Lynn-Edwards Corp.

202 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Lynn-Edwards Corp. and Chauffeurs, Teamsters and Helpers Local 150, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-CIO.' Case 20-CA- 18133 July 29, 1988 SUPPLEMENTAL DECISION AND ORDER BY CHAIRMAN STEPHENS AND MEMBERS JOHANSEN AND BABSON On October 29, 1986, the National Labor Rela- tions Board issued a Decision, Order, and Direc- tion of Second Election2 in this proceeding in which it affirmed the judge' s rulings, findings, and conclusions and adopted his recommended Order as set forth in the attached judge's decision. The Board in the absence of exceptions adopted pro forma the judge's conclusions that the Respondent had violated Section 8(a)(1) of the Act by threaten- ing employees with the loss of a profit-sharing plan should they become covered by a retirement plan negotiated by the Union, and by maintaining an eli- gibility provision in its Employee Stock Ownership Plan (ESOP), and by related explanatory language in its employee handbook and summary plan docu- ment, which unlawfully excluded employees from participation in the plan.3 The Respondent thereafter filed a petition to review the Board's Order with the United States Court of Appeals for the Ninth Circuit and the Board filed a cross-application for enforcement. On August 10, 1987, the court vacated the Board's Order and remanded the case to the Board.' The court determined that the Respondent, in fact, had adequately raised an exception to the judge's find- ing that the Respondent's ESOP eligibility provi- sion violated Section 8(a)(1) of the Act. According- ly, the court directed the Board on remand to con- sider three specified questions raised to the court by the Respondent regarding its ESOP. These questions are: 1. Is Lynn-Edward's ESOP a retirement plan or a profit sharing plan? I On November 1, 1987, the Teamsters International Union was read- mitted to the AFL-CIO Accordingly, the caption has been amended to reflect that change 2 282 NLRB 316 ' Chairman Stephens dissented in part , finding that the Respondent's exceptions did in fact call into question the characterization of the ESOP Chairman Stephens would have found that the Respondent 's ESOP was a retirement plan, not a profit -sharing plan, and would have revised the re- medial order to permit an amendment to the eligibility provision that "makes the participation of bargaining unit employees in the ESOP a matter to be negotiated in the context of a collective bargaining agree- ment " 282 NLRB at 52 4 Lynn-Edwards Corp v NLRB, 825 F 2d 413 (9th Cir 1987) 2. Is the current ESOP eligibility provision lawful? 3. May Lynn-Edwards amend the eligibility provision in light of the principles of Rangaire Corp., 157 NLRB 682 (1966)? By letter dated November 3, 1987, the Board ad- vised the parties that it had decided to accept the remand from the court and invited them to submit statements of position with respect to the issues raised by the remand . Thereafter, the Respondent and the Charging Party filed statements of position. The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has reconsidered this case in light of the court's decision, which we consider the law of the case, and the parties ' statements of position, and has decided to affirm the judge's rulings, find- ings, and conclusions only to the extent consistent with this Supplemental Decision and Order. Initially, we reaffirm our adoption of the judge's finding, to which it appears the Respondent has not taken exception, that the Respondent violated Sec- tion 8(a)(1) of the Act on April 5, 1983, when its president, Scarzella, told employees that the "union cannot participate in ESOP" and its vice president, Riley, stated that "[a]ny employee who is a member of collective bargaining cannot be eligible for this [ESOP] plan." The basis for these viola- tions is fully set forth in the judge's attached deci- sion at section III,C,l , paragraphs 1-2.5 We next proceed to an analysis of the questions remanded to us by the court. To put the issue in perspective, we first note the following as back- ground. The Respondent's ESOP, in effect since 1977, was amended in 1983 , retroactive to June 1, 1981. The amendment includes the following pertinent provisions: ARTICLE I Name and Purpose of Plan 1.1 Name The Employee Stock Ownership Plan estab- lished by the LYNN-EDWARDS CORPO- RATION, a California Corporation (Employer herein) shall be known as the Stock Bonus Employee Stock Ownership Plan (Plan herein) 5 Notwithstanding the later language in the judge's Conclusion of Law 3, which appears to base this violation on a finding , which we reverse infra, that the Respondent's ESOP is a profit-sharing plan, it is clear from the judge's earlier discussion that he based his finding of a violation in these comments on the fact that, whether the ESOP was a profit-sharing or a pension plan, the Respondent unlawfully threatened its employees with the loss of the ESOP immediately on their being represented by a union 290 NLRB No. 28 LYNN-EDWARDS CORP 203 and the Employee Stock Ownership Trust exe- cuted by Employer and EDWARD F. SCON- BERG, JR. and WALTER E. RILEY, (Trust- ees herein) shall be known as the Employee Stock Ownership Trust (Trust herein). 1.2. Purpose It is the purpose of this plan to recognize the contribution of the Employees to the suc- cessful operation of the Employer and to reward such contribution by establishing the system that would enable the employees to ac- quire through a Stock Ownership Plan equity ownership in the Employer without diminish- ing take-home pay. A major portion of the Employer contributions to the trust will be in- vested in stock of Employer, , ARTICLE 3 • Eligibility and Participation. 