Clemson Bros., Inc.

944 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Clemson Bros., Inc. and Local Lodge 1835, Interna- tional Association of Machinists & Aerospace Workers, AFL-CIO. Case 2-CA-18592 August 24, 1988 DECISION AND ORDER BY CHAIRMAN STEPHENS AND MEMBERS JOHANSEN AND CRACRAFT On January 28, 1983 , Administrative Law Judge Eleanor MacDonald issued the attached decision. The Respondent and the General Counsel filed ex- ceptions and supporting briefs. The National Labor Relations Board has consid- ered the decision and the record in light of the ex- ceptions and briefs and has decided to affirm the judge's rulings, findings, ' and conclusions as modi- fied below and to adopt the judge's recommended Order. 1. The judge found that the Respondent violated its good-faith bargaining obligation under NLRB v. Truitt Mfg. Co., 351 U.S. 149 (1956), first by reject- ing the Union's economic bargaining demands based on a claim that the business was losing money and then refusing to grant the Union's de- mands for verification of that claim. The Respondent's exceptions contend that no Truitt disclosure obligation arose because rather than claiming inability to pay it gave repeated as- surances that the Respondent could afford to grant the Union's bargaining demands . We find the Re- spondent's exceptions lacking in merit. When the entire course of conduct is examined, the Respondent's disclaimer of having made a fi- nancial inability claim rings hollow. The Respond- ent reiterated that because of losses incurred and continuing in the manufacturing operation, it needed to cut unit costs by 30 percent over 3 years and it emphasized at the bargaining table that in the prior 4 years it had sustained large losses, recit- ing the loss figures for each of those years. The Board does not require an express plea of poverty to invoke the application of Truitt. It is sufficient if the employer's words and conduct specifically link its bargaining position to economic hardship.2 i The Respondent has excepted to some of the judge's credibility find- ings The Board's established policy is not to overrule an administrative law judge's credibility resolutions unless the clear preponderance of all the relevant evidence convinces us that they are incorrect Standard Dry Wall Products, 91 NLRB 544 (1950), enfd 188 F 2d 362 (3d Cir 1951) We have carefully examined the record and find no basis for reversing the findings 2 E I duPont & Co, 276 NLRB 335, 336 (1985) See also Cowin & Co, 277 NLRB 802 fn 1 (1985) (despite its assertions to the contrary, the employer "was in fact expressing financial inability to pay") Nielsen Lith- ographing Co, 279 NLRB 877 fn 3 (1986) ("by its words and conduct" the employer "conveyed to the Union an inability to pay and thus triggered a duty to disclose financuil information") Coast Engraving, 282 NLRB 1236 fn 1 (1987) (employer had to have a wage freeze "in order Here, it is plain from the statements concerning continued annual losses and the need to substantial- ly reduce unit labor costs over the next 3 years that the Respondent, despite its incantation of an ability to afford higher wages, was basing its rejec- tions on its business losses. In fact, its statement of "unwillingness," i.e., that it did not make sense to pay higher wages, was admittedly predicated on the same asserted manufacturing losses.3 Thus, the Respondent's statements specifically linked its bar- gaining position to economic hardship. Moreover, the Respondent's rejection of the Union's demands was solely predicated on the poor financial health of this, its only business. Its reiter- ation of its claim concerning the profitability of its business as a ground for rejecting the Union's de- mands put the validity of that claim into issue. It is immaterial whether the Respondent also revealed that it had other resources, unconnected with its business, that it chose not to use in meeting the Union's demands. The Union might reasonably assume that the Respondent expected the business to pay for itself.4 Therefore, the Respondent's re- peated claims that, because of the plant's unprofita- bility, it needed concessions, including a wage freeze, and elimination of the February 1 COLA, amounted to an assertion of inability rather than unwillingness to pay for the Union's demands. Thus the Union was entitled under Truitt to sub- stantiation of the Respondent's claims, which likely would have furthered the bargaining process.5 We, to stay in business and recoup some bad losses they had [m] the first few months of the year") ' The relevant test , as recently reiterated by the Seventh Circuit in NLRB Y. Harvstone Mfg Corp, 785 F 2d 570, 575 (7th Cir 1986), "is to ascertain whether the employer said it 'would not' as opposed to 'could not' pay the employees' proposed demands " (Citing United Fire Proof Warehouse Co v NLRB, 356 F 2d 494, 498 (7th Cir 1966) ) The court in Harvstone found the seeking of concessions because of the competitiveness of the market was not an assertion of financial inability In contrast, the Respondent has asserted no claim of competitive disad- vantage in the instant case 4 See United States Steel Corp , 122 NLRB 1519, 1525- 1526 (1959) (where employer (U S Steel) said it was financially able to meet the union's demands (for zinc mine employees) but claimed the zinc mine was operating at a loss), and Celotex Corp, 146 NLRB 48, 52-54 (1964) (in which the employer's statement that it had the ability to pay whatever it thought was right, was evaluated in light of the additional statements that the plant was not being operated profitably and that the negotiations would be on the basis of the labor costs which the plant , not the entire corporate operations, could afford) ' The objective of the disclosure obligation is to enable the parties to perform their statutory function responsibly and "to promote an intelli- gent resolution of issues at an early stage and without industrial strife " Monarch Machine Tool Co, 227 NLRB 1265, 1268 (1977) Compare the Board's recent decisions in Atlanta Hilton & Tower, 271 NLRB 1600 (1984), and Advertisers Mfg. Co, 275 NLRB 100 (1985), in which numer- ous employer reasons for refusing union bargaining demands were found to have demonstrated unwillingness rather than financial inability, and where requiring production of demanded financial information would therefore not have served the bargaining process 290 NLRB No. 111 CLEMSON BROS. 945 therefore, find that the Respondent's repeated re- fusals to allow verification of its asserted financial inability contravened its duty to bargain in good faith, in violation of Section 8(a)(5) of the Act.