Peelle Co.

PEELLE CO. 113 The Peelle Co. ' and Shopmen's Local Union No. 455, International Association of Bridge, Struc- tural and Ornamental Iron Workers, AFL-CIO. Case 29-CA-10584 June 15, 1988 DECISION AND ORDER BY MEMBERS JOHANSEN , BABSON, AND CRACRAFT On February 28, 1985, Administrative Law Judge Raymond P. Green issued the attached deci- sion. The General Counsel filed exceptions and a supporting brief, and the Respondent filed an an- swering brief, exceptions, and a supporting 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 briefs and has decided to affirm the judge' s rulings, findings, 2 and conclusions as modified and to adopt the recom- mended Order as modified.3 We agree with the judge that the Respondent violated Section 8(a)(5) and (1) of the Act by uni- laterally granting its employees merit increases in July 1983.4 However, we reverse the judge's find- i The caption is corrected to spell the Respondent's name properly. 2 In sec. I, par. 1, and thereafter , the judge incorrectly spelled Re- spondent The Peelle Co.'s name as "Peele." In sec . II, par. 6 of his decision, the judge erroneously stated that the Union notified Independent Association of Steel Fabricators on June 20, 1976, rather than January 20, 1976, that it did not consent to certain members withdrawing from that multiemployer bargaining association. In sec . II, par. 9, the judge incorrectly cited the first court of appeals decision to which he referred. The correct citation is NLRB v. Independ- ent Assn. of Steel Fabricators, 582 F.2d 135 (2d Cir. 1978), cert. denied 439 U.S. 1130 (1979). The Second Circuit Court of appeals decision, NLRB v. Koenig Iron Works, issued June 7, 1982, not June 6, 1983, and is reported at 681 F.2d 130. In sec . III, par. 2, and thereafter, the judge incorrectly spelled William Colavito's surname as "Colovito." In the last paragraph of sec. III, the judge stated that Israel wrote to Colavito on February 7, 1983. The correct date is February 7, 1984. In sec. IV, par. 5, the judge set forth a chart showing wage increases the Respondent's employees received. C. Hollamby, however, received a 40-cent wage increase in July 1983, not 50 cents. G. Pagano received $1.35 in July 1981, not $1.05, and 61 cents in July 1979, not 66 cents. C. Scholl received a 60-cent increase in July 1983, not 1982; his wage change is set forth in fn. I1 of the judge's decision. In fn. 11, the judge erroneously stated C. Scholl's personnel card indi- cated he earned $1985 per month as of July 1, 1980. The correct figure is $1485 per month. In sec. V, par. 1, the judge referred in the text to a fn . 15. There is no fn. 15. [The footnotes have been renumbered.] In sec. V, B, par. 15, the judge erroneously stated the Respondent pro- posed in October 1983 that any contract entered with the Union expired September 30, 1988, rather than 1987. In the last paragraph of sec. V, B the judge omitted a reference to fn. 20 at the end of that paragraph. [Noted and corrected.] We correct these inadvertent errors. a We have modified the recommended Order to provide that the Re- spondent cancel any unilateral changes in wages if requested to do so by the Union. Elias Mallouk Realty Corp., 265 NLRB 1225 fn. 3 (1982). 4 In finding that the July 1983 wage increases violated the Act, we note that this case is distinguishable from NLRB v. Patent Trader, Inc., ing that the Respondent did not violate the Act when it unilaterally granted wage increases to two employees in January and February 1984. Since 1978, the Respondent's employees of more than 6 months have received wage increases on an annual basis. The Respondent granted the wage in- creases generally in July in amounts above or below a predetermined average percentage figure based on the employee's performance. Consequent- ly, the wage increases varied over a wide range. The record establishes that the Respondent granted its employees wage increases in July 1983. Because newly hired employee Paul Simonson had not re- ceived a July merit increase, the Respondent grant- ed him a wage increase in January 1984. Subse- quent to a change from part-time to full-time status, the Respondent also granted employee Donald O'Sullivan a wage increase in January 1984. In February 1984 O'Sullivan was given a second in- crease. The Respondent's treasurer testified that the increase was given because O'Sullivan threatened to quit unless he was given more money. The judge rejected the Respondent's argument that the July 1983 wage increases resulted from its longstanding policy of ' granting merit increases each July and were not a unilateral change. Citing, inter alia, NLRB v. Katz, 369 U.S. 736 (1962), for the proposition that an employer must bargain over the discretionary aspects of merit wage increases, the judge found that in granting the July 1983 in- crease without prior notification to the Union, the Respondent violated Section 8(a)(5) of the Act. The judge found, however, that the January and February 1984 wage increases to employees O'Sul- livan and Simonson did not violate the Act. The judge held that these wage increases were given to the two employees at a time well after bargaining had ceased between the Union and the Respondent, and at least as far as O'Sullivan was concerned, merely constituted individual pay adjustments. The General Counsel excepts to the judge's find- ing regarding the wage increases to O'Sullivan and Simonson, and we find merit in the exception. We find no record evidence of an impasse existing prior to the January and February 1984 wage in- 415 F.2d 190 (2d Cir. 1969), modified as to remedy 426 F.2d 791 (2d Cir. 1970) (en banc), in which the court refused to enforce a finding of unlaw- ful unilateral wage increase because the union never protested the various increases as they were granted, even though the union did in fact know about them and about the company 's general practice of granting wage increases on a semiannual basis . Further, the court found that negotia- tions were not obstructed by the grant of discretionary increases because the company merely continued its policy. In the instant case, no evidence exists that the Union was aware prior to the hearing of the Respondent's grant of the July increases or its general practice of granting wage in- creases on an annual basis . Accordingly, the facts establish the very danger seen in such discretionary increases outlined by the court in Patent Trader. Id. at 199-200. 