3.1 Eligibility. . - . However, notwithstanding any provi- sion to the contrary, no employee covered by a collective bargaining agreement between an Employee representative and the Employer shall become a Participant in the Plan, provid- ed that retirement benefits of said class of Em- ployees was the subject of good faith bargain- ing between the Employee representative and the Employer, and said Employee's retirement benefits are being funded pursuant to said col- lective bargaining agreements. The General Counsel argued to the judge that the eligibility provision in the amendment violated Section 8(a)(1) of the Act and the judge agreed. In so finding, the judge noted that in Rangaire Corp., 157 NLRB 682 (1966), the Board found that similar exclusionary language in a pension plan was held permissible. The judge further noted the Respond- ent's argument that the exclusionary language of its amendment fell "within the parameters" of Ran- gaire and similar cited cases. The judge rejected this argument, noting that "the gravamen of the violations in [the General Counsel's cited] cases as well as the instant case involves the language in the employers' `profit sharing plans' which automatical- ly preclude employees from enjoying the benefits of such plans if they become covered by a 'retire- ment' plan negotiated by the union [emphasis added]." (Sec. III,C,1, par. 6.) Thus, in the judge's estimate, the case turned on whether the Respond- ent's ESOP was a profit-sharing or a pension plan. The judge found it to be a profit-sharing plan and concluded that an employer "may not, through provisions of a profit sharing plan, automatically deprive employees of benefits therefrom if they elect to be covered by a retirement or pension plan negotiated by the union." (Sec. III,C,1, par. 8.) He thus found the Respondent's amendment with its unlawful exclusionary language violated the Act. This is the finding that the court has directed us to consider on the merits by an analysis of the three questions remanded to us. We answer those ques- tions now in the order set out by the court. 1. Is Lynn-Edwards' ESOP a retirement plan or a profit-sharing plan? The Respondent argues that its ESOP is a retire- ment plan as a matter of Federal statutory law under the Employee Retirement Income Security Act of 1974 (ERISA).6 The Charging Party takes the position that the ESOP is a profit-sharing plan, and argues that although the Respondent's ESOP may qualify for certain tax benefits under ERISA, this does not mean that the Respondent is not of- fering greater benefits to nonunion employees, such as profit-sharing and retirement plans, than employ- ees represented by the Union, and is thus violating Section 8(a)(1) of the Act. This argument is but an- other way of claiming that the Respondent's ESOP is a profit-sharing,plan. We now find Lynn-Edwards' ESOP to be a re- tirement plan within the meaning of ERISA. In this regard, we note that the Respondent's ESOP was amended in 1983 retroactive to June 1, 1981, for the express purpose of causing the plan to be a Stock Bonus ESOP under ERISA and to obtain tax-qualified status under ERISA and the Internal Revenue Code.7 Thus, the Respondent's ESOP was designed to come within the statutory purview of ERISA. We have further considered that ESOPs, such as the one in question, are in fact cre- ated under and defined by ERISA and related reg- ulations." By statutory definition, an ESOP is an "individual account plan."9 An individual account plan, in turn, by statutory definition, is a "pension plan."10 Thus, individual account plans are, by def- inition, pension plans. Moreover, an examination of the ERISA definition of an employee pension bene- fit plan confirms that ESOPs are merely subspecies 6 Pub L 93-406, 88 Stat 829 (codified as amended 29 U S C §§ 1001- 1462, and in various sections of 26 U S C ) ' The preamble to the Stock Bonus Employee Stock Ownership Trust states 2 The restated plan and this restated trust constitutes the plan in- tended to comply with and qualify under Section 401(a) of the Inter- nal Revenue Code of 1954, as an Employee Stock Ownership Plan, which is defined in Section 4975 (e)(7)(A) of said code, the Employ- ee Retirement Income Security Act of 1974 particularly Section 407 (d)(3)(a) and 407 (d)( 6) and corresponding provisions of the laws of the State of California 6 The term "ESOP" is defined by ERISA at 29 US C § 1107 (d)(6) and by 29 C F R § 2550 407d-6 (1987) 9 29 U S C § 1107 (d)(6) 1029USC § 1002(34) 204 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD of federally regulated employee retirement benefit plans. I 1 We therefore find, contrary to the judge, that ESOPs, by statutory definition, are retirement plans, even if they are funded from the profits of a company. Accordingly, we conclude that Lynn- Edwards' ESOP is a retirement plan within the meaning of ERISA for purposes of the case before 12 us. 2. Is the current ESOP eligibility provision lawful? The-Respondent, relying on Handleman Co., 283 NLRB 451 (1987), argues that its ESOP's eligibility provision is lawful. It also contends that because the provision is functionally identical to the excep- tion to minimum participation standards described in 26 U.S.C. § 410(b)(3)(A) of the Internal Reve- nue Code, to find that the provision violates Sec- tion 8(a)(1) would be tantamount to finding that the language Congress chose to describe the excep- tion to minimum participation standards for tax qualification purposes also violates Section 8(a)(1) of the Act. The Charging Party, relying on Kroger Co., supra, argues that once it is determined that the Respondent's ESOP is a profit-sharing plan it is clear that the exclusionary language of the Re- spondent's plan is unlawful. It further asserts that Handleman is distinguishable from the instant case. We find, for the following reasons, that the Re- spondent's ESOP eligibility provision does not vio- late Section 8(a)(1) of the Act.13 As mentioned above, the Respondent's ESOP contains an eligibility provision, which states: 3.1 Eligibility . . . [N]otwithstanding any provision to the contrary, no employee covered by a collective bargaining agreement between an Employee representative and the Employer shall become a Participant in the Plan, provided that retire- ment benefits of said class of Employees was the subject of good faith bargaining between the Employee representative and the Employ- er, and said Employee's retirement benefits are being funded pursuant to said collective bar- gaining agreements. 