° 2. The judge found that the Respondent's lock- out of its bargaining unit employees before reach- ing a bargaining impasse on February 1, 1982, was motivated by a desire to avoid paying the COLA or bargaining further with the Union, in violation of Section 8(a)(3) and (1). In light of this finding, the judge also found similar violations in the Re- spondent's use of temporary replacements for the locked-out employees and the offers of reinstate- ment conditioned on the discriminatorily locked- out employees' waiving the COLA and pension and dental plan payments provided by the contract. Further, the Respondent's reinstatement offer con- stituted direct dealing with employees in violation of Section 8(a)(5) and (1) because the offer differed from the contract agreed to by the parties. And similarly, the Respondent's cessation of contractual payments, including pension and dental plan contri- butions and the COLA payment, concurrent with the lockout, constituted unlawful unilateral changes. The Respondent excepts to the above findings of the judge because the parties had reached impasse and thus the lockout and other events that fol- lowed were lawful. In support of these exceptions, the Respondent contends that the judge's finding of no bargaining impasse is erroneous and based solely on her unsupportable refusal-to-bargain fording. The Respondent further argues that it had the right, under article 33 of its contract,7 to lock out its employees if no new agreement was reached within 60 days after negotiations were reopened. We disagree with the Respondent. We concur in the judge's finding that the Respondent failed to bargain in good faith because it refused to allow the Union to verify its asserted inability to pay for the Union's demands. We, therefore, conclude that e The judge found the Respondent's reneging on Schrade's promise to offer a wage increase to be evidence of bad-faith bargaining. Contrary to the judge, in light of the Respondent's consistent bargaining position that it would grant increases only if total labor costs did not increase, we do not infer bad faith from the Respondent's decision to overrule the prom- ise to offer a wage increase that was not tied to any commensurate bene- fit reduction. T The contract provides as follows: (33.0) ... Either party may serve a written notice upon the other sixty (60) days prior to November 1, 1981 to amend the wage rates and fringe benefits provided for in this agreement . Upon receipt of such notice, the other party will meet immediately and negotiate in good faith concerning the modifications proposed. (33.1) In the event that the parties fail to agree on the modifica- tions proposed within sixty (60) days after receipt of the aforesaid notice, any limitation upon the right of the union to strike established by the terms expressed or implied of this agreement shall terminate on and after the sixtieth (60th) day following the receipt of the afore- said notice. In the event of a strike or lockout the contract shall ter- minate. there can be no impasse because the cause of the alleged deadlock was the Respondent 's own failure to bargain in good faith.8 Thus the Respondent was engaged in bad-faith bargaining at the point when it initiated the lockout and it maintained the lockout while continuing to refuse to bargain in good faith with the Union.9 And it is the Respond- ent's avoidance of its bargaining obligation in insti- tuting the lockout, l 0 rather than the absence of a lawful impasse, which renders the lockout violative of Section 8(a)(3) and (1).11 Furthermore, the Re- spondent's reliance on its contractual right to ter- minate the contract and lock out employees is una- vailing because article 33 states that such actions are dependent on the parties' good-faith bargaining. Finally, the Respondent thereafter conditioned rehiring of the laid-off employees on their willing- ness to waive contractual COLA and pension and dental benefits. Such actions, as found by the judge, were clearly discriminatory as well as inimi- cal to the collective-bargaining process. We, there- fore, adopt the judge's findings that the Respond- ent unlawfully locked out and temporarily replaced its employees 18 as well as her other findings of violations flowing from that unlawful lockout, and we adopt her "make-whole" Order. 13 ORDER The National Labor Relations Board adopts as its Order the recommended Order of the adminis- trative law judge and orders that the Respondent, Clemson Brothers, Inc., Middleton, New York, its officers, agents, successors, and assigns, shall take the action set forth in the Order, except that the at- 8 Marine & Shipbuilding Workers v. NLRB, 320 F.2d 615, 621 (3d Cir. 1963). ' American Ship Building Co. v. NLRB, 380 U.S. 300 (1965); Yore Cinema Corp., 254 NLRB 1288 (1981). 10 "Proper analysis of the problem (lockout] demands that the simple intention to support the employer's bargaining position ... be distin- guished from a hostility to the process of collective bargaining which could suffice to render a lockout unlawful." American Ship Building Co., 380 U.S. at 309. Here, as the judge found, the lockout was motivated by the Respondent's wish to avoid the COLA payment , a matter about which we have found the Respondent refused to bargain in good faith. 11 Darling & Co., 171 NLRB 801, 803 (1968), enfd. sub nom. Lane Y. NLRB, 418 F.2d 1208 (D.C. Cir. 1969). 's We note that the Board's recent decision in Harter Equipment, 280 NLRB 597 (1986), is inapplicable in this case which involves replacement of employees who were locked out unlawfully. 1e We shall amend the judge's remedy by providing that the compli- ance proceeding herein address the question of whether the Respondent must pay any additional sums into employee benefit funds in order to sat- isfy the "make-whole" remedy. Merryweather Optical Co., 240 NLRB 1213 (1979). In accordance with our decision in New Horizons for the Retarded, 283 NLRB 1173 (1987), interest on and after January 1, 1987, shall be com- puted at the "short-term Federal rate" for the underpayment of taxes as set out in the 1986 amendment to 26 U.S.C. 16621 . Interest on amounts accrued prior to January 1, 1987 (the effective date of the 1986 amend- ment to 26 U.S.C. 16621), shall be computed in accordance with Florida Steel Corp., 231 NLRB 651 (1977). 