289 NLRB No. 17 114 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD creases. We further find no significant distinction between the July 1983 wage increases that the judge found were violative of the Act and the Jan- uary and February 1984 wage increases that the judge found were lawful. Simonson's wage increase in January reflected the July 1983 wage increase given to all employees. Likewise, O'Sullivan's Jan- uary wage increase, although resulting from a change in status, reflected the July increase as well. Further, the Respondent's explanation for the Feb- ruary 1984 increase to O'Sullivan is irrelevant to the issue of the Respondent's duty to bargain over a discretionary wage increase. Thus, we find no basis in fact or law for the judge's finding regard- ing the lawfulness of the January and February wage increases. Accordingly, we conclude that the unilateral grant of the January and February 1984 wage increases, as well as the July 1983 wage in- creases, violated Section 8(a)(5) of the Act. ORDER The National Labor Relations Board adopts the recommended Order of the administrative law judge as modified below and orders that the Re- spondent, The Peelle Co., Bay Shore, New York, its officers, agents, successors, and assigns, shall take the action set forth in the Order as modified. 1. Substitute the following for paragraph 1(a). "(a) Refusing to bargain collectively with Shop- men's Local Union No. 455, International Associa- tion of Bridge, Structural and Ornamental Iron Workers, AFL-CIO by unilaterally granting wage increases to employees without prior notice to and consultation with the Union." 2. Substitute the following for paragraph 2(a). "(a) On request by Local No. 455, cancel the unilateral wage increases granted to bargaining unit employees." 3. 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 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 refuse to bargain collectively with Shopmen's Local Union No. 455, International As- sociation of Bridge, Structural and Ornamental Iron Workers, AFL-CIO by unilaterally granting merit wage increases to our employees during the course of collective-bargaining negotiations, with- out prior notice to and consultation with the Union. 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. On request by the Union, WE WILL cancel the unilateral wage increases granted to bargaining unit employees. THE PEELLE CO. Beatrice Kornbluh, Esq., for the General Counsel. Robert A. Goldstein Esq. (Kliegman, Goldstein, Israel & Cooper), of New York, New York, for the Respondent. Belle Harper, Esq. (Sipser, Weinstock, Harper & Dorn), of New York, New York, for the Charging Party. DECISION STATEMENT OF THE CASE RAYMOND P. GREEN, Administrative Law Judge. This case was heard by me in Brooklyn, New York, on May 31 and June 1, 4, and 21, 1984. The charge in this pro- ceeding was filed on July 8, 1983, and a complaint was issued on October 31, 1983. In substance, the complaint alleged that the Respondent, since at least February 8, 1983, bargained in bad faith with no intention of reach- ing an agreement with the Union. At the hearing the General Counsel moved to amend the complaint to add an allegation that in July 1983 and January and February 1984, the Respondent granted unilateral wage increases to its employees. Based on the entire record in this proceeding, includ- ing my observation of the demeanor of the witnesses, and after reviewing the briefs of counsel, I make the fol- lowing 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 FINDINGS OF FACT 1. JURISDICTION It is agreed by all parties that The Peele Co. is an em- ployer engaged in commerce within the meaning of Sec- tion 2(2), (6), and (7) of the Act. It also is agreed that the Union is a labor organization within the meaning of Sec- tion 2(5) of the Act. PEELLE CO. II. BACKGROUND This case and a series of other cases i have a long his- tory of litigation. Insofar as relevant, the background is described below. For a period of time prior to 1975, Peele had main- tained a collective-bargaining relationship with the Union, initially on an independent, as opposed to multi- employer, basis. (Before 1975, the Union also bargained with an employer association called the Allied Building Metal Industries Inc.) As a result, Peele and other inde- pendent companies that bargained with the Union came to have a history of executing a series of successive con- tracts that basically were referred to as the standard in- dependent contract. Over a period of time there evolved a degree of difference between the standard independent contracts and the Allied contracts. In early 1975 Peele, along with other companies that were not members of the Allied Building Metal Indus- tries Inc. (the Allied Association), decided to form their own multiemployer association called the Independent Association of Steel Fabricators. One of the new Asso- ciation's goals was to achieve parity with the contract held by the Allied Association. Bargaining between the Union and the Independent Association commenced on June 1, 1975. No contract having been reached by June 30, 1975, the Union com- menced a strike on July 1 1975. From July 1 to late August there was a hiatus in negotiations, albeit one of the Independent Association's members signed a separate contract with the Union. In late August and through October 1975, negotiations were held between the Union and the Independent Asso- ciation. However, not much progress was made. In Oc- tober the spokesman of the Association advised Local 455 that another union was interested in organizing the employees involved. Subsequently, between November 1975 and January 1976, some of the employer-members of the Independent Association entered into contracts with Local 810 International Brotherhood of Teamsters, an action later held to be unlawful by the Board and the Second Circuit. 231 NLRB 264 and 582 F.2d 135. In early January 1976, the Union and the Allied Asso- ciation reached a contract settlement. On January 14 the Union offered the wage and fund package to the Inde- pendent Association on the same basis as had been agreed to with the Allied Association. However, the In- dependent Association, desirous of parity, offered to accept the exact same terms as had been agreed to with the Allied Association. The Union refused. On January 16, Local 455 was notified that 19 of the Independent Association's members had withdrawn from the Associa- tion. On June 20, the Union notified the Association that it did not consent to such withdrawals. It further advised that any agreement made between it and the Associa- tion's remaining members would be binding on those em- i On various days in March, April, June, and September 1984, I heard a number of other cases in which the facts were substantially related to the instant case These were G Zaffino & Sons Inc, Case 29-CA-10582, Achilles Construction Co, Case 29-CA-10585, Roman Iron Works Inc, Case 29-CA-10583, and Koenig Iron Works, Case 29-CA-10586 As the cited cases were not consolidated for hearing with the present case, I shall, in due course, issue separate decisions in each of these 115 ployers who had attempted to withdraw without the Union's consent. On January 23, 1975, Local 455 met with three em- ployers that had not