29USC § 1002 (2XA) 'a Further, for the reasons set forth by Chairman Stephens at fn 8 of his prior concurring and dissenting opinion in this case and contrary to the Union's contention in its statement of position, we find that the Board's decisions in Kroger Co, 164 NLRB 362 (1967), enfd 401 F 2d 682 (6th Cir 1968), cert denied 395 U S 904 (1969), and Winn-Dixie Stores, 224 NLRB 1418 (1976), enfd in part 567 F 2d 1343 (5th Cir 1978), are not inconsistent with this holding "The Union's argument is rejected because, as more fully discussed above, the plan is a retirement plan, not a profit -sharing plan , for the pur- poses of the case before us We again note that the finding that the dis- puted provision is lawful is not inconsistent with the holding in Kroger, supra In finding that the Respondent's eligibility provi- sion does not violate Section 8(a)(1), we note that the provision does not automatically terminate the employees' benefits upon selection of the Union as its exclusive representative. Rather, it provides that the benefits may only be terminated if two condi- tions are met. First, retirement benefits for the cov- ered employees must be the subject of good-faith bargaining. Second, the employees' retirement ben- efits must be funded pursuant to the collective-bar- gaining agreement. Thus, the employee's participa- tion in the Respondent's ESOP continues through- out the negotiation process and is discontinued only in the event that a new retirement plan is funded through the agreement. Finally, we note that the Respondent and the Union under this scheme main- tain the option, through good-faith negotiations, to either continue coverage for employees under the Respondent's ESOP, or to negotiate for the substi- tution of a different plan, which may include stock ownership features. Under these circumstances, it is clear that the Respondent's eligibility provision does not run afoul of Section 8(a)(1).14 3. May Lynn-Edwards amend the eligibility provi- sion in light of the principles of Rangaire Corp., 157 NLRB 682 (1966)? The Respondent argues that this issue has been rendered moot by the Board's decision in, inter alga, Handleman Co., supra, since both the language and application of the disputed provision here are less restrictive concerning the eligibility of repre- sented employees than the eligibility provisions in- volved in that case. By contrast, the Charging Party premises its argument on the assumption that the Respondent's ESOP is a profit-sharing plan, a contention that we have rejected above. We agree with the Respondent. Thus, although the Respondent may, if it so desires, amend the eli- gibility provision in its ESOP in light of the princi- ples of Rangaire Corp., there is no need to do so because the eligibility provision as written does not run afoul of Section 8 (a)(1). In conclusion, we find, contrary to the judge, that the Respondent's ESOP is a retirement plan and that its eligibility provision does not violate Section 8(a)(1). Nonetheless, we reaffirm that part of the judge's Conclusion of Law 4 in which he found that "Respondent has violated Section 8(a)(1) of the Act . . . by maintaining those por- 14 See , eg, Rangaire Corp, 157 NLRB 682, 683-684 (1966), Tappan Co, 228 NLRB 1389, 1390 (1977), enfd 607 F 2d 764 (6th Cir 1979), Ni- agara Wires, 240 NLRB 1326, 1328 (1979), Sarah Neuman Nursing Home, 270 NLRB 663, 680-681 (1984), Handleman Co, 283 NLRB 451 (1987) In finding that the disputed provision does not violate Sec 8(a)(1), we also note the similarity between this provision and 26 U S C § 410(b)(3)(A) LYNN-EDWARDS CORP tions of existing booklets and documents which contain related explanatory material." It is clear that by "existing booklets and documents" the judge was referring to the Respondent's employee handbook and summary plan document, and by "related explanatory material," it is clear the judge was referring to the description in both documents that indicated that eligible for the ESOP were "[a]ll full-time employees, except those covered by collective bargaining agreements."15 It is well set- tled that an employer violates Section 8(a)(1) through a-provision in, or a statement about, a plan that suggests that coverage of employees will auto- matically be withdrawn as soon as they become represented by a union or that continued coverage under the plan will not be subject to bargaining. See, e.g., Niagara Wires, 240 NLRB 1326 (1979), and cases cited therein. Accordingly, we find the description of the ESOP in the handbook and sum- mary plan document here violated the Act.16 In so concluding, we find Handleman Co., supra, and Dallas Morning News,, 285 NLRB 807 (1987), to be distinguishable on this point from the instant case. In Handleman, unlike the present case, the ex- clusionary language contained in the respondent's eligibility provision, indicated that coverage for represented employees was subject to negotiations and, thus, did not automatically withdraw or com- pletely foreclose, coverage for such employees. In Dallas Morning News, employees represented by a union had historically been excluded from cover- age from various sick-pay plans instituted by the employer for the benefit of nonunion employees. Some of these plans were written and some were not. The respondent subsequently drafted a written plan to provide a consistent policy in all depart- ments in which the employees had sick leave bene- fits of one kind or another and indicated that the plan excluded "those covered by a collective bar- gaining arrangement." The Board reversed the judge's finding there that the institution of this plan, with its exclusion of "those covered by a col- lective bargaining arrangement," was a per se vio- lation of Section 8(a)(1). In doing so, the Board noted that in the past sick pay had been a subject of negotiations between the respondent and the union but that the parties had never entered into '5 The Respondent clearly was aware that the judge had found viola- tions based on the language in the handbook and summary plan docu- ment Thus, we note that in its brief to the Board in support of its excep- tions to the judge's decision it specifically stated, at p 2, that the judge "found that Lynn-Edwards maintained an unlawful exclusionary provi- sion in its profit-sharing plan, in its employee handbook, and in its sum- mary plan document " 16 As the judge noted, these documents were in existence during the election campaign We therefore rind no basis to reconsider our prior de- termination in the representation case to set aside the election and direct a second election 205 contracts that provided a sick-pay plan. The Board held that "[w]ere the per se violation found by the judge to stand, an employer would effectively be required to grant its unionized employees any bene- fit that the nonunit employees possessed, or