946 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD tached notice is substituted for that of the adminis- trative law judge. APPENDIX NOTICE To EMPLOYEES POSTED BY ORDER OF THE NATIONAL LABOR RELATIONS BOARD An Agency of the United States Government The National Labor Relations Board has found that we violated the National Labor Relations Act and has ordered us to post and abide by this notice. Section 7 of the Act gives employees these rights. To organize To form, join, or assist any union To bargain collectively through representa- tives of their own choice To act together for other mutual aid or pro- tection To choose not to engage in any of these protected concerted activities. WE WILL NOT refuse to bargain in good faith with Local Lodge 1835, International Association of Machinists & Aerospace Workers, AFL-CIO. WE WILL NOT make unilateral changes in terms and conditions of employment. WE WILL NOT deal directly with our employees. WE WILL NOT unlawfully lock out our employ- ees, replace them, and offer them conditional rein- statement. WE WILL NOT threaten our employees with dis- charge if they refuse conditional offers of reinstate- ment. WE WILL NOT in any like or related manner interfere with, restrain, or coerce you in the exer- cise of the rights guaranteed you by Section 7 of the Act. WE WILL, on request, bargain in good faith with the Union and, if an understanding is reached, embody such understanding in a signed agreement. WE WILL make the below-named employees whole, with interest, for any losses of pay and ben- efits without prejudice to seniority and other rights that may have resulted from our unlawful lockout: Angel L. Soto Juan Barbosa Charles E. Bandi Domingo Rodriquez Stanley Della Gatta Harry W. Decker Gene E. Elliott Daniel Serrano William O. Vogt Vincent S. DiGuida Thomas Iron Chester J. Zuchnick Leonard M. Forney Marguerite E. From Donald C. Vandermark Vincent T. Fox Tomas Ruiz Theodore J. Hunt Isabelle M. Fox Robert M. Halstead Jane T. Moran Stanley F. Hunt Walter H. Paffenroth John A. Sezerba Robert Hallcot Mildred B. Ordway CLEMSON BROTHERS, INC. Louis Melendez, Esq., for the General Counsel. John A. Pateracki Jr. and Kevin P. Barry, Esqs. (Whitman & Ransom), of New York, New York, for the Re- spondent. John L. Gallagher, for the Charging Party. DECISION STATEMENT OF THE CASE ELEANOR MACDONALD, Administrative Law Judge. This case was tried at New York, New York, on 5 days between May 17 and July 9, 1982. The complaint, issued on April 19, 1982, alleges that Respondent failed to bar- gain in good faith with the Charging Party, unlawfully locked out all of its unit employees, permanently re- placed its unit employees, made unilateral changes in terms and conditions of employment, offered its employ- ees reinstatement on condition they forego benefits under the collective-bargaining agreement, threatened its em- ployees with discharge, and unlawfully discharged its employees in violation of Section 8(a)(1), (3), and (5) of the Act. On the entire record, including my observation of the demeanor of the witnesses, and after due consideration of the briefs filed by the General Counsel and Respondent in September 1982, I make the following FINDINGS OF FACT I. JURISDICTION Clemson Brothers, Inc., a New York corporation with an office and place of business in Middletown, New York, is engaged in the manufacture and sale of hacksaw blades and files. Respondent annually ships goods valued in excess of $50,000 directly to customers located outside the State of New York. Respondent admits, and I find, that it is an employer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act, and that the Union is a labor organization within the meaning of Section 2(5) of the Act. II. ALLEGED UNFAIR LABOR PRACTICES The Respondent, an old family-owned business, and the Union have had a collective-bargaining contract for the period November 1, 1980, through November 1, 1983, the Company and the Union agreed, in view of the Company's claims that the business was not sufficiently profitable, that there would be no general wage increase but that there would be a cost-of-living allowance (COLA), payable in the second and third years of the contract.' In addition, article 33 of the contract provides ' The first year's COLA, due February 1, 1982, would have increased each employee's pay by $2 per week. CLEMSON BROS. 947 for a wage and fringe benefit reopener at the end of the first year: (33.0) . . . Either party may serve a written notice upon the other sixty (60) days prior to No- vember 1, 1981 to amend the wage rates and fringe benefits provided for in this agreement. Upon re- ceipt of such notice, the other party will meet im- mediately and negotiate in good faith concerning the modifications proposed. (33.1) In the event that the parties fail to agree on the modifications proposed within sixty (60) days after receipt of the aforesaid notice, any limitation upon the right of the union to strike established by the terms expressed or implied of this agreement shall terminate on and after the sixtieth (60th) day following the receipt of the aforesaid notice. In the event of a strike or lockout the contract shall termi- nate. Pursuant to article 33, on August 17, 1981 , the Union notified Respondent that it wished to amend the wage rates and fringe benefits, and the parties met and negoti- ated from September 1981 to January 1982.2 No agree- ment to amend the contract was reached , and the Com- pany told the unit employees not to report to work on February 1 , 1982, the day the COLA payment was due to be made. By the time of the trial, all the unit employ- ees except one had been recalled by Respondent.3 A. The Negotiations Joseph Schrade II, secretary-treasurer of Respondent, and Emil Jeker, its vice president, represented the Com- pany at the negotiations. John C. Gallagher, grand lodge representative, represented the Union; he was accompa- nied by an employee-negotiating committee. In addition, a Federal Mediation and Conciliation Service (FMCS) mediator was present at some of the meetings. In its proposal, the Union was seeking improved hospi- talization benefits, an improved vacation schedule, three additional holidays, additional contribution to the IAM pension fund, 5 paid sick days, a $2-across-the-board wage increase, discontinuance of present job classifica- n There were also negotiations in February and March 1982. 3 Employee Robert Hallcot is on medical leave according to Respond- ent. The employees who were unlawfully locked out according to the complaint were Angel L. Soto Juan Barbosa Charles E. Bandi Domingo Rodriquez Stanley Della Gatta Harry W. Decker Gene E. Elliott Daniel Serrano William O. Vogt Vincent S. DiGuida Jane T. Moran Walter H. Pafienroth Robert Hallcot Thomas Kron Chester J. Zuchnick Leonard M. Forney Marguerite E. Krom Donald C. Vandermark Vincent T. Fox Tomes Ruiz Theodore J Hunt Isabelle M. Fox Robert M. Halstead Stanley F. Hunt John A. Sezebra Mildred B Ordway tions and replacement with prior job classifications, addi- tional paid personal days off, one-half hour paid lunch period, and increased sickness and accident benefits pay- ments. Respondent countered by proposing that the contract remain in force for one more year with no adjustments in wage rates or fringe benefits, waiver of the cost-of-living clause, elimination of certain holidays, fewer personal days off with pay, less vacation time, and the establish- ment of a hold harmless trust for the Company's liability under Federal pension legislation.. The Company's avowed aim throughout the negotiations was to reduce unit labor costs by 30 percent over the next 3 years. 