withdrawn from the Independent Association. At this meeting the parties present reached an agreement, although the three employers stated that they were not authorized to represent the Association. Thereafter in late January, five employers signed the January 23 stipulation, albeit refusing to do so on behalf of the Independent Association. Meanwhile the strike was continuing against the other members of the Independent Association who had not signed contracts with Local 455. The Union thereupon sent a letter to the employers who had withdrawn from the Independent Association, requesting that they imple- ment the January 23 stipulation.2 Two employers did execute agreements identical to the January stipulation. The others, including Peele, did not. In light of the situation summarized above, Local 455 filed various unfair labor practice charges. Also an unfair labor practice charge was filed against the Union. All those cases were consolidated for trial and ultimately led to a series of decisions by the Board and the Second Cir- cuit reported at 231 NLRB 264, 528 F.2d 135, 252 NLRB 922, and 110 LRRM 2995 (June 6, 1983). Insofar as relevant to the present case, certain former members of the Independent Association, including Respondent, were ordered to bargain on an individual basis (as op- posed to a multiemployer basis) with Local 455. Also certain employers who had executed contracts with Local 810 were ordered to abrogate such contracts and withdraw recognition with that Union. During the course of the strike and throughout the next 7 years, Peele operated essentially as if it were a nonunion enterprise. That is, it did not renew its contract with Local 455 and it ceased to abide by the terms and conditions of the expired contract.3 Additionally, many new employees were hired as replacements of the strik- ers, albeit two of the strikers did return to work in 1976 and 1977. At the time negotiations between Peele and Local 455 were resumed in the summer of 1982, the Company employed, at its Bay Shore facility, about 13 employees. Also noted is that during the strike, the Com- pany moved a large part of its fabricating operation to Canada leaving its Bay Shore facility primarily as a warehouse with fewer employees than had been em- ployed before the strike III. THE NEGOTIATIONS After the court's June 6 opinion, the Union on June 8, 1982, sent a letter to Peele and other companies asking to start negotiations. On July 12 the Union sent another letter requesting information including the names and ad- dresses of employees. 2 On the theory that their withdrawals from the Independent Associa- tion were untimely and therefore they were bound to execute any agree- ment made between the Union and the remaining members of the Asso- ciation 3 For example, on expiration of that contract, Peele ceased making payments to the various trust funds as required by that contract 116 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD On August 18, 1982, a meeting was held between Wil- liam Colovito, president of Local 455, and Stanley Israel, a labor attorney representing Peele and seven other com- panies. (These were G. Zaffino and Sons Inc., Achilles Construction Co., Koenig Iron Works, Melto Metal Products Inc., Master Iron Craft Corp., and Mohawk Steel Fabricators Inc.)4 At this time, Colovito presented, as the Union's proposal, certain wage increase demands plus the same Standard Independent Contract that these companies had rejected in 1975. Israel, on behalf of his clients, told Colovito that they would not agree to the standard independent contract and would each insist on negotiating contracts suitable to themselves. On September 1, 1982, Israel forwarded to Colovito a letter setting forth information the Union had requested, plus a document purporting to be a contract offer.5 The proposed contract has a number of interesting features, foremost being that the Union is never mentioned as being a party to the contract. Among the proposed clauses were the following: (1) Article 1, stated, inter alia that "The Employ- er reserves the right to change without notice all or any portion of these Articles after due and reasona- ble consideration, except where notice is specifically stated." (2) "An employee(s) may be dismissed where in the opinion of the Company a disharmonious rela- tionship would result from continued employment." (3) Article 19 contains an employee complaint procedure which does not include or mention union representation. The covering letter of September 1, 1982, states, inter alia: We also submit to you the following contractual counterproposal. 1. Enclosed is the basic form of Agreement we propose. To the extent, benefits as previously dis- closed to you are superior, they are to be substitut- ed for those in this document. 2. We also require a strong management rights clause (including control over all matters not cov- ered in the contract), a no strike-no lockout clause, a "just cause" discharge clause , an arbitration clause (AAA). 3. Prior employment with the Company is not to be counted for any purpose. 4. Working foremen need not be members of the Union, but shall be allowed to do production work. In this regard, the three current highest paid em- ployees shall be deemed to be working foremen. 5. There is to be an "open" shop. 6. The contract shall be of six years duration commencing October 1, 1982. Across the Board in- creases equal to the cost of living increase for each prior year shall be given to each then employee on * Of these companies , Master, Mohawk, and Melto ultimately signed contracts with Local 455 5 Also forwarded was a list of employees giving their history of wage increases the 1st day of October 1983, 1984, 1985, 1986 and 1987. Classification rates shall not be affected. At the next meeting on September 17, Mr. Colovito said that the Company's proposed contract was unac- ceptable and looked more like work rules than a collec- tive-bargaining agreement . Colovito was told by Israel that the two major concerns of the Company were (1) an open-shop and (2) a long duration contract. Unlike the negotiation involving Roman Iron Works and some of the other companies , it appears that far less time was spent between Israel and the Union . This may have been due to the somewhat outlandish initial propos- als of Peele and that discussions between Israel and Co- lovito regarding Israel's other employer-clients were fol- lowing more traditional paths. Suffice it to say that the record suggests that for whatever reason, discussions be- tween Peele and the Union were to a great extent put on the backburner while more intensive negotiations cen- tered on some of the other companies. On October 5, 1982, Peele sent to the Union a copy of its pension and welfare plans . On December 12, Colovito sent Israel some revisions of the Union's initial contract proposal for