at least would not be able to provide accurate descriptions of the details and scope of all its existing employee benefits when non-unit employees were the benefi- ciaries of any plan in which the unit employees were not included." Noting that there was no alle- gation of bad-faith bargaining in. the .u (Qy- ees' not securing a sick-pay plan " or aegation that the announcement of the plan was used as a device to defeat the union, the Board dismissed the complaint allegation. In so holding, however, the Board distinguished its decision in Melville Confec- tions, 142 NLRB 1334 (1963), enfd. 327 F.2d 689 (7th Cir. 1964), cert. denied 377 U.S. 933 (1964), on which the judge had relied. The Board indicated that, in Melville, employer statements that suggest- ed that employees would automatically forfeit an existing benefit plan if they voted for a union in the pending representation election constituted a viola- tion of Section 8(a)(1). The statements in the em- ployee handbook and summary plan document here likewise indicate that employees covered by a col- lective-bargaining agreement will automatically forfeit their entitlement to the ESOP and are there- fore unlawful. AMENDED CONCLUSIONS OF LAW Substitute the following for paragraphs 3 and 4 of the judge's Conclusions of Law: "3. The Respondent has violated Section 8(a)(1) of the Act by threatening employees with loss of the Employee Stock Ownership Plan in the event they become represented by a union. "4. The Respondent has violated Section 8(a)(1) of the Act by maintaining those portions of its em- ployee handbook and summary plan document, which contain language specifying that the Re- spondent's Employee Stock Ownership Plan ex- cludes full-time employees who are covered by collective-bargaining agreements." AMENDED REMEDY Having found that the Respondent has engaged in unfair labor practices within the meaning of Sec- tion 8(a)(1) of the Act, we shall order that it cease and desist therefrom, and that it take certain affirm- ative action to effectuate the policies of the Act. Accordingly, we shall order the Respondent to amend any existing employee handbooks or sum- mary plan documents so as to eliminate therefrom any language which indicates that employees who are covered by collective-bargaining agreements 206 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD automatically will be excluded from the Respond- ent's Employee Stock Ownership Plan. ORDER The National Labor Relations Board orders that the Respondent, Lynn-Edwards Corp., North Highlands, California, its officers, agents, succes- sors, and assigns, shall 1. Cease and desist from (a) Threatening employees with loss of Employ- ee Stock Ownership Plan in the event they become represented by a union. (b) Maintaining those portions of the employee handbook and summary plan document which con- tain language specifying that the Respondent's Em- ployee Stock Ownership Plan excludes full-time employees who are covered by collective -bargain- ing agreements. (c) In any like or related manner interfering with, restraining, or coercing employees in the ex- ercise of the rights guaranteed them by Section 7 of the Act. 2. Take the following affirmative action neces- sary to effectuate the policies of the Act. (a) Amend its existing employee handbook and summary plan document so as to eliminate there- from any language that indicates that employees who are covered by collective-bargaining agree- ments automatically will be excluded from the Re- spondent's Employee Stock Ownership Plan. (b) Post at its North Highlands, California facili- ty copies of the attached notice marked "Appen- dix."' 7 Copies of the notice, on forms provided by the Regional Director for Region 20, after being signed by the Respondent's authorized representa- tive, shall be posted by the Respondent immediate- ly upon receipt and maintained for 60 consecutive days in conspicuous places including all places where notices to employees are customarily posted. Reasonable steps shall be taken by the Respondent to ensure that the notices are not altered , defaced, or covered by any other material. (c) Notify the Regional Director in writing within 20 days from the date of this Order what steps the Respondent has taken to comply. i' 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 - APPENDIX NOTICE To EMPLOYEES POSTED BY ORDER OF THE NATIONAL LABOR RELATIONS BOARD An Agency of the United States Government The National Labor Relations Board has found that we violated the National Labor Relations Act and has ordered us to post and abide by this notice. WE WILL NOT threaten you with loss of the Em- ployee Stock Ownership Plan in the event you become represented by a union. WE WILL NOT maintain those portions of the em- ployee handbook and summary plan document which contain language specifying that our Em- ployee Stock Ownership Plan excludes full-time employees who are covered by collective-bargain- ing agreements. WE WILL NOT in any like or related manner interfere with, restrain, or coerce you in the exer- cise of the rights guaranteed you by Section 7 of the Act. WE WILL amend those provisions of our employ- ee handbook and summary plan document which indicate that employees covered by a collective- bargaining agreement automatically will be dis- qualified from participating in our Employee Stock Ownership Plan. LYNN-EDWARDS CORP. Carmen Plaza De Jennings and Boren Chertkov, Esqs., for the General Counsel. Dennis R. Murphy, Esq. (Diepenbrock, Wulff Plant & Hannegan), of Sacramento, California, for the Re- spondent. Carol Livingston, Esq., of Sacramento, California, for the Union. DECISION STATEMENT OF THE CASE GERALD A. WACKNOV , Administrative Law Judge. Pursuant to notice, a hearing regarding this matter was held before me in Sacramento, California, on November 29, 1983.' The initial charge was filed on June 16, by Chauffeurs, Teamsters and Helpers, Local 150, affiliated with International Brotherhood of Teamsters, Chauf- feurs, Warehousemen and Helpers of America (the Union), and an amended charge was filed by the Union on July 27 Thereafter, on July 29, the Regional Director for Region 20 of the National Labor Relations Board (the Board) issued a complaint and notice of hearing alleging a violation by Lynn-Edwards Corp. (Respondent) of I All dates or time periods are within 1983 unless otherwise specified LYNN-EDWARDS