1. September 23, 1981 The first session of the negotiations was held on Sep- tember 23, 1981 . At this meeting, ground rules for the negotiations were agreed to by the parties.' 2. September 30, 1981 Gallagher testified that on September 30, the parties discussed the employee classification system and the Company indicated that it would not grant a wage in- crease. The Company confirmed that it had hired some salespeople. According to Schrade, the parties exchanged proposals and clarified their intent . The Company's rep- resentatives told the Union that Respondent had the funds to meet the Union's demands but that these were not realistic. Although Clemson Brothers had invest- ments and capital, it was not earning a sufficient return on its manufacturing operation. 3. October 7, 1981 On October 7, according to Gallagher, the Union pre- sented its proposal to increase disability payments and the various medical insurance programs . The parties dis- cussed these demands, the hourly rate and the hold harmless Employee Retirement Income Security Act (ERISA) trust fund proposed by the Company. The Company was asking $ 1 per hour to be contributed to the fund from the employees' wages . The Union rejected this concept. On October 7, according to Schrade, he asked Gallagher for information about the pension fund portfolio. The latter told him to communicate directly with the fund director. The Union asked for information regarding the new work rules and the Company prom- ised to produce information . Then, medical insurance was discussed. 4. October 14, 1981 On October 14, according to Gallagher, the parties discussed medical insurance. Jeker and Schrade said that orders had fallen off and business was down; Gallagher asked if they were "pleading inability to meet any de- mands, over poverty" and Respondent's representatives said "no, it just doesn't make sense to give any increase." 4In his testimony, Gallagher mistakenly placed the first meeting on September 30, 1981. 948 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD According to Schrade, Jeker supplied certain cost infor- mation at this meeting. 5. October 16, 1981 On October 16, Gallagher testified, the Union present- ed a new proposal.5 The Union asked that the Company withdraw its "take-away" program and it modified its vision care proposal. Furthermore, it dropped the holi- day increase demand, decreased its pension demand, and decreased its sick leave demand. After a caucus, the Union decreased its wage demand to $1 per hour. The Company rejected the entire package. The Company stated that it had no intention of granting a wage in- crease. Again Gallagher asked if Respondent was plead- ing poverty or inability to meet the Union's demands, and again Respondent's representative replied, "no, it just doesn't make sense to grant any wage increases." Gallagher testified that he asked to see the Company's books once it claimed to be operating at a loss but that Joseph Schrade refused. According to Schrade, at this meeting, the Union cut its original proposals in half. It dropped some proposals and scaled down others. The Company said it was not going to increase its pension contribution rate and explained its fear of increased li- ability due to a change in the pension law. Schrade testi- fied, "we never seriously considered" making increased pension contributions. Respondent's negotiators also told the Union that its was probably not realistic to discuss wage increases and that increases in any benefits would have to be made within a framework of decreasing labor costs. 6. October 27, 1981 On October 27, according to Gallagher, he again asked the Company to open its books to prove is was losing money, and again Respondent refused. The parties discussed Respondent's price list and the fact that it had last increased prices in February 1981. Joseph Schrade said that if the Union was willing to consider giving up some holidays, Respondent would be able to offer the Union an increase. The parties discussed the cost of dis- ability insurance and the Union's vision program, and the Union reduced its wage demand to 50 cents per hour. The Company responded that it had no intention of granting a wage increase or additional benefits. The Union dropped its proposal to increase personal and sick leave. According to Schrade, at its meeting the Compa- ny provided information relating to disability income protection. The parties discussed the possibility of a wage increase. The Company discussed the competitive- ness of the saw blade market and its difficulty in raising prices. The Company said it would consider an increase in benefits provided total labor costs to the Company were not increased. The Company again stated its goal to decrease unit labor costs 30 percent over 3 years. 6 On cross-examination, Gallagher stated that there had been no meet- mg on October 16, the only meeting was on October 14 7. October 30, 1981 On October 30, Gallagher testified the Company re- ported that it had still not heard from its insurance agent concerning disability costs. Gallagher told the Company that the employees' last wage increase had been in 1979 and asked Respondent if it had identified any other sources of cost cutting besides labor costs. The Company asked the Union to delete the COLA provision from the contract and extend the contract to November 1982. Jeker mentioned that profit sharing was a possibility but he offered no proposal relating to this subject. Jeker said the Company was losing money and Gallagher asked to see the books. At the membership meeting that day, the employees rejected the Company's offer to delete the COLA freeze the contract until 1982, and a majority of the employees voted to authorize a strike. However, Gallagher convinced the employees to continue negotia- tions in view of the fact that the COLA would soon take the effect and provide some economic relief. According to Schrade, on October 30 the Company withdrew its proposals to reduce vacation, holiday, and personal time and withdrew the proposal for a hold harmless trust. 