all the companies, including Peele. On Janu- ary 4, 1983, after having been notified by the Regional Director for Region 29 that the withholding of employee addresses was probably illegal, Peele forwarded a list of employee names and addresses to the Union.6 On April 8, 1983, Israel sent a letter to the Union modifying Peele's September 1 proposal as follows: (1) We will include a checkoff provision to con- form to that contained in Section 5 of the Agree- ment we have proposed with respect to Achilles, Mello, Roman, Mohawk and Zaffino. (2) We will include the following grievance pro- cedure clause: Any dispute between the companies and the Union arising out of this agreement or as to the meaning, application, or alleged violation of any provision or provisions of this Agreement, shall upon request of either party to this Agreement, be submitted to an Arbitrator of the American Arbitration Association designated in accordance with its rules and regulations. The Arbitrator's decision shall be final and binding upon the em- ployees involved and upon the parties to this Agreement. (3) We will include a provision providing for the furnishing of work shoes or a work shoes allow- ance, to the extent previously granted by this em- ployer. 6 Israel took the position that because of certain union misconduct during the strike , the Union was not entitled to employee addresses. It is noted that the delay in furnishing employees' addresses is not alleged as being violative of the Act, but is only offered as background evidence for the General Counsel's contention that the Company engaged in surface bargaining PEELLE CO. 117 In May 1983, Colovito revised his economic demands vis-a-vis all the companies. Thereafter, by letter dated June 6, 1983, Peele revised its offer as follows: This letter is being submitted to you as a FINAL offer in advance of our June 7, 1983 negotiating ses- sion. The offer contained in our letter of September 1, 1982, as thereafter modified in our letter of April 8, 1983, is further modified in the following regards: (1) The term of the Agreement shall be five (5) years from October 1, 1982. (2) The cross-the-board wage increases shall in no event be less than 50^ per hour in each year. (3) There shall be no restriction on subcon- tracting. We shall be prepared to discuss the final offer at our June 7 meeting. In response to your recent inquiry, the Company has been advised of a pending 17% Blue Cross pre- mium increase. The third meeting exclusively concerning Peele took place on June 13, 1983. At this meeting the Company of- fered to have the cost-of-living increases take effect in July rather than October and to use New York City cost-of-living statistics as the basis of its COLA proposal. (As noted above, the Company also proposed a 50-cent floor on its COLA proposal.) There also was a discus- sion of what the Company meant by part-time employees it proposed to exclude from contract coverage. Regard- ing this issue, the Company asserted that it basically was talking about students who worked 2 hours a day, 4 days a week. On July 1, 1983, Local 455 and Master Iron Craft en- tered into a 4-year contract containing, inter alia, a pro- vision allowing the Company the unrestricted right to subcontract. On July 25, 1983, Colovito wrote to Israel as follows: It would greatly help us, and avoid unnecessary confusion in our ongoing negotiations with the above Employers, if you could supply us with a separate statement for each of the Employees, set- ting forth its last offer, covering all items. On July 28, 1983, Israel's response included the fol- lowing economic offer of Peele: Peele (a) Five year contract from October 1, 1982. (b) Across-the-board (not classification minima) cost of living increases on July 1 of each year, com- mencing July 1, 1983, but in no event less than 500 per hour. (c) All other existing economic items to remain as is. This letter is intended only as the recapitulation you requested. It is not intended to modify any prior offers or current positions and any discrepan- cy between the prior offers and this recapitulation is to be resolved in favor of the prior offers. I wish also to point out that each of the employ- ers requires the same subcontracting clause as nego- tiated with Master. I mention this item specifically inasmuch as you might consider it as part of the economic package. A meeting was scheduled for early August but Colo- vito could not attend and had to call it off on short notice. On August 4, Israel wrote to Colovito as follows: I was unable to head off Ed Peele and he was rather put out coming into New York only to find that the collective bargaining session had been can- celled at the last moment. However, and in order to move this matter along, I have been authorized to revise the Peele offer contained in our June 6th letter in the following respects: (1) The Company will agree to an Agency shop on terms we can discuss at our next meeting. (2) The Company will agree to include a contract provision providing for Union visitation rights. (3) The Company will grant Washington's Birth- day as an additional paid holiday. (4) The Company will agree to notify the Union of job openings and allow the Union to recommend employees under conditions which we will set forth at the next meeting. At a meeting on September 21 or 25, Israel said he would put together a complete contract offer. As a con- sequence, Israel - on behalf of Peele, forwarded a con- tract offer on October 10, 1983. This proposed contract, which is based, to some degree, on the contract proposal made in September 1982, eliminates many of the more absurd aspects of the earlier offer. Thus this contract contains the following provisions: (1) A job referral clause wherein the employer agrees to give the Union 48 hours to furnish new employees from its hiring hall. (2) A dues check off clause. (3) A clause permitting discharge of non-proba- tionary employees only for just cause. (4) A union visitation clause. (5) An arbitration clause providing for final and binding arbitration of grievances in accordance with the rules of the American Arbitration Association. (6) A clause providing super seniority for shop stewards. (7) Cost of Living Wage Increases with a floor of 50Q per hour. (8) A clause setting forth three proposed job classification[s] (trainee, experienced, experienced welder) providing for minimum rates of pay for each classification. Regarding the above-noted contract proposal, it is noted that although the Company continued to propose that working foremen be excluded from the unit, it no longer was defining this category as being the three highest paid employees. As to this issue, the parties had further discussion, without resolution, at a meeting on October 13, 1983. 