiations, Kalinowski com- plained regarding a job setup. Durnford complained re- garding the deburring of parts. Frisk was on the day shift and Durnford and Kalinowski were on the swing shift. It was the responsibility of Durnford and Kahn- owski to correct any problems Frisk had during the day. Kruse also testified about complaints from Kalinowsld and Frisk's propensity to walk around talking to fellow employees. However, he gave no details. Kruse further testified that a major breakdown oc- curred due to carelessness on a machine operated by Frisk and that there were continuous small problems on another machine He admits, however, that the break- down occurred 4 or 5 years prior to the hearing and that the carelessness may have been on the part of Frisk or of someone else. He further admits that he has only spoken to Frisk regarding his work performance three or four times in 10 years; and, regarding the small problems, that there had been only three or four occasions in the past 10 years when the machine was down because of prob- lems due to Frisk and that on some of the occasions the problem could have been an electrical one over which Frisk had no control. He also testified that the employees rehired first had accidents or problems causing a ma- chine breakdown only rarely. He defined "rarely" as two or three times over a 5-year period for all the machines. 3. Conclusions The General Counsel argues that in locking out its em- ployees and continuing its operations with the use of cer- tain locked-out employees rehired as "temporary" re- placements with the status of new hires, Respondent was motivated by unlawful considerations and was without good-faith business justification. Respondent argues that it was motivated by valid business considerations and therefore the lockout is a lawful employer weapon to apply economic pressure in support of its bargaining po- sition. I have carefully considered all the cases cited by Respondent and conclude that, applied to the circum- stances herein, they do not support Respondent's posi- tion. According to Jacobs, when a part is finished it leaves a sharp edge on the machine part, which creates a danger in handling, and there were constant complaints about Frisk's failure to remove burr's from his work on completion. UNITED CHROME PRODUCTS 1185, The Supreme Court has held that an employer does not violate Section 8(a)(1) and (3) of the Act when, after a bargaining impasse is reached, it temporarily shuts down its plant and lays off its employees for the sole purpose of bringing economic pressure to bear in support of its legitimate bargaining position. American Ship Build- ing Co. v. NLRB, 380 U.S. 300 (1965). In so holding, the Court concluded that the lockout is not "one of those acts which are demonstrably so destructive of collective bargaining that the Board need not inquire into employer motivation, as might be the case, for example, if an em- ployer permanently discharged his unionized staff and re- placed them with employees known to be possessed of a violent anti-union animus" 380 U.S. at 309. Subsequently in Ottawa Silica Co., 197 NLRB 449 (1972), the Board held that the employer did not violate Section 8(a)(1) and (3) of the Act by locking oUt its bar- gaining unit employees and continuing to operate utiliz- ing nonunit employees and supervisors as temporary re- placements. In so holding the Board stated: We are not persuaded by the record before us that Respondent's conduct did not constitute "a measure reasonably adapted to the effectuation of a legiti- mate business end." . . . . We see nothing in Respondent's conduct which would warrant a conclusion that it was motivated by any antiunion considerations or that it was in- tended to discourage the exercise of protected em- ployee rights. We view the lockout here as having been used solely in support of Respondent's legiti- mate bargaining position. In such circumstances, it was not inconsistent with the right to bargain col- lectively nor 'with the right to strike. Having con- cluded that the resulting harm to employee rights by the lockout and continued operation by use of temporary replacements was comparatively slight and being of the view that there is insufficient evi- dence of improper motivation, we hold that Re- spondent did not violate Section 8(a)(1) and (3). Thereafter, in Loomis Courier Service, 235 NLRB 534 (1978), the Board held that the employer violated Sec- tion 8(a)(3) of the Act by terminating driver employees at its Manteca branch and thereafter recalling them as "new hires." There, following the employees' rejection of the employer's "last offer," the employer terminated the drivers and closed its Manteca branch, but continued to service its Manteca routes from another branch office utilizing temporary employees. Bargaining negotiations continued, resulting in a new agreement, and 5 to 6 weeks after the terminations, the Manteca branch was re- opened and the terminated employees recalled as new hires. The Board characterized the discharges as a lock- out and concluded: . . . that Respondent terminated its Manteca em- ployees in order to exert extreme pressure on them in support of its bargaining position and continued to serve its customers after advertising for and se- curing a number of new employees as replacements. By taking the drastic action of discharging its em- ployees for a coercive purpose, Respondent unlaw- fully exceeded the limits of permissible conduct which allow employers to continue to operate with replacements without disturbing the employees status of their regular work force. Respondent's resort to the severe sanction