8. November 6, 1981 On November 6, the Company proposed profit-sharing plan to replace the COLA. According to Gallagher, the proposal was not well formulated and did not set forth details relating to how the plan would be administered or how profits would be computed. After this, Schrade and Jeker asked for the return of the proposal saying that it never should have been presented. The Union reduced its vision program demand at this session. Gallagher stated that he asked to see the Company's proposal. A profit-sharing proposal was given to the Union which was intended as a basis for future negotiations, especially the percentage rate. The company explained it was a skeleton proposal designed to elicit further negotiations, but Gallagher refused to discuss it saying it was "face- tious." Gallagher said the Union had no ability to check the Company's profit figures. Schrade said he would present the Company's tax figures for this purpose but that he would not let the Union audit company books. The Union proposed a pension contribution of 5 cents, a reduction of its prior demand, and a 50-cent wage in- crease. The Union also modified its disability income proposal, revising it downward. The Company rejected the package as excessive, but said it wanted to keep talk- ing. The Company was informed of the strike vote. 9. November 20, 1981 On November 20, according to Gallagher the Compa- ny said it would offer a wage increase in return for cut- ting holiday and vacation time . There was discussion of wages and business conditions, and discussion of the Company's pension liability. The Company gave the Union the operating figures for the previous 5 years. In 1977, sales were $3,223,033 and the profit was $37,769. In the year ending June 1981, sales were $2,845,417 and the operating loss was CLEMSON BROS. $280,222.6 The Company promised it would have a wage proposal at the next meeting. According to Schrade, at this meeting the Company said it might grant a wage increase in return for conces- sions in other areas of the contract relating to paid time off. The Union's last proposal and the Company's finan- cial position were discussed. The Company explained that although it had liquid assets it was not profitable on its current operations. In fact, the Company was losing money. The Union responded by asking to see the books, saying that unless union accountants could verify the fig- ures the Union could not consider them. The Company refused to permit the Union to inspect its books. The Company said it would not increase pension contribu- tions. Schrade promised that the Company would make a wage offer at the next meeting. However, Schrade testi- fied that before the next meeting, he was overruled by Richard Schrade, president of Respondent. 10. December 9, 1981 On December 9, Gallagher testified, Joseph Schrade said the Company wanted to eliminate the COLA and did not wish to give any raise. He refused to have a union accountant go over the Company's books. Schrade stated that COLA would be paid to any employee who was working on February 1, 1982. According to Schrade, at this meeting, the Company made no wage offer. It proposed a zero increase explaining that the manufacturing end of the business was not providing an adequate rate of return. At this session, the Company first indicated there might be anyone working on Febru- ary 1, 1982, if the Union did not waive the COLA, by saying that COLA would be paid to anyone who was working on February 1. 11. January 26, 1982 On January 26, according to Gallagher, the parties met as a result of an urgent call from Emil Jeker. They discussed the COLA, and Schrade said the Company would not pay the COLA that was due on February 1. Gallagher again asked if the Company was pleading pov- erty or inability to meet the Union's demands, and Schrade replied, "No, it just doesn't make sense to pay it." Schrade said that if there was no agreement to waive the COLA, the plant would be closed. Jeker said Re- spondent wanted a wage freeze with a reopener later in 1982. The Union said this did not make sense based on past experience. The Union proposed a $600 bonus for each employee per year in lieu of the COLA, but the Company rejected this plan. The Company proposed a 6 According to Vincent Fox, a member of the union negotiating com- mittee, the Company mentioned as early as September 1981 that it had lost $280,000 in the preceding fiscal year. Jack Judelson, Respondent's independent accountant for the last 18 years, testified that a new generation of the family has taken over the management of Respondent and is attempting to make it profitable. The business is overcapitalized and has excess cash to invest . At least 4 years ago, Judelson advised management that unless the business could show a net profit of at least $300,000 it should be sold or terminated . In the last 4 years, the Company's operating losses have totaled about $390,000 and $280,000 of this was experienced in 1981. The Company has a surplus generated by its investments, but this is declining due to the operating losses. 949 bonus of 5 hours' pay, or about $35, for each employee that year. Gallagher asked whether the Company was pleading inability to pay. Respondent's representatives replied that they had made an offer and that the plant would be closed if the Union did not agree to waive the COLA. The Company did not say it was terminating the contract nor that it was locking out the employees. According to Schrade, on January 26, 1982, the Com- pany twice stated that in the absence of a waiver of the COLA, the plant would be closed. The Company ex- plained that it was not pleading inability to pay, only that it made no sense to pay. Gallagher offered to waive the COLA for a bonus of $600 per year. Schrade said this was a very positive proposal and "very construc- tive" but that the parties were far apart on the numbers. The Company offered 1 hour's bonus and the offer was amended to propose a bonus of 5 hours' pay for the second year of the contract and 10 hours' pay for the third year. The Union would not accept this. Schrade testified that impasse was reached on January 26, 1982. The impasse occurred when the Company told the Union that time was running out and that a conces- sion was needed, and the Union offered a bonus in lieu of the COLA but no agreement was ever reached. Re- spondent's managers had believed for some time that it was unlikely the parties would settle their differences. They had discussed locking out the employees as early as October 30, 1982, and sought the advice of counsel on this point. B. The Lockout On January 27, 1982, Respondent had a press release read to its assembled employees . The release stated: Clemson Bros. today announced the lay off of all hourly employees at the end of work on Friday 29 January 1982. The Company said that negotiations of freeze wages have been unsuccessful. In the ab- sence of such an agreement the Company believes that continued operations under terms of the present labor contract to be uneconomical. The leadership of Local 1835 of I.A.M. which represents Clemson hourly workers has not in- formed the Company whether or not Company pro- posals have been presented to the membership for a acceptance or rejection. Clemson Bros. has had unsatisfactory operating results for several years. Schrade testified that the notice used the term "lay off' instead of lockout in. order to avoid sabotage. Schrade said the Company would not have laid off the employees if the Union had agreed to waive the COLA payments. The reason for the lockout of the employees was to employ economic pressure to cause the Union to accept the Company's terms and to avoid paying the COLA. The Company did not continue to make pension or dental plan contributions under the collective -bargain- ing agreement; however, Schrade said the Company did not consider the employees as discharged during the lockout. 