118 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD On October 14, Israel sent a correction of an error in its October 10 contract proposal. On October 27 Israel, in response to the Union's request for employee job clas- sifications, sent a chart purporting to be a description of the jobs performed by each of Peele's employees. There- after, there were no further communications between the Union and Peele until January 19, 1984, when Colovito wrote to Israel seeking updated information relating to Peele's employees. Israel responded on January 23 that there were no changes. On February 7, 1983, Israel wrote to Colovito informing him of the hire of a new employee, the granting of wage increases to two employ- ees, and the granting of a Christmas bonus to all employ- ees. On February 10, 1984, Colovito sent another letter to Israel, regarding Peele, in which he modified the Union's economic demands. Although requesting another meeting, Peele did not respond. This was, as far as this record shows, the final communication between Local 455 and Peele. IV. THE ALLEGED UNILATERAL WAGE INCREASES At the trial the General Counsel moved to amend the complaint to allege that Respondent unilaterally granted wage increases in July 1983 and January and February 1984. I granted that motion to amend, and gave Re- spondent additional time to respond to the amendment. Peele's records show that all but one of its employees at its Bay Shore facility received wage increases in early July 1983. These wage increases varied over a fairly wide range and were given by the Company as merit in- creases. The records also showed that two employees re- ceived wage increases in January and February 1984 as described below. There is no dispute that the Union was never notified of these wage increases. In fact, Colovito first learned of the July raises at the hearing after exam- ining certain business records that the General Counsel had subpoenaed.7 The Company's records also establish that since at least 1978 all employees, except for newly hired employ- ees, received wage increases each July. (In 1980, the wage increases were given in late June.) The Company's controller, Fred Weber, testified that for many years the Company has had a policy of annually budgeting wage increases as an average percentage increase . He also tes- tified that, based on annual performance reviews, wage increases are granted in July to each of its employees (if employed for more than 6 months) in amounts above or below the predetermined average percentage figure, de- pending on the employee's performance. In the case of the two employees who received wage increases in January and February 1984, Weber explained these situations as follows. In the case of Paul Simonson, Weber stated (and the records confirm) that he was hired on February 8, 1983, and therefore did not receive a merit increase in July because he had not yet worked for 6 months. Weber asserts that in accordance with compa- ny policy, Simonson nevertheless received, on January 16, 1984, a raise around his anniversary date (50 cents), and would thereafter be eligible for the annual July raises. Regarding Donald O'Sullivan (hired in May 1982), Weber states that on January 20, 1984, O'Sullivan changed from being a part-time to full-time employee and therefore, in accordance with company policy, re- ceived a pay adjustment to reflect this change of status. As to the February wage increase, Weber testified that this simply resulted from O'Sullivan's threat to find em- ployment elsewhere unless he got a raise. Regarding Weber's testimony concerning the annual July raises, the Company's records show the following:8 Name July 1978 July 1979 July 1980 July 1981 July 1982 July 1983 C. Hollamby $.25 $ 35 $.45 $.50 $.50 $ .50 G. Pagano .25 66 89 1.05 1.05 1.00 A. Reynolds .25 .51 .74 1.10 .85 .85 S. Sinclair .25 .35 N/E* N/E' .60 .40 M. Lilly 9 0 0 0 0 .85 1.00 D. O'Sullivan 10 0 0 0 0 .60 0 C. Scholl 11 0 0 0 0 60 0 C. Ramsden 12 0 0 1.25 50 1.00 .40 P. Simonson 13 0 0 0 0 0 0 A. Torres 14 0 0 0 .50 50 40 * Not employed. 7 Inasmuch as Colovito was never informed of the July raises until the trial, the Respondent can hardly claim that the Union waived its right to bargain about those wage increases 8 It is noted that the Company's records show that there have been occasions when employees have also gotten raises at times other than July However, the records indicate that such non-July raises have nor- mally been given on a change in an employee's status For example, when an employee changes from being part time to full time , or when an employee changes classification, or when an employee gains a new skill 9 M. Lilly was hired on 12/14/81. 10 D O'Sullivan was hired on 5/17/82 11 C Scholl was hired on 2/26/47 His personnel card indicates that as of 7/1/80 he was paid $1985 per month, that on 7/1/81 he was raised to $1620 per month, that on 7/4/82 he was transferred to the weekly pay- roll at $ 1005 per hour, and that on 7/4/83 he received a raise to $1065 per hour 12 C Ramsden was hired on 10/31 /79 His personnel card indicates that on 12/7/81 he became a general mechanic and received a raise of 45 cents per hour Is P Simonson was hired on 2/8/83 14 A Torres was hired on 6/26/80. PEELLE CO. 119 III. ANALYSIS A. The Wage Increases Insofar as the July 1983 wage increases, there is no question but that the Union was never informed that those increases were granted. Accordingly the Union was therefore never given either an opportunity to bar- gain about such wage increases or given the opportunity to waive its right to bargain about this subject. Insofar as I can determine, the principal defense of the Respondent can only be that because it had a longstand- ing policy of granting merit increases each July, the July 1983 raises cannot be construed as a unilateral change. Put somewhat differently, Respondent might argue that given this longstanding practice, if it had ceased giving such merit increases during the course of the negotia- tions, it could be argued that it would have violated Sec- tion 8(a)(1) and (3) of the Act. See for example Palestine Bottling Co.', 269 NLRB 639 (1984), and Southeastern Michigan Gas Co., 198 NLRB 1221 (1972), enfd. 485 F.2d 1239 (6th Cir. 1973). Respondent would-therefore argue that it would be anomolous to hold that it would violate Section 8(a)(1) and (5) by granting the July 1983 wage increases, but on the other hand, subjecting it to liability under Section 8(a)(1) and (3) of the Act if it chose to withhold these increases. In NLRB v. Katz, 369 U.S. 736, 746 (1962), the Su- preme Court held that the company violated Section 8(a)(5) of the Act when, during the course of negotia- tions and absent an impasse, it granted merit increases to some of its employees without prior notice to the Union. Although arguing that these raises were part of an estab- lished practice, the Court noted that the merit raises in question were "in no sense