of a lockout, which in- volved the wholesale dismissal of its Manteca em- ployees and the continued operation of some or all of its Manteca routes with new employees, consti- tuted conduct which was inherently destructive of their rights and designed to frustrate collective bar- gaining. Where, as here, an employer's conduct is so inherently prejudicial to employee rights, no other proof of antiunion motivation is needed even if an employer introduces evidence that its conduct was motivated by business considerations. Although the Administrative Law Judge found that Respond- ent originally intended to phase out its Manteca op- erations and would have done so but for the Union's picketing, the record clearly shows that Re- spondent did continue to service many, if not all, of its customers from Livermore and did resume its operations at the Manteca location. Accordingly, we conclude, contrary to the Administrative Law Judge, that Respondent discriminatorily discharged its Manteca employees in violation of Section 8(a)(3) and (1) of the Act. In reviewing the Board's decision, the court concluded that the Board had based its conclusion of inherently de- structive conduct on a factual finding that the employer closed the Manteca branch for an unlawful purpose and thus its legal conclusion must rise or fall with the validi- ty of its factual finding. The court then applied the "sub- stantial evidence" rule and concluded there was insuffi- cient basis in the record for the Board to reverse the ad- ministrative law judge's credibility finding that the em- ployer originally intended to phase out its Manteca oper- ations and would have done so but for the union's post- discharge picketing; and to infer from the advertisement, the use of replacements, and the reopening that the em- ployer never intended to close its Manteca branch per- manently. Accordingly, enforcement was denied. Loomis Courier Service, supra. Respondent's reliance on the court's decision in Loomis is misplaced. That case is factually inapposite. Here Re- spondent locked out its employees, and within 3 days had required them to submit applications for rehire as new employees; had engaged in such seeming vindictive- ness as refusing to permit them to make appointments for employment interviews while on Respondent's premises, but rather requiring them to leave the premises and tele- phone for appointments; had permitted at least one of the ' unit employees to resume work without telephoning for an interview because "he was a non-union employee under the grandfather clause"; and then resumed oper- ations with some of its locked out employees who were rehired as new employees. These rehired employees were considered as probationary employees and were ac- corded seniority as of the date of their rehire. 1186 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD These circumstances tend to establish a discriminatory motive for the lockout. Respondent, however, argues that it had legitimate and substantial business justification for its conduct. I find insufficient support in the record for this argument. The evidence regarding business justi- fication relates only to Respondent's generally straight- ened economic circumstances during this period of time. Assuming arguendo that this would have been sufficient business justification for continued operation with tempo- rary new or nonunit personnel, the record contains no justification for the immediate withdrawal of seniority rights from the locked out employees. Here, contrary to the situation in Loomis in which the discharges and the rehire of the discharges as new em- ployees were separate and discrete incidents, it is appar- ent that the lockout and the deprivation of seniority rights were intertwined and that the lockout was intend- ed not for the sole purpose of exerting economic pres- sure in support of its legitimate bargaining position, but also as a device to deprive employees of a significant term and condition of employment. Since this change was not contained in Respondent's preimpasse "last offer," 7 it can only be inferred that Respondent's con- duct was in retaliation for the Union's refusal to acqui- esce in its economic demands and the employees' refusal to accept Respondent's last offer. Accordingly, I find that by locking out its employees and, as an integral part of the lockout, implementing conditions of employment not encompassed by its preim- passe offer to the Union, which deprived employees of seniority rights theretofore enjoyed, Respondent violated Section 8(a)(1), (3), and (5) of the Act. Because of this finding and the remedy, it is unnecessary to specifically consider the failure to recall or delay in recalling Paasche, Frisk, and Chaney. D. The Alleged Withdrawal of Recognition 1. The facts On June 3, Respondent sent a letter to the Federal me- diator, the body of which reads: After having consulted our attorney regarding the Companys' [sic] position, we have been advised it is not necessary to proceed with the step of Fed- eral Mediation. It is our understanding that having given the union our final proposal on Saturday, May 22nd at 8:15 P.M. and their having voted to reject ratifica- tion of our final proposal and notifying us of such on Monday, May 24th at approximately 8:30 P.M., that we have reached a total impasse. We are now advertising for and hiring temporary help in order to continue the Companys' [sic] operation. 