950 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD On January 29, 1982, the production manager gave each unit employee a layoff slip, a slip for unemployment insurance, a set of medical insurance conversion papers, and any severance pay due under the contract. Gallagher was notified of the layoff by the employees, but Re- spondent never notified him of its actions. The plant did not close on February 1. There was in- ventory on hand and there were outstanding orders to fill. In addition, some goods in process could be finished rapidly. The clerical employees worked in the plant and three wives of company officials had skills and were put to work. In addition, 8 to 10 outsiders were hired. They were told that a labor dispute was in progress and they were not promised permanent employment. Schrade tes- tified that five of these are still on the payroll performing nonbargaining unit work. On February 12, 1982, Respondent addressed a letter to 19 of its 26 employees offering them their jobs at their old wages, but without payment of the COLA and with- out pension or dental plan contributions. The letter re- quired acceptance by February 22, and warned that if the employees did not come back to work "we will at- tempt to find a replacement for you. Should we succeed, you may be permanently discharged." Respondent did not send copies to Gallagher or to any other union offi- cial. The Company received identical responses from the employees accepting the offer to return to work but re- fusing to waive COLA, pension, and dental payments. Respondent did not permit the employees to return to work under their conditions and sent a letter to the em- ployees stating that the offer to return to work was "can- celled" and that the Company "will attempt to replace you.,, On April 27, 1982, the Company offered unconditional reinstatement to all of its employees agreeing to honor all the terms of the contract. Employees hired since Feb- ruary 1, 1982, were no longer to do bargaining unit work. This offer was accepted by the Union and the em- ployees returned to work. C. Discussion and Conclusions 1. Alleged bargaining in bad faith The General Counsel argues that the Company negoti- ated in bad faith, requesting that employees who had foregone any wage increase for over 2 years agree to waive a COLA payment and to accept the reduction of other benefits . In lieu of the COLA, the Company pro- posed a bonus of 13 cents per week. This was unreason- able in view of the fact that Respondent acknowledged that it had the money to meet the Union 's demands, but argued that it did not make sense to pay because the manufacturing operation was not sufficiently profitable. Further evidence of bad faith, according to the General Counsel, lies in the Company 's refusal to permit the Union to inspect its books to verify its claim of unprofi- tability. The Company also reneged on its promise to make a money offer during the negotiations. The General Counsel concludes that the totality of Re- spondent's conduct shows that the Company had a pre- determination not to reach agreement; it knew the Union would not accept its proposals to waive the COLA and it made no offer that the Union could accept. The Gen- eral Counsel urges that Respondent violated Section 8(a)(1) and (5) by bargaining in bad faith. Respondent argues that it never made any claims of in- ability to pay during the negotiations; in fact, Respond- ent's representative acknowledged that the Company had the money to meet the Union's demands. Respondent concludes that it was therefore under no obligation to comply with the Union's request to produce financial books and records for inspection by the Union. In NLRB v. Truitt, 351 U.S. 149 (1956), the Supreme Court said: Good-faith bargaining necessarily requires that claims made by either bargainer should be honest claims. This is true about an asserted inability to pay an increase in wages. If such an argument is im- portant enough to present in the give and take of bargaining, it is important enough to require some sort of proof of its accuracy. 351 U.S. at 152-153. This rule relating to an employer's claims of inability to meet a union's demands has been construed by the Second Circuit in Pressman Local 51 v. NLRB, 538 F.2d 496 (2d. Cir. 1976).7 In that case, Judge Hays rejected a mechanistic approach in determining whether an em- ployer had indeed raised a claim of inability to pay: So long as the employer's refusal reasonably inter- preted is the result of financial inability to meet the employees' demand rather than simple unwillingness to do so, the exact formulation used by the Employ- er is . . . immaterial. 538 F.2d at 500. The employer in the circuit court had repeatedly met each of the union's wage demands with the response that it could not "reach" them. The court concluded that the "plain English meaning of this . . . reiterated statement clearly indicates that the Employer was claiming an in- ability to pay,"8 and the court found that the employer's refusal to produce financial records requested by the union was a violation. In the instant case, Respondent's officers advised the Union that its manufacturing operation was not profita- ble and that unit labor costs must be cut 30 percent over the next 3 years. The Company made it clear that but for some investments unconnected to the manufacturing op- eration, Clemson Brothers would have been operating at a net loss. Indeed, the Company read certain sales and loss figures to the negotiating committee across the table. The plain English meaning of the Company's statements was that the Company's manufacturing operation em- ploying all the bargaining unit workers was losing money and that the Respondent could no longer afford to subsidize the manufacturing end of the business by a drain on its investments; a drastic decline in labor costs was necessary. This claim was tantamount to saying that the Company was unable to afford a wage increase. It is immaterial that the Company avoided using the magic 7 Rev. Milbin Printing, 218 NLRB 223 (1975). 