automatic, but were informed by a large measure of discretion. There simply is no way in such case for a union to know whether or not there has been a substantial departure from past practice, and therefore the union may properly insist that the company negotiate as to the procedures and criteria for determin- ing such increases." In a very recent case, State Bank of India, 273 NLRB 267 (1984), the Board stated at 267: Finally, the Bank's contention that it gave the wage increase on the basis of an earlier promise is not a legally sufficient defense. Even accepting the Bank's evidence that the employees were promised a wage increase in April and that the timing of the increase was predetermined, the amount of the in- crease was discretionary and became a matter as to which the Bank was obligated to consult with the bargaining agent. Is there therefore an unresolvable dilemma facing em- ployers who embark on labor negotiations while having a past history of granting annual merit increases? The answer to this problem was given in Oneita Knitting Mills, 205 NLRB 500 fn. 1 1973. The Board stated: Respondent argues that a finding that the unilateral grant of merit increases was a violation of Sec. 8(a)(5) would be inconsistent with the holding of this Board in Southeastern Michigan Gas Company, 198 NLRB No. 8, wherein we found a discontinu- ance of merit increases to have been a violation of Sec. 8(a)(5). We disagree. An employer with a past history of a merit increase program neither may dis- continue that program (as we found in Southeastern Michigan) nor may he any longer continue to unilat- erally exercise his discretion with respect to such increases, once an exclusive bargaining agent is se- lected. N.L.R.B. v. Katz, 396 U.S. 736 (1962). What is required is a maintenance of preexisting practices, i.e., the general outline of the program, however the implementation of that program (to the extent that discretion has existed in determining the amounts or timing of the increases), becomes a matter as to which the bargaining agent is entitled to be consulted. In view of the above, it is my opinion that by granting the July 1983 merit increases without prior notification to the Union, the Respondent, in the circumstances herein, violated Section 8(a)(1) and (5) of the Act.15 On the other hand I do not view the January and February 1984 raises to employees O'Sullivan and Simonson as being violative of the Act. In the case of O'Sullivan, he received a raise on January 20, 1984, when he changed from part-time to full-time status. He received another raise in February 1984 when he threatened to quit unless he got more money. Simonson got his raise on January 16, 1984, because he was not eligible for the July 1983 merit increases. These wage increases were given to the two employees at a time well after bargaining had ceased between the Union and the Company and, at least as far as O'Sullivan was concerned, merely constituted individ- ual pay adjustments. B. The Surface Bargaining Allegation Section 8(d) of the Act, which defines the duty to bar- gain, does not compel either party to a collective-bar- gaining relationship to agree to a proposal or to make a concession. Therefore, insofar as mandatory subjects of bargaining (generally relating to wages, hours, and terms and conditions of employment), the Act does not require either party to yield or compromise its position. In this respect, the Supreme Court in NLRB v. American Na- tional Insurance Co., 343 U.S. 395, 404 (1952), stated: [T]he Board may not, either directly or indirectly, compel concessions or otherwise sit in judgment upon the substantive terms of collective bargaining agreements. The court further stated in H. K Porter v. NLRB, 397 U.S. 99, 107-108 (1970): It is implicit in the entire structure of the Act that the Board acts to oversee and referee the process of collective bargaining, leaving the results of the con- test to the bargaining strengths of the parties. . . . 15 For the same reasons set forth in my opinion in Achilles Construction Co., JD-NY-9-85, I reject Respondent's reliance on M & M Contractors, 262 NLRB 1472 (1982), and AAA Motor Lines, 215 NLRB 793 (1974). 120 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD While the parties' freedom of contract is not abso- lute under the Act, allowing the Board to compel agreement when the parties themselves are unable to agree would violate the fundamental premise on which the Act is based-private bargaining under governmental supervision of the procedure alone, without any official compulsion over the actual terms of the contract. It also is clear that it was the intention of Congress to permit (within limits) employers and unions to utilize their relative economic strengths vis-a-vis each other as part of the bargaining process.I6 As pointed out by the Supreme Court in NLRB v. Insurance Agents, 361 U.S. 477, 489 (1960): The presence of economic weapons in reserve, and their actual exercise on occasion by the parties, is part and parcel of the system that the Wagner and Taft-Hartley Acts have recognized. . . . [T]he truth of the matter is that at the present statutory stage of our national labor relations policy, the two fac- tors-necessity for good-faith bargaining between parties, and the availability of economic pressure devices to each to make the other party incline to agree on one's terms-exist side by side. It therefore is not necessarily unlawful for the stronger side to make demands or take positions consistent with its strength. Quite obviously, the respective strength of a union versus a company in bargaining is largely depend- ent on the support of the employees it represents, their willingness to strike, and the vulnerability of the compa- ny to a strike. See, for example, World Publishing Co., 220 NLRB 1065, 1071 (1975), enfd. sub nom. Omaha Ty- pographical Union 190 v. NLRB, 545 F.2d 1138 (8th Cir. 1976). Furthermore, collective bargaining is basically a two-way street. Thus although a union may lawfully make demands designed to improve existing employee wages and benefits, there is nothing in the Act that denies an employer the right, for its part, to demand gi- vebacks. Where the parties are negotiating to replace a prior contract, neither side is precluded from seeking modifications to its own advantage. The Act simply does not preclude an employer from demanding that various provisions of the old contract be modified, altered, or even eliminated. Thus, in the present case, when the General Counsel argues that the Respondent sought to modify or eliminate contractual provisions contained in the contract that expired in 1975, I am unimpressed as to the materiality of such a fact. Although it is not illegal for a company to engage in hard bargaining, Section 8(a)(5) of the Act nevertheless requires the company to bargain in good faith, which