CORP Section 8(a)(1) of the National Labor Relations Act (the Act). Pursuant to a representation petition filed by the Union on April 7 in Case 20-RC-15616,, an election by secret ballot was conducted on June 2. The tally of bal- lots reflects that of the approximately 79 eligible employ- ees, 16 cast ballots for. the Union and 53 cast ballots against the Union. There were three challenged ballots which were insufficient in number to affect the results of the election. Subsequently, the Union filed timely objec- tions to the election. Pursuant to a Report on Objections, notice of hearing, and order consolidating cases issued by the Regional Director on August 31, certain objections were consolidated with the instant unfair labor practice proceeding for the purpose of hearing, ruling, and deci- sion by an administrative law judge. The parties were afforded a full opportunity to be heard, to call; examine, and cross-examine witnesses, and to introduce relevant evidence. Since the close of the hearing, briefs have been received from the General Counsel2 and counsel for Respondent. ' On the entire record, and based on my observation of the witnesses and consideration of the briefs submitted, I make the following FINDINGS OF FACT 1. JURISDICTION The Respondent is a California corporation, with an office and place of business in North Highlands, Califor- nia, and is engaged in the wholesale sale and distribution of office products and supplies . Respondent, in the course and conduct of its business operations, annually purchases and receives products, goods, and materials valued in excess of $50,000 directly from points outside the State of California. It is admitted, and I find, that Respondent is now, 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. 11. THE LABOR ORGANIZATION INVOLVED It is admitted that the Union is, and has been at all times material, a labor organization within the meaning of Section 2(5) of the Act. III. THE ALLEGED UNFAIR LABOR PRACTICES A. The Issues The principal issues raised by the pleadings are wheth- er the Respondent, pursuant to the provisions of its Em- ployee Stock Ownership Plan, unlawfully excluded em- ployees represented by a union from participation in the plan, and threatened its employees with loss of plan ben- efits if the employees were to unionize; and whether such conduct warrants the direction of a second election. 2 The General Counsel's request to correct the transcript is granted 207 B.' The Facts On April 4 the Union requested recognition from Re- spondent in an appropriate unit.3 On April 5, the day following the Union's request for recognition, but before the filing of the representation petition, the Respondent held separate meetings for unit employees on each of three shifts. The Respondent was represented by Jack Scarzella, president and chief execu- tive officer; Walter Riley, vice president in charge of marketing, and a trustee of Respondent's Employee Stock Ownership Plan (ESOP);4 and Ken Saunders, Re- spondent's chief financial officer. President Scarzella's outline of the meetings reflect that he began by telling the employees that the Company had received a claim for recognition by the Union and that it-doubted whether the Union represented a majori- ty of its employees. He then went on to enumerate six points under the general topic "UNIONS TELL YOU WHAT THEY CAN DO FOR YOU-NO GUARAN- TEE OF WAGE INCREASE OR SECURITY." He apparently spoke negatively about the "LARGE UN- FUNDED VESTED LIABILITY" of the Teamsters pension plan, and then mentioned the Respondent's ESOP plan, telling the employees that "UNION CANNOT PARTICIPATE IN ESOP." Scarzella testi- fied that although he did not read from the outline, he "essentially" followed it in conveying its meaning. After further statements regarding the costs of belonging to a union and other matters, Scarzella introduced Riley and Saunders for the express purpose of discussing the Re- spondent's ESOP plan. Riley commenced this portion of the meeting by reading the following description of the plan: Lynn-Edwards Corporation Employee Stock Ownership Plan (ESOP) was adopted on June 1, 1977. ESOP is a voluntary program on the part of corporation's management and its continuance and growth is dependent on contributions from profits which are not needed for growth, debt reduction, etc. ESOP is a form of retirement program designed to benefit the long term employee. The purpose of this plan is to recognize the con- tribution of the employees to the successful oper- ation of Lynn-Edwards and to reward their contri- bution by enabling the employees to acquire equity ownership in the Corporation without diminishing take home pay. A major portion of the Corporate contribution to the Employee Stock Ownership Trust will be invested in Lynn-Edwards Corpora- tion Stock. The value of the stock fluctuates with the performance of the business. Any employee who The unit as described here is as follows , . All shipping and receiving employees including stock pullers, stock- ers, returns, packers, shipping/strappers, maintenance employee driv- ers, and forklift operators employed by Lynn-Edwards Corporation at its North Highlands, California facility, excluding office clerical employees, salespersons, managerial employees, guards, and supervi- sors as defined in the Act ' The record clearly shows, and I find, that Riley is a supervisor and agent of Respondent, as alleged 208 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD is a member of collective bargaining cannot be eligible for this plan . [Emphasis added.] After providing the details of the plan's operation, in- cluding the vesting provisions , Riley told the employees that: All participating employees as of May 31, 1982 will be receiving their individual statements in the mail this week. This is being done to respect indi- vidual employee privacy. Scarzella testified that during additional group meet- ings subsequent to the April 5 meetings and following the filing of the representation petition, he did recall that he compared the ESOP plan to the "contributory nature and the solidity" of the Teamsters' pension plan. Howev- er, according to Scarzella, the matter was not considered to be a major point during the preelection campaign. The parties stipulated that all employees are furnished with Respondent's employee handbook, which contains a detailed