8 538 F.2d at 500. CLEMSON BROS. 951 words-inability to meet the demand. The fact is, the Company wished to convince the Union that the manu- facturing operation could not meet the cost of improved wages and benefits. The truth of this analysis is proven by the Company's behavior at the bargaining table when it actually presented certain loss figures to the Union. As the Supreme Court said, "If such an argument is impor- tant enough to present . . . it is important enough to re- quire some sort of proof of its accuracy."9 Thus, having presented the figures, the Company should have been willing to have its books inspected by a union account- ant, and its unwillingness in the face of a union request was a refusal to bargain in good faith in violation of Sec- tion 8(a)(5) and (1) of the Act. There is further evidence of Respondent's bad-faith bargaining: Respondent acknowledges that on November 20, 1981 , it promised to make a wage offer at the next session and that it reneged on this promise . Further, al- though Respondent characterized the Union's willingness on January 26, 1983, to accept a bonus in lieu of COLA as "very constructive" and a step in the right direction, Respondent nevertheless locked out its employees on February 1, 1982, without engaging in further bargaining on this important concession. 2. Alleged unlawful lockout The General Counsel argues that the lockout of the employees before impasse was reached was unlawful be- cause it was designed to avoid paying COLA and avoid bargaining and was not supported by economic justifica- tion or the imminent possibility of a strike .10 The Gener- al Counsel concludes that the lockout was inherently prejudicial and devoid of economic justification and vio- lated Section 8(a)(3) and (1) of the Act, citing American Ship Building Co. v. NLRB., 380 U.S. 300 (1965); and Yore Cinema Corp., 254 NLRB 1288, 1293 (1981). Respondent urges that the parties had reached an im- passe in the negotiations . No further progress was likely after the meeting of January 26, 1982, because neither side was likely to compromise. Thus, Respondent con- cludes, in the face of a genuine impasse Respondent could institute a lawful lockout. Based on my findings above as to Respondent 's failure to bargain in good faith, I have concluded that no genu- ine impasse in the negotiations existed. I t In American Ship Building, supra, the facts showed that the parties had bargained to impasse in good faith and that the lockout was not based on hostility to the Union or a desire to avoid collective-bargaining obligations. In the instant case, the employer did not bargain in good faith and no genuine impasse was reached. Furtherance, it is clear that the lockout was motivated by Respond- ent's wish to avoid the COLA payment required by the contract and by Respondent's desire to avoid bargaining in a situation where it was unable to gain any further concessions from the Union. Respondent has presented 9 351 U.S. at 152-153. ,o According to the General Counsel , Schrade had decided on a lock- out on October 30, 1981 . However, the record shows that Respondent's officials only considered a lockout at this time, but had not reached a de- cision. I I Pressman Local 51, supra at 501. no evidence of economic justification for the lockout nor evidence of an imminent strike . Indeed, Respondent's brief concedes that the lockout was "not motivated by economic considerations." Therefore, the lockout of Feb- ruary 1, 1982, violated Section 8(a)(3) and (1) of the Act. 12 3. Alleged unlawful hiring of replacements The General Counsel argues that the locked -out em- ployees were discharged and permanently replaced in violation of Section 8(a)(3) and (1). In the alternative, the General Counsel argues that if the replacements were temporary, their use was inherently destructive of em- ployee rights in that Respondent did not demonstrate a substantial business justification for using replacements. The evidence does not show that the unit employees were discharged nor that their replacements were any- thing but temporary . However, since I have found above that the lockout was unlawful, it follows it that the tem- porary replacement of the employees was also in a viola- tion of Section 8(a)(1) and (3). 4. Alleged unilateral changes The General Counsel argues that Respondent violated Section 8(a)(5) by unilaterally ceasing the payment of COLA as well as payment of pension and dental plan contributions on February 1, 1982. The General Counsel contends that the contract had not terminated , as urged by Respondent, because the employees had been unlaw- fully locked out. Even if the contract had been terminat- ed, Respondent had no right to make unilateral changes. Article 33.1 of the contract provides that the contract terminates on a strike or lockout. However, since I have found that the lockout was unlawful , I find that the con- tract did not terminate. Thus, it was unlawful for Re- spondent to cease making any of the payments required by the contract, including pension and dental plan contri- butions and the COLA payment. I fmd that Respondent violated Section 8(a)(5) of the Act. NLRB v. Katz, 369 U.S. 736 (1962). 5. Alleged unlawful conditional offer of reinstatement The General Counsel contends that having been discri- minatorily discharged, Respondent's employees were en- titled to unconditional offers of reinstatement . Because Respondent did not make such offers initially , it violated Section 8(a)(3) and (1). I find that the offers of employ- ment made to the unlawfully locked-out employees on February 12, 1982, were conditional in that they would have required employees to waive the COLA, pension, and dental plan payments provided by the contract. Having been discriminatorily locked out , the employees were entitled to unconditional offers of reinstatement; Respondent's failure to tender such offers of reinstate- ment; Respondent's failure to tender such offers violated Section 8(a)(3) and (1) of the Act. K & E Bus Lines, 255 NLRB 1022 (1981). 12 American Ship Building, supra; Vore Cinema Corp., supra. 