is essentially defined as a willingness to enter into a con- tract. NLRB v. Insurance Agents, supra, 361 U.S. 477, 485. Thus, although a company may use its relative strength to press for contract terms favorable to itself, it 15 There are of course statutorily defined limits on each side's use of economic power . Thus for example, Sec. 8(b)(4)(B) prohibits a union from engaging in secondary boycotts , and Sec 8(aX3) would preclude an employer from discharging employees who join or support a union. may not use its strength to engage in futile or sham ne- gotiations with the intention of never reaching an agree- ment. NLRB v. Herman Sausage Co., 275 F.2d 229, 232 (5th Cir. 1960). As stated in Abingdon Nursing Center, 197 NLRB 781, 787 (1972): Good faith, or want of it, is concerned essentially with a state of mind. . . . That determination must be based upon reasonable inference drawn from the totality of conduct evidencing the state of mind with which the employer entered into and partici- pated in the bargaining process. . . . All aspects of the Respondent's bargaining and related conduct must be considered in unity, not as separate frag- ments each to be assessed in isolation. I have already indicated my view that the initially pro- posed "contract," tendered by the Respondent on Sep- tember 1, 1982, was problematical at the very least. However, it is not unusual for both unions and compa- nies to make initial proposals that they know will be un- acceptable to the other side and that they do not serious- ly pursue throughout negotiations. The key question in surface bargaining cases is not what a respondent initially offers, but what its bottom line position is throughout or at the end of the negotiations. In fact, it has been argued that if a company or union comes to the table with a rea- sonable offer from which it is unwilling to compromise, that such a position would constitute surface bargaining. Although I view the Respondent's initial contract pro- posal as being unreasonable, the evidence suggests that Israel on behalf of Peele had every intention of making compromises as the negotiations advanced. For better or worse, however, it seems that progress in these particu- lar negotiations proceeded at a rather slow pace in that Colovito and Israel concentrated their bargaining on some of the other companies with whom Local 455 was simultaneously negotiating. The evidence in this case shows that the Respondent, during the course of the negotiations, made substantial concessions, eliminated some of its more objectionable proposals, and made significant offers on substantive issues. The following are examples. (1) Although the initial contract offer tendered on Sep- tember 1 (G.C. Exh. 6b), made no reference to a union- management grievance procedure, the accompanying letter and later offers make it clear that the Respondent offered a rather traditional grievance-arbitration proce- dure. (2) Although the Company's initial contract offer stated that the contract could, in effect, be changed at the Company's sole discretion and without notice, this absurd provision was soon dropped and long forgotten. (3) The initial company proposal included a provision allowing employees to be dismissed if, in the opinion of the Company, "a disharmonious relationship would result from continued employment." This proposal was thereafter dropped and replaced by a company proposal for a standard clause permitting discharge only for "just cause." (4) Although the initial company proposal called for the exclusion from the bargaining unit, as working fore- PEELLE CO. 121 men, the three highest paid employees, this demand was dropped and replaced by a demand that those persons who were working foremen be excluded from the unit. The evidence, although documenting the company and union positions on this issue, does not, however, establish that the Respondent insisted to impasse or as a condition of reaching agreement, that the bargaining unit be modi- fied to exclude nonsupervisory employees who otherwise should be part of that unit.'' (5) The initial company proposal did not offer either union-security or checkoff provisions. However, on August 4, 1983, Peele offered an agency shop and on October 10, offered a dues-checkoff provision. As to a union-security clause, Israel expressed the Company's view that notwithstanding the Court's enforcement of the bargaining order on June 6, 1982, a number of em- ployees were not interested in joining the Union and the Company did not want to compel their membership. (6) On August 10, 1983, the Company offered to use the Union's hiring hall on a first-call basis, for the refer- ral of new employees. (7) Insofar as wages, the Company's initial offer was to grant cost-of- living raises each October over the 6-year term of a contract (to September 30, 1988). On June 6, 1983, in response to the Union's modification of its initial demands, the Company offered a cost-of-living increase each year with a floor of 50 cents per hour. On June 13 the Company proposed that such raises be given each July rather than each October. Its final proposal in Octo- ber 1983 was for cost-of-living increases each July until the contract expired (proposed to be September 30, 1988) with a 50-cent floor. Notwithstanding the above, there are a number of fac- tors from which an argument might be made that Re- spondent should be inferred to have bargained without an intention of reaching agreement. Some examples shall be discussed below, but in my opinion they do not, in the context of this entire record, warrant the ultimate con- clusion that the General Counsel would draw. (1) The Respondent refused to furnish the addresses of its employees until January 1983. Notwithstanding the fact that Local 455 was held to have committed some 8(b)(1)(A) violations in 1975, I have no doubt that Peele was legally obligated to furnish the names of its employ- ees in 1982. Gehnrich & Gehnrich, Inc., 238 NLRB 528, 535 (1981). However, the Company's refusal to furnish addresses occurred outside the statute of limitations period and, in my opinion, is only remotely related to the issue of surface bargaining. (2) The Company gave unilateral increases during the negotiations which I have found above to have constitut- ed a violation of Section 8(a)(1) and (5) of the Act. Unlike the refusal to furnish addresses, it is my opinion that the unilateral wage increases are much more directly related to the issue of surface bargaining. See for exam- ple NLRB v. Fitzgerald Mills Corp., 313 F.2d 260, 267 (2d Cir. 1963). Yet here too we are dealing with evidentiary points and I cannot say that such unilateral changes nec- essarily demonstrate an intent to avoid entering into a contract. (3) The General Counsel contends that the Company's insistence on a provision that would permit it to subcon- tract is evidence of its intention to avoid reaching an agreement. Her argument appears to be that if the Com- pany were able to obtain such a clause, it theoretically could subcontract out all of its business and eliminate the bargaining unit. The subject of subcontracting is a mandatory subject of bargaining, which means that either side may insist on its position regarding the subject. Thus, a union would clearly be within its right if, during negotiations, it insist- ed on a clause that precluded all subcontracting by a company.' 