summary of the ESOP plan. Significant portions of the handbook summary are as follows: EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) The purpose of this plan is to enable full time permanent employees of the Company to share in the growth and prosperity of the Company and to provide participants with an opportunity to accu- mulate capital for their future economic security. The Plan is designed to do this without any deduc- tions from participant's paychecks and without call- ing upon them to invest their personal savings A primary purpose of the Plan is to enable participants to acquire a proprietary interest in the Company- consequently a major portion of the Employer Con- tributions made to the Trust will be invested in Company stock. This Plan is administered by a Committee con- sisting of not less than three (3) nor more than five (5) members. All full-time employees, except those covered by collective bargaining agreements, who have attained the age of 20 and have completed two (2) months of continuous service prior to the Plan Entry Date of May 31st, are eligible to participate. [Emphasis added.] Vesting Schedule: Vesting measures a Participant's right to receive the value of the Employer's contributions which have been allocated to his account in the event he terminates employment for reasons other than death, disability or retirement. ESOP contributions are made from corporation funds and are divided to all participants in same proportions as their salary is to total salaries. It is important to note that no money is withheld from the employee's salary. The Plan is totally funded by the Corporation and should be thought of as extra salary being invested for each participant. [Emphasis added.] In 1978 a "Summary Plan Document" was distributed to employees. This summary, inter alia, contains the fol- lowing: The purpose of this Plan is to enable participating employees of the Company to share in the growth and prosperity of the Company and to provide Par- ticipants with an opportunity to accumulate capital for their future economic security. The Plan is de- signed to do this without any deductions from Par- ticipants' paychecks and without calling upon them to invest their personal savings. A primary purpose of the Plan is to enable Participants to acquire a proprie- tary interest in the Company-consequently, a major portion of the Employer Contnbutions made to the Trust will be invested in Company stock. This Plan is adopted as an amendment of the Company's Profit Sharing Plan, and the assets of the Profit Sharing Plan will be transferred to the Trustee under this Plan. The Plan is administered by a Com- mittee consisting of not less than three, no more than five members. [Emphasis added.] 2. When do I become eligible to participate? All full-time employees, except those covered by collective bargaining agreements, who have attained age 20 and have completed at least 2 months of continuous service are eligible to participate as of the effective date of the Plan. [Emphasis added.] The documentary evidence indicates that the ESOP plan, which has been in effect since 1977, was amended in 1983 retroactive to June 1, 1981.5 The amendment, a document of some 37 pages, contains the following: ARTICLE I Name and Purpose of Plan 1.1 Name The Employee Stock Ownership Plan established by the LYNN-EDWARDS CORPORATION, a California corporation (Employer herein) shall be known as the Stock Bonus Employee Stock Owner- ship Plan (Plan herein) and the Employee Stock Ownership Trust executed by Employer and EDWARD F. SCONBERG, JR. and WALTER E. RILEY (Trustees herein) shall be known as the Employee Stock Ownership Trust (Trust herein). 1.2 Purpose It is the purpose of this plan to recognize the contribution of the Employees to the successful op- eration of the Employer and to reward such contri- bution by establishing the system that would enable the employees to acquire through a Stock Owner- ship Plan equity ownership in the Employer with- out diminishing take-home pay. A major portion of 3 The amendment does not denote the month and day in 1983 when the plan was amended This case was litigated on the premise that the amendment has been in effect at all times material LYNN-EDWARDS CORP the Employer contributions to the trust will be in- vested in stock of Employer. ARTICLE 3 Eligibility and Participation 3.1 Eligibility . . However, notwithstanding any provision to the contrary , no employee covered by a collective bargaining agreement between an Employee repre- sentative and the Employer shall become a Partici- pant in the Plan, provided that retirement benefits of said class of Employees was the subject of good faith bargaining between the Employee representa- tive and the Employer , and said Employee's retire- ment benefits are being funded pursuant to said col- lective bargaining agreements. C. Analysis and Conclusions 1. The unfair labor practice case Both the Respondent 's employee handbook and its summary plan document, copies of which have been fur- nished to the employees since 1977 or 1978, specify that all employees are able to participate in the plan "except those covered by collective bargaining agreements." Similarly, on April 5, the Respondent's president, Scar- zella, told the employees at a series of meetings that the "union cannot participate in ESOP," and Vice President Riley stated that "Any employee who is a member of collective bargaining cannot be eligible for this plan." Such statements by Scarzella and Riley are clearly viola- tive of the Act, as alleged. In Niagara Wires, 240 NLRB 1326, 1327-1328 (1979), the Board found that virtually identical language appear- ing in a pension plan and summaries of the plan , consti- tuted a violation of Section 8(a)(1) of the Act. The Board stated- While, as Respondent notes, the Board has indeed found violations under the Act based on an employer's unlawful conduct in implementing a re- strictive eligibility provision to deprive otherwise eligible employees of benefits, or by explicitly using the eligibility restriction as a coercive device during an election campaign,3 it is clear that such conduct is not a sine qua non for finding a violation in this area. Rather, we have consistently stated that the mere maintenance and continuance of a provision in a pension plan, making lack of union representation one of the qualifications