7 It is well established that after bargaining to an impasse an employer does not violate Sec. 8(a)(5) of the Act by making unilateral changes, as long as the changes are reasonable, encompassed by the employer's preimpasse proposals. Here the change was unlawful since not so encom- passed NLRB v. Katz, 369 U.S. 736, 745 (1962); NLRB u Crompton Highland Mills, 337 U S. 217, 224 (1949), Western Publishing Co., 269 NLRB 355 (1984). If we receive any information from our attorney to change our minds in using the Federal Mediation and Conciliation Service, or negotiating at any future date, we will immediately contact you. On June 15, Respondent sent another letter to the Fed- eral mediator, the body of which reads: Having given our final contract offer to the United Steelworkers of America and Local #8105, and their rejecting it, we feel there is no union rep- resenting the men. We have hired through newspa- per advertisement. 8 Therefore, there is no need for us to negotiate on an expired contract nor on the proposal that has been rejected. At this point in time, our differences will have to be settled through the National Labor Relations Board charges brought against us by the Union. Nevertheless, Respondent did meet with a Federal medi- ator and the Union several times thereafter over a period extending into September. The record does not establish whether, during these meetings, Respondent continued to assert that no union represented its employees. Marsh, however, admits that after the June 15 letter was sent to the Federal mediator, the foreman told the union presi- dent that he could not have time off to conduct union business because the Union no longer represented the employees. 2. Conclusions The General Counsel argues that withdrawal of recog- nition is established by (1) the foreman's statement to the union president and (2) that portion of the June 15 letter which reads: Having given our final contract offer to the United Steelworkers of America and Local #8105, and their rejecting it, we feel there is no union rep- resenting the men. We have hired through newspa- per advertisement. Therefore, there is no need for us to negotiate on an expired contract nor on the proposal that has been rejected. Respondent claims that it did not withdraw recogni- tion from the Union and that by its June 15 letter it did not intend to imply or convey that it was doing so. Fur- ther, the record establishes that Respondent thereafter continued to negotiate with the Union and to process grievances submitted by the Union. In these circum- stances, I find that Respondent did not withdraw recog- nition from the Union, as alleged in the complaint, in violation of Section 8(a)(1) and (5) of the Act. E. The Alleged Bypassing of the Union and Direct Dealings with Employees On June 10, Respondent distributed the following memorandum to all employees, including the union presi- dent: 8 Marsh admits that this statement is untrue and that Respondent has not hired through newspaper advertisement. UNITED CHROME PRODUCTS 1187 ._, The company is requesting any employee that is willing to take a note for their accrued and earned vacation pay up to and including May 22, 1982 to please notify the company in writing by Friday, June 11, 1982. This note will be at a rate of 12% per annum. We are anticipating to have all notes paid in 60 days. Those employees -not willing to do so please notify the company in writing by Friday, June 11, 1982. On December 30, 1982, Respondent posted a notice on its bulletin board announcing an incentive program effec- tive as of January 1, 1983. On that same date, a copy of the announcement was sent to the Union. The bulletin reads: TO ALL EMPLOYEES Subject to our present implemented wage and fringe benefit policy, beginning January 1, 1983, the Company will pay 10% of our monthly total sales that exceeds $120,000.00 as an incentive. This money will be divided among all personnel (includ- ing foremen and office staff) and distribution will be based upon all hours worked. In addition to the monthly sales total of over $120,000.00, the cuts and redo's must not exceed 3% of the total sales. This incentive program will continue as long as it proves beneficial to employees and,the Company. The notice was removed after Marsh was advised that the Union was filing an unfair labor practice charge with regard thereto. The program was never implemented. Both the proposed modification in method of vacation pay and the incentive program are terms and conditions of employment about which Respondent has an obliga- tion to afford the Union an opportunity to bargain. In both instances Respondent failed to do so and instead di- rectly solicited the employees' participation in a scheme to defer their receipt of vacation pay and, without prior notification to, and consultation with, the Union, an- nounced to employees an incentive program. By this conduct, Respondent bypassed the Union and dealt di- rectly with employees in violation of Section .8(aX1) and (5) of the Act. Friederich Truck Service, 259 NLRB 1294 (1982). F. The Alleged Modification and Abrogation of the Health and Welfare Provisions of the Contract It is undisputed that the health insurance covering unit employees was canceled on July 30, 1982, and that em- ployees were without such coverage for a period of time. Marsh testified, however, without contradiction, that the coverage was canceled by the carrier, that a new policy was sought and obtained that coverage under the new policy was made retroactive to cover the interim period, and that all employee claims incurred during the interim period have been adjusted and paid. The General Coun- sel offered no evidence that the new coverage was dif- ferent from that proposed by Respondent in its last offer on May 22. In these circumstances, and since the Gener- al