8 By the same token I can see nothing illegal in a company refusing to agree to subcontracting restric- tions or, alternatively, insisting on a right to subcontract during the life of the labor agreement. To hold otherwise would, in effect, impose a lack of mutuality in collective bargaining, which I do not believe was envisioned by Congress. In the present case there is no evidence that Peele was taking its positions vis-a-vis subcontracting be- cause it, in fact, intended to take the draconian step of eliminating the bargaining unit. All that can be said is that Israel intended to give the Company the option of subcontracting if economic circumstances made that de- sirable. I therefore do not believe that the Company's position regarding subcontracting is evidence of surface bargaining in the context of this case. (4) The General Counsel correctly notes that the Com- pany wanted significant give backs from the last contract it had with Local 455. However, there had been a 7-year hiatus between the expiration of that contract and the re- sumption of negotiations, and a great many changes had evolved in the Employer's terms of employment during the interim. Moreover, I do not perceive the Act to pro- hibit a company from demanding give backs. Collective bargaining is a two-way street and each side, based on its relative strength, is entitled to try to get the best deal possible for itself. Gehnrich & Gehnrich, Inc., 258 NLRB 528 (1981). (5) Although a union-security clause was contained in the contract that expired in 1975, the Company, during these negotiations, offered only an agency-shop and a dues-checkoff provision. However, as noted above, sev- eral years had elapsed since the expiration of the last contract and most of the Company's current employees had neither been employed before the strike nor had been members of Local 455. Under such circumstances, I do not view as unreasonable the Company's refusal to agree to a union-security clause. It seems to me that although the General Counsel has presented some evidence that perhaps in another context might give rise to a prima facie inference of surface bar- gaining, the record in this case convinces me that she has 17 In NLRB v. Borg-Warner Corp., 356 U.S. 342 (1958), the Supreme Court held that although either side may seek to bargain about nonman- datory subjects of bargaining, a Respondent will only violate the Act if it bargains to impasse over that subject or insist on its position vis-a-vis a permissive subject, as a condition of reaching an agreement. 18 I should note, however, that there are certain types of subcontract. ing clauses that are illegal pursuant to Sec. 8(e) of the Act. For a discus- sion of so-called union signatory clauses in the context of Sec. 8(e) see for example Retail Clerks Local 1288 (Nickel's Pay-less), 163 NLRB 817 (1976), enfd. 390 F.2d 856 (D.C. Cir. 1968). 122 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD not sustained her burden of persuasion . Thus, although I would say that the Respondent has engaged in hard bar- gaining consistent with its relative strength vis-a -vis the Union, I am equally convinced that it did not cross the line into surface bargaining.19 CONCLUSIONS OF LAW 1. Respondent, The Peele Co., is and has been, at all times material, an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act. 2. Shopmen's Local Union No. 455, International As- sociation of Bridge, Structural and Ornamental Iron Workers, AFL-CIO is, and has been at all times materi- al, a labor organization within the meaning of Section 2(5) of the Act. 3. By unilaterally granting wage increases to employ- ees in July 1983 without prior notice to, and consultation with, the Union during collective-bargaining negotia- tions, Respondent has violated Section 8(a)(1) and (5) of the Act. 4. The aforesaid unfair labor practice affects commerce within the meaning of Section 2(6) and (7) of the Act. 5. The Employer has not violated the Act in any other respect alleged by the complaint. REMEDY Having found that the Employer has engaged in cer- tain unfair labor practices, I find it necessary to order the Employer to cease and desist therefrom and to take cer- tain affirmative action designed to effectuate the policies of the Act. On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed20 19 The record shows that on February 10, 1984, long after negotiations had ceased, Colovito requested further meetings and that Peele did not respond The General Counsel does not allege, however, that this action constituted a refusal to bargain As there was no other evidence regard- ing this event , and as the Company did not seek to litigate this matter, I shall not find that the Respondent's failure to respond to the Union's Feb- ruary 10, 1984 letter was a violation of the Act. 20 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 ORDER The Respondent, The Peele Co., Bay Shore, New York, its officers, agents, successors, and assigns, shall 1. Cease and desist from (a) Refusing to bargain collectively with Shopmen's Local Union No. 455, International Association of Bridge, Structural and Ornamental Iron Workers, AFL- CIO by unilaterally granting wage increases to employ- ees, during the course of collective-bargaining negotia- tions, without prior notice to, and consultation with, the Union provided, however, that nothing contained in this Order shall compel Respondent to rescind such wage in- creases previously granted. (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) In the event that the Respondent and the Union resume negotiations, Respondent shall notify the Union as to all proposed wage increases to employees in the bargaining unit and shall not implement such wage in- creases absent an impasse in negotiations or consent by the Union. (b) Post at its plant copies of the attached notice marked "Appendix."21 Copies of the notice, on forms provided by the Regional Director for Region 29, after being signed by the Respondent's authorized representa- tive, 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 Respondent to ensure that the notices are not altered, defaced, or covered by any other materi- al. (c) Notify the Regional Director in writing within 20 days from the date of this Order what steps the Re- spondent has taken to comply. 21 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 "