for eligibility to participate therein, itself tends to interfere with , restrain, and coerce employees who are otherwise eligible in the exercise of their self-organizational rights .4 Here, Respondent's plan, in limiting eligibility to employ- ees who are not covered by a collective-bargaining agreement, in effect, conditions eligibility on the un- represented status of the employees. It is clear that Respondent publicized this restriction by distribut- ing summaries of the plan to its employees a few weeks before they were scheduled to vote in the 209 union election . While there is no reason to assume that the distribution of the plan was unlawfully mo- tivated , the communication and the continued exist- ence of such an exclusionary eligibility requirement necessarily exert a coercive impact on the employ- ees. It is for this reason that an employee benefit plan which restricts coverage to unrepresented em- ployees is per se violative of Section 8(a)(1) of the Act, regardless of whether the employer adds to the misconduct by implementing the restriction or ex- ploiting it during an organizing campaign.5 ' See, e g , Firestone Synthetic Fibers Company , 157 NLRB 1014, 1018, 1019 ( 1966), enforcement denied 374 F2d 211 ( 1967), Sunshine Food Markets, Inc, 174 NLRB 497, 504 (1969) * See, eg, Jim O'Donnell, Inc, 123 NLRB 1639, 1643 ( 1959), Melville Confections, Inc, 142 NLRB 1334, 1338 (1963), enfd 327 F 2d 689 (7th Cir 1964), cert denied 377 U S 933 See also A M Steigerwald Co, 236 NLRB 1512 (1978) 5 See, e g, White Sulphur Springs Company, d/b/a Greenbrier Hotel, 216 NLRB 721, 727 (1975), Sunshire Food Markets, Inc, 174 NLRB 497, 504 ( 1969), Goodyear Tire & Rubber Company, 170 NLRB 539, 550 ( 1968), modified in part 413 F 2d 158 (6th Cir 1969), Dura Corporation , 156 NLRB 285, 288, 289 (1965), enfd 380 F 2d 970 (6th Cir 1967) Further, even assuming the exclusionary language of the amendment to the plan , supra, is not unlawful , and that Scarzella and Riley simply misrepresented the provision to the assembled employees , as the Respondent main- tains, their statements are nevertheless unlawful . Thus, in Rangaire Corp., 157 NLRB 682, 684 (1966), the Board found under similar circumstances that although the ex- clusionary language of the plan was not unlawful , never- theless a "plainly misleading statement of fact which pur- ports to exclude the possibility of bargaining over con- tinuation of an existing condition of employment inter- feres with the protected right of employees to engage in collective bargaining " See also Tappan Co., 228 NLRB 1389 (1977). It is therefore clear, and I find, that the similar misleading statements by Scarzella and Riley during the course of the April 5 group meetings were per se unlawful and violative of Section 8(a)(1) of the Act. In Rangaire, supra at 683 , the Board found that lan- guage in a pension plan excluding "any person covered by a collective bargaining agreement entered into with the employer, which agreement does not provide for coverage of such person by this plan " was permissible. Similarly, in Tappan , supra at 1390, the language in the "retirement savings benefit plan" which was further de- scribed as "Tappan Company Retirement Savings Plan for Non-Bargaining Unit Employees " was not found' to be unlawful, in that it did not automatically exclude union employees, but rather provided that they would be excluded only if they become members "of a bargaining unit recognized for the purpose of collective bargaining, and for whom the Company maintains or contributes to an employee benefit plan pursuant to agreement with the collective bargaining representative for the unit." The Respondent contends that the exclusionary lan- guage in its amendment to the plan falls within the pa- rameters of the cited cases, and is therefore lawful be- 210 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD cause, as stated by the Board in Solo Cup Co., 176 NLRB 823 at fn. 3 (1969): This does not mean of course, that an employer may not advise his employees, in a noncoercive fashion, that pensions for those in the unit are sub- ject to bargaining and that if a separate pension plan for those in the unit is agreed upon, coverage in the existing plan will not be maintained, i.e., the em- ployer is not obligated to provide "double cover- age." The General Counsel, however, citing Solo Cup, supra Kroger Co., 164 NLRB 362 (1967), enfd 401 F.2d 682 (6th Cir. 1968), cert. denied 395 U.S. 904 (1969), and Winn-Dixie Stores, 224 NLRB 1418 (1976), enfd. in perti- nent part 567 F.2d 1343 (2d Cir. 1978), maintains that the language is unlawful because of the nature of Respond- ent's plan. As argued by the General Counsel, the grava- men of the violations in the foregoing cases as well as the instant case involves the language in the employers' "profit sharing plans" which automatically preclude em- ployees from enjoying the benefits of such plans if they become covered by a "retirement" plan negotiated by the union. Thus, profit-sharing plans and retirement plans, as characterized by the Board, are different enti- ties. Profit-sharing plans are essentially dependent on an employer's current and future profits and, as in the in- stant case, constitute a bonus for employees whose ef- forts have enabled the company to make a profit As stated in the Respondent's employee handbook, the con- tributions are to be viewed as "extra salary." Indeed, the amendment to the plan renames it to reflect that it is a "Stock Bonus" plan designed to reward the employees for their contributions to the Respondent's success. Al- though certainly more elaborate, the plan, in essence, may be viewed as similar to an annual Christmas bonus rewarding employees for a job well done; and indeed, the value of the bonus to the employees may diminish with time, as the benefits are dependent on the value of the Respondent's stock upon the employees' retirement. In contrast, retirement plans or pension plans, as contem- plated or discussed by the Board in the foregoing cases, are not subject to the vicissitudes of an employer's busi- ness operations, but rather are customarily funded on a different basis, ensuring regular contributions and stabili- ty. The fact that Respondent's plan is sometimes denomi- nated as a retirement plan by the Respondent in the van- ous documents or speeches referred to above does