Counsel concedes in the complaint that impasse was reached in May, I find that the General Counsel has failed to establish that Respondent violated Sections 8(a)(1) and (5) and 8(d) of the Act by modifying and ab- rogating the health and welfare provisions of its contract by ceasing to make the prescribed monetary contribu- tions, and failing to pay required benefit claims. G. The Alleged Failure to Honor the Grievance and Arbitration Procedures of the Expired Collective- Bargaining Agreement I. Facts Marsh testified that employees filed grievances over Respondent's failure to return them to work in accord- ance with their seniority at the time of the "lockout" and that these grievances were processed and scheduled for arbitration on March 1. By letter dated February 23, however, Respondent's attorney informed the Union, inter alia: There is currently scheduled on March 1, 1983, an arbitration between the two parties for determi- nation of grievances filed by the individuals of the bargaining unit who became "temporary help" after the date of lockout and after they accepted employ- ment as temporary employees subject to the wage, hour and insurance benefit package previously ex- plained to them as a condition of employment. Insofar as the grievances which are set to be heard on March 1 before Mr. Dorsey involve acts on behalf of the company occurring after the date of impasse and clearly after the date of expiration of the collective bargaining agreement between the parties, it is my advice to the company that they are under no legal obligation to arbitrate any of the grievances which are set for hearing before Mr. Dorsey on March 1, 1983. Therefore, finding no basis for a mandatory arbi- tration proceeding, and further finding no waiver of its right to decline arbitration, and fmding that there is no collective bargaining agreement in existence between the parties at this time, please be advised that the company will not appear at the arbitration hearing currently set for March I, 1983. Please be advised that the company does not deem itself liable for any financial charges incurred in the various communications between the parties which appear to be preparatory towards the estab- lishment of this March 1, 1983 arbitration hearing date, except for the imposition of a reasonable can- cellation charge, if any there be, which may be sought by the arbitrator himself. This notice is being given on this date so that hopefully Mr. Dorsey's services may be utilized in other arbitration hearings so as to minimize the fi- nancial impact of this notice of nonparticipation at this date. 1188 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 2. Conclusions The complaint alleges that Respondent violated Sec- tion 8(a)(1) and (5) of the Act by its failure since Febru- ary 23 to honor and continue in full force and effect the grievance and arbitration procedures of the expired con- tract. Respondent argues that it was not obligated to ar- bitrate inasmuch as the events giving rise to the griev- ances occurred after the expiration of the contract and in support thereof cites NoIde Bros. v. Bakery Workers Local 358, 430 U.S. 243 (1977). Respondent misapplies Nolde Bros. to the facts. In that case, the Supreme Court held that the parties' obligations under their arbitration clause survived the contract ter- mination when the dispute was over an obligation argu- ably created by the expired contract. Contrary to Re- spondent's urging, I find that the basis of the grievances that involved Respondent's failure to accord employees their seniority rights under the expired agreement, were arguably over an obligation created by the expired con- tract. I further find nothing in the contract to negate, either expressly or by clear implication, the presumption that the parties intended to arbitrate all grievances aris- ing out of the contractual relationship. Accordingly, I find that by refusing to arbitrate these grievances, Re- spondent has violated Section 8(a) (1) and (5) of the Act. American Sink Top Co., 242 NLRB 408 (1979). CONCLUSIONS OF LAW 1. Respondent is an employer engaged in commerce within the meaning of Section 2(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. The following unit is appropriate for the purposes of collective bargaining. All production, maintenance and shipping-receiving employees, excluding office clerical employees, guards, professional employees, and supervisors as defined in the Act. 4. At all times material, the Union has been, and is now, the exclusive representative for all employees in the aforesaid appropriate unit for the purpose of collective bargaining within the meaning of Section 9(a) of the Act. 5.By bypassing the Union and dealing directly with its employees concerning vacation pay and an incentive bonus program; and by unilaterally failing to continue in full force and effect the grievance and arbitration proce- dures of the recently expired contract, Respondent has engaged in unfair labor practices within the meaning of Section 8(a)(5) and (1) of the Act. 6. By locking out its employees in retaliation for the Union's refusal to acquiesce in its economic demands and the employees' refusal to accept Respondent's last offer and, as an integral component of the lockout, implement- ing terms and conditions of employment not encom- passed by its preimpasse offer to the Union, which de- prived employees of seniority rights theretofore enjoyed, Respondent has unlawfully refused to bargain with the Union and has discouraged membership in the Union in violation of Section 8(a)(5), (3), and (1) of the Act. 7. The above-described unfair labor