952 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 6. Alleged unlawful direct dealing The General Counsel contends that Respondent dealt directly with its employees in violation of Section 8(a)(5) and (1) of the Act, and requests permission to amend the complaint to allege this separate violation. The General Counsel points out that Respondent's February 12, 1982 offer of conditional reinstatement was made by letter to the employees and that the Union was not notified and had no opportunity to bargain over the mandatory terms of employment sought to be changed by Respondent's offer. Although this violation is not alleged in the complaint, the alleged unlawful activity was related to and inter- twined with the allegations in the complaint and the matter was fully litigated. Therefore, I grant the General Counsel's motion to amend the complaint. Doral Hotel & Country Club, 240 NLRB 1112 (1979). The facts concerning the reinstatement offer of Febru- ary 12, 1982, are not in dispute and are conceded by Re- spondent. The reinstatement offer would have required employees to forego payments mandated by the collec- tive-bargaining agreement. Respondent was attempting to change wages and other terms of employment by dealing directly with its employees. I find that Respondent vio- lated Section 8(a)(5) and (1) of the Act by mailing an offer to employees which differed from the contract agreed to by the parties. Mt. Airy Psychiatric Center, 230 NLRB 668, 680 (1977). 7. Alleged unlawful threats The General Counsel urges that Respondent threat- ened its employees with discharge in violation of Section 8(a)(1) when it informed them by letter of February 12, 1982, that they might be permanently discharged. The General Counsel states that the threat must be consid- ered in light of Respondent's bad faith in the negotiations and the unlawful lockout. I have found above that the lockout of the employees was unlawful and that Respondent' s unilateral attempt to reinstate the employees at different wages and conditions of employment was unlawful. In this context, Respond- ent's statement that the employees might be discharged if they refused to accept the unlawful conditions imposed by Respondent on their return to work was coercive and interfered with the employees' rights in violation of Sec- tion 8(a)(1) of the Act. CONCLUSIONS OF LAW 1. The Respondent, Clemson Brothers, Inc., is an em- ployer engaged in commerce within the meaning of Sec- tion 2(2), (6), and (7) of the Act. 2. Local Lodge 1835, International Association of Ma- chinists & Aerospace Workers, AFL-CIO is a labor or- ganization within the meaning of Section 2(5) of the Act. 3. By failing to bargain in good faith with the Union, making unilateral changes in terms and conditions of em- ployment and dealing directly with its employees, Re- spondent violated Section 8(a)(5) and (1) of the Act. 4. By locking out its employees, replacing them, and offering them reinstatement on certain conditions, Re- spondent violated Section 8(a)(3) and (1) of the Act. 5. By threatening its employees with discharge if they did not accept conditional offers of reinstatement, Re- spondent violated Section 8(a)(1) of the Act. 6. The unfair labor practices found above affect com- merce within the meaning of Section 2(6) and (7) of the Act. 7. Respondent did not violate the Act by discharging its employees. THE REMEDY Having found that Respondent has engaged in unfair labor practices in violation of Section 8(a)(1), (3), and (5) of the Act, I shall recommend that Respondent be or- dered to cease and desist, and take certain affirmative action to effectuate the policies of the Act. Having found that Respondent unlawfully locked out its employees but then offered them reinstatement, I shall direct that the employees be made whole for any losses of pay and benefits they may have suffered by reason of the unlawful lockout and that the previously accom- plished reinstatement shall be without prejudice to the employees' seniority and other rights and privileges. All loss of earnings and other benefits due under the terms of this Order shall be computed within interest in the manner prescribed in F. W. Woolworth Co., 90 NLRB 289 (1950); Isis Plumbing Co., 138 NLRB 716 (1962); and Florida Steel Corp., 231 NLRB 651 (1977). On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed" ORDER 8. Alleged unlawful discharge The General Counsel contends that Respondent's letter of February 23, 1982, notified the employees that they had been discharged in violation of Section 8(a)(3) and (1) of the Act. The General Counsel argues that the employees' protected conduct in refusing the conditional offer of reinstatement was the motivating factor for the discharge. The Respondent's letter of February 23, 1982, does not contain a notification of discharge. It merely states that Respondent will attempt to replace the employee. There is no evidence that any of the employees were dis- charged and this allegation of the complaint should be dismissed. The Respondent, Clemson Brothers, Inc., Middleton, New York, its officers, agents, successors, and assigns, shall 1. Cease and desist from (a) Failing to bargain in good faith with the Union, making unilateral changes in terms and conditions of em- ployment, and dealing directly with its employees. (b) Locking out its employees, replacing them, and of- fering them conditional reinstatement. 13 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. CLEMSON BROS. 953 (c) Threatening its employees with discharge if they refuse conditional offers of reinstatement. (d) 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) Post at all of its facilities copies of the attached notice marked "Appendix." 14 Copies of the notice, on forms provided by the Regional Director for Region 2, after being signed by the Respondent's authorized repre- sentative, 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 14 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." are not altered, defaced, or covered by any other materi- al. (b) Make whole the employees listed in footnote 3 above for any losses of pay and benefits without preju- dice to seniority and other rights in the manner set forth in the remedy section of this decision. (c) On request, bargain with the Union as the exclusive representative of the employees in the following appro- priate unit concerning terms and conditions of employ- ment and, if an understanding is reached, embody the un- derstanding in a signed agreement. (d) Preserve and, on request, make available to the Board or its agents for examination and copying , all pay- roll records, social security payment records, timecards, personnel records and reports, and all other records nec- essary to analyze the amount of backpay due under the terms of this Order. (e) Notify the Regional Director in writing within 20 days from the date of this Order what steps the Re- spondent has taken to comply. IT IS FURTHER RECOMMENDED that the complaint be dismissed insofar as it alleges violations of the Act not specifically found.