not alter the plan's essential purpose. As the Board has stated in Winn-Dixie, supra at 1419, the fact that "enjoyment of the benefits derived from Respondent's contributions is deferred until a point of time normally associated with retirement," is not a determinative factor. On the basis of the foregoing, I find that Respondent's ESOP plan is a profit-sharing plan within the purview of the aforementioned cases. It is clear that an employer may not, through provisions of a profit-sharing plan, automatically deprive emplo) ees of benefits therefrom if they elect to be covered by a retirement or pension plan negotiated by the union. Because this is precisely the ex- press intent of the language in Respondent 's profit-shar- ing plan, such provisions are unlawful . I therefore con- clude that by maintaining such an unlawful exclusionary clause in its profit-sharing plan Respondent has violated Section 8(a)(1) of the Act, as alleged Winn-Dixie Stores, supra; Solo Cup Co., supra; Kroger, supra. -2. The representation case Insofar as the record shows, and as found above, the Respondent has maintained an unlawful exclusionary provision in its profit -sharing plan during all times mate- rial The amended plan was in existence during the elec- tion campaign , as were the employee handbook and the summary plan document. Immediately before the filing of the petition , and as a direct consequence of the Union's request for recognition, the Respondent empha- sized language contained in the employee handbook and summary plan document, by telling the employees that the benefits of the ESOP plan were not available to union-represented employees.6 Further, during the course of the postpetition campaign , Respondent admit- tedly mentioned its ESOP plan to the employees, for purposes of comparison with the Union's retirement plan. It is clear that conduct violative of Section 8(a)(1) as found here is, a fortiori, conduct which interferes with a free and untrammeled choice in the election. Federated Department Stores, 241 NLRB 240, 253 fn. 38 (1979); Dal-Tex Optical Co., 137 NLRB 1782, 1786 (1962). Re- spondent contends that the ESOP plan was not consid- ered by Respondent to be a significant issue during the preelection campaign and therefore should not constitute grounds for setting the election aside The Board stated in Enola Super Thrift, 233 NLRB 409 (1977), the "only recognized exception to this policy [of finding that con- duct violative of Section 8(a)(1) constitutes a fortiori in- terference with a free election] is where the violations are such that it is virtually impossible to conclude that they could have affected the results of the election." Ap- plying this test to the instant factual situation, it is clear that Respondent's contention is without merit. Moreover, I find no merit to Respondent's similar ar- gument that because the vote was overwhelmingly against union representation , it would serve no useful purpose to conduct a second election . It is clear that "whether certain conduct warrants setting aside an elec- tion does not turn on the election results, but rather on its likelihood to coerce prospective voters to cast their ballots in a particular manner." United Broadcasting Co., 248 NLRB 403, 404 (1980). The Respondent's profit-sharing plan is a financial ben- efit which, it may reasonably be presumed , significantly affects each unit employee. Indeed, the Respondent, when confronted with the Union's request for recogni- tion, deemed it expedient to present the employees with the details and benefits of the plan in an effort to per- 6 It is well-established that prepetition conduct may be considered for purposes of evaluating objections insofar as it lends meaning and dimen- sion to postpetition conduct or assists in its evaluation Arthur Briggs, Inc , 265 NLRB 299 (1982), Maywood, Inc, 251 NLRB 979 fn 4 (1980), Dressler Industries, 231 NLRB 591 (1978), Parke Coal Co, 219 NLRB 546 (1975) LYNN-EDWARDS CORP. suade them that not only was a union unnecessary, but that selecting a union would result in their exclusion from the plan. I therefore conclude that, under the cir- cumstances, it is necessary to recommend that a second election be conducted.7 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 Respondent has violated Section 8(a)(1) of the Act by threatening employees with loss of a profit-shar- ing plan in the event they become covered by a retire- ment plan negotiated by the Union. 4. The Respondent has violated Section 8(a)(1) of the Act by maintaining article 3.1, Eligibility, of its amended profit-sharing plan which unlawfully excludes employees from participation in the plan, and by maintaining those portions of existing booklets and documents which con- tain related explanatory material 5. The aforesaid unfair labor practices are unfair labor practices affecting commerce within the meaning of Sec- tion 2(6) and (7) of the Act. 7 A separate, unrelated election objection was withdrawn by the Union at the hearing 211 6. By the unfair labor practice found above, the Re- spondent has interfered with the freedom of choice of its employees in the representation proceeding, and it is rec- ommended that the election in Case 20-RC-15616 held on June 2, 1983, be set aside and that a second election be conducted. THE REMEDY Having found that Respondent violated and is violat- ing Section 8(a)(1) of the Act, I recommend that it be required to cease and desist therefrom and from in any like or related manner interfering with, restraining, or coercing its employees in the exercise of their rights under Section 7 of the Act, and take certain affirmative action described here, including the posting of an appro- priate notice attached hereto as "Appendix [omitted from publication]." Having found that Respondent violated Section 8(a)(1) of the Act by maintaining article 3.1 "Eligibility" of its amended profit-sharing plan, it is recommended that Re- spondent cease and desist from further maintaining the paragraph. Further, Respondent shall be ordered to amend the plan and any existing employee booklets and/or publications so as to eliminate therefrom any lan- guage which suggests that employees covered by a re- tirement plan resulting from collective bargaining through a union will be disqualified from participating in Respondent's profit-sharing plan [Recommended Order omitted from publication.]