practices are unfair labor practices affecting commerce within the meaning of Section 2(6) and (7) of the Act. 8. Respondent has not engaged in unfair labor prac- tices alleged in the complaint, except as found above. THE REMEDY Having found that the Respondent has engaged in cer- tain unfair labor practices, I fmd it necessary to order it to cease and desist and to take certain affirmative action designed to effectuate the policies of the Act. Having found that Respondent has violated Section 8(a)(5), (3), and (1) of the Act by locking out its employ- ees and recalling them as new employees, without the se- niority rights and related benefits theretofore enjoyed, I will recommend that Respondent offer those employees who have not already been asked to return to work rein- statement to their former positions or, if those positions are no longer available, to substantially equivalent posi- tions, dismissing or laying off, if necessary, any new or less senior employees hired as replacements. If there are still not sufficient available positions to reinstate all the locked out employees, we will order Respondent to place those remaining on a preferential list, by seniority. We shall also order Respondent to make whole those employees who have been reinstated or are entitled to reinstatement by restoring their seniority and related ben- efits and by payment to them of any earnings or benefits they may have lost because of the unlawful lockout and withdrawal of seniority rights for the period from their lockout to their reinstatement or offer or reinstatement, less their net earnings, plus interest. Regarding the resto- ration of seniority, because the lockout was unlawful from its inception, I will recommend that the reinstate- ment and backpay portions of this order be implemented in accordance with the seniority provisions of the ei- pired contract. As the unlawful conduct of Respondent is of such seri- ous nature and strikes at the very heart of the rights in- tended to be protected by the Act, we shall issue a broad order requiring that Respondent cease and desist in any other manner from infringing on the rights of employees. Hickmott Foods, 242 NLRB 1357 (1979). On these fmdings of fact and conclusions of law and on the entire record, I issue the following recommend- ed9 ORDER The Respondent, United Chrome Products, Inc. and United Saw Service, Corvallis, Oregon, its officers, agents, successors, and assigns, shall 1. Cease and desist from (a) Bypassing the Union and dealing directly with its employees in the appropriate unit described below con- cerning vacation pay and an incentive bonus program. 9 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 m Sec. 102.48 of the Rules, be adopted by the Board and all objections to them shall be deemed waived for all pur- poses UNITED CHROME PRODUCTS 1189 (b) Failing to honor and continue in full force and effect the grievance and arbitration procedures of the re- cently expired contract. (c) Locking out its employees in retaliation for the Union's refusal to acquiesce in its economic demands and the employees' refusal to accept its last offer arid, as an integral component thereof, implementing terms and con- ditions of employment not encompassed by its preim- passe offer to the Union, which deprived employees of seniority rights theretofore enjoyed. (d) In any other manner interfering with, restraining, or coercing employees in the exercise of the rights guar- anteed them by Section 7 of the Act. 2. Take the following affirmative action necessary to effectuate the policies of the Act. (a) Offer those locked-out employees, who have not yet been reinstated, reinstatement to their old positions or, if those positions are no longer available, to substan- tially equivalent positions, dismissing, if necessary, any new or less senior employees hired as replacements; and place the remaining employees for whom jobs are not available on a preferential hiring list, as set forth in the remedy section. (b) Credit the locked-out employees with seniority from their original date of hire by Respondent and pay them the amount, with interest thereon, to which they would have been entitled for sick leave, vacation, and other benefits in accordance with their restored seniority, as set forth in the remedy section. (c) Make whole the locked-out employees fo- r loss of pay each may have suffered by reason of Respondent's unlawful lockout imposed on May 24, 1982, with interest thereon, as set forth in the remedy section. (d) On request, bargain with the Union as the exclu- sive representative of the employees in the following ap- propriate unit concerning terms and conditions of em- ployment and, if an understanding is reached, embody the understanding in a signed agreement: All production, maintenance and shipping-receiving employees, excluding office clerical employees, guards, professional employees, and supervisors as defined in the Act. (e) 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. (0 Post at its place of business in Corvallis, Oregon, copies of the attached notice marked "Appendix."" Copies of the notice, on forms provided by the Regional Director for Region 19, after being signed by the Re- spondent's authorized representative, shall be posted by the Respondent immediately 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 Respond- ent to ensure that the notices are not altered, defaced, or covered by any other material. (g) Notify the Regional Director in writing within 20 days from the date of this Order what steps the Re- spondent has taken to comply. " 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."