Garrison Nursing Home

122 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD Beverly Enterprises North Dakota, Inc d/b/a Garri son Nursing Home and North Dakota Human Services Employee Association, Inc, Petitioner Case 18-RC-14124 March 8, 1989 DECISION ON REVIEW AND DIRECTION BY CHAIRMAN STEPHENS AND MEMBERS JOHANSEN AND CRACRAFT On July 22, 1987,1 the Acting Regional Director for Region 18 issued a Decision and Direction of Election in which he found that the Petitioner was not disqualified from representing employees in the unit sought by reason of a conflict of interest on the part of the Petitioner's executive director On August 5, the Employer filed a timely request for review, which was granted on August 28 Pursuant to the Board's procedures, an election was held as scheduled on August 28 in the unit found appropri ate by the Regional Director, and the ballots were impounded The National Labor Relations Board has delegat- ed its authority in this proceeding to a three member panel The Employer, Beverly Enterprises-North Dakota, Inc d/b/a Garrison Nursing Home, owns and operates a nursing home in Garrison, North Dakota The Petitioner, North Dakota Human Services Employee Association, Inc, was incorpo rated on December 8, 1986, by its current execu tive director, Dave Giessinger Giessinger first met with employees of the Employer on April 29 to discuss organizing The petition was filed on May 18, and the hearing was conducted on June 29-30 The Employer contends that the Petitioner should be disqualified from representing employees of the nursing home because of numerous activities and involvements on the part of Giessinger that constitute conflicts of interest Thus, the Employer argues, Giessinger maintains interests in several other entities in the health care industry that com- pete with the Employer, and therefore the Petition er should not be allowed to represent the Employ er's employees for purposes of collective bargain ing The Employer also urges that Giessinger's po sition as holder of a promissory note arising from the sale of the nursing home to the Employer cre- ates a conflict of interest that precludes the Peti- tioner from representing the employees The Board has long held that a union may not represent the employees of an employer if a con- flict of interest exists on the part of the union such i Unless otherwise specified all dates are in 1987 that good-faith collective bargaining between the union and the employer could be jeopardized 2 The employer bears the burden of showing that such a conflict of interest exists, and that burden is a heavy one There is a strong public policy favoring the free choice of a bargaining agent by employ- ees This choice is not lightly to be frustrated There is a considerable burden on a noncon- senting employer, in such a situation as this, to come forward with a showing that danger of a conflict of interest interfering with the collec- tive bargaining process is clear and present 3 The employer need not demonstrate that mischief already has resulted from a conflict, however, but only that its potential exists 4 Such a conflict of interest on the part of a union's agent, by contrast, does not absolutely pre elude the union from representing the employer's employees 5 Instead, if the union receives a majori ty of the votes cast, the Board will withhold certi- fication as long as the individual occupies a posi- tion with the union in which he might subvert the bargaining process in pursuit of his own interests 6 Thus, even if Giessinger is shown to have a dis qualifying conflict of interest, it does not follow that the Petitioner would be absolutely disqualified from representing the Employer's employees We first address the Employer's assertion that a conflict of interest arises from Giessinger's affili ation with other entities in the health care industry The record establishes that Giessinger has, in fact, been involved at one time or another in a multitude of organizations and activities in the health care in- dustry Thus, Giessinger has been a nursing home administrator for most of the last 20 years, most re cently as the owner and administrator of the facili- ty in question 7 He was the founder, past president, and director of the North Dakota Health Care As- sociation (NDHCA), an organization of licensed nursing home administrators 8 However, he has not 2 See e g Bausch & Lomb Optical Co 108 NLRB 1555 (1954) 9 Quality Inn Wit kiki 272 NLRB 1 6 (1984) enfd 783 F 2d 1444 (9th Cir 1986) NLRB v David Buttrick Co 399 F 2d 505 507 (1st Cir 1968) 4 Bausch & Lomb supra 108 NLRB at 1562 5 Harlem River Consumers Cooperative 191 NLRB 314 319 (1971) 8 Id 7 Giessinger is the sole stockholder of DSC Inc which owned the Garrison Nursing Home from February 11 1982 until December 31 1985 when it was sold to the Employer As administrator of the facility Giessinger set terms and conditions of employment for and supervised the employees (roughly half of whom were still employed at the time of the hearing) He also drafted and disseminated to employees a statement setting forth his company s opposition to unions 8 At the time of the hearing NDHCA rented office space in a building owned by Giessinger However the minutes of a meeting of the organ zation on May 5 indicate that a motion was passed apparently in re sponse to the news of Giessinger s involvement with the Petitioner that NDHCA not renew its lease when it expired on August 31 293 NLRB No 11 GARRISON NURSING HOME served as an officer or director of NDHCA since 1984, and has not belonged to the organization since the end of 1985 Giessinger did receive $10,000 from NDHCA in January and February in return for his lobbying efforts in the state legisla- ture 9 However, those efforts ended around Febru ary 23, and his dealings with NDHCA were termi- nated at that time Giessinger was, for a time, associated with Pri- vate Pay Long Term Care Promoters (Promoters), a group of four or five individuals who were at- tempting to obtain a certificate of need from the State for a nursing home that would operate on a strictly private pay basis Giessinger allowed the group to use his name in its application and gave advice concerning the most effective way to phrase some of its submissions Giessinger contributed no capital to Promoters, whose application had been denied at the time of the hearing He also testified that he had written a letter around May 27 com- pletely severing his relationship with the group Giessinger also was the president and chairman of the board of Enable, Inc, a nonprofit organiza tion that operates five intermediate care homes for mentally retarded persons in Bismarck and Mandan, North Dakota Giessinger resigned from the board of Enable on June 9, but was replaced by his dependent son, the other two board mem- bers are Giessinger's wife and his attorney The fa cilities owned and operated by Enable serve a dif ferent clientele from those of the Employer and other nursing homes According to Giessinger, Enable has never owned or operated a nursing home or a long-term care facility 10 Finally, Giessinger is a member of the board of Gentle, Inc , a nonprofit corporation that exists for the purpose of distributing money to other non- profit organizations, such as Enable or Pride Indus- tries 11 Giessinger made a $2000 or $3000 contribu- tion to the Petitioner through Gentle The other members of the board of Gentle are Giessinger s wife and either his mother or his attorney On the basis of the foregoing, we agree with the Acting Regional Director that neither Giessinger nor the organizations he is currently involved with are suppliers to, customers of, or competitors with the Employer Thus, neither Enable, Inc nor Gentle, Inc has been shown to be involved in any way with nursing homes or other facilities that 9 The Acting Regional Director inadvertently stated that Giessinger s lobbying efforts were on behalf of Private Pay Long Term Care Promot ers another group with which Giessinger has been affiliated We correct the error which has no effect on our decision 10 Like NDHCA Enable rents office space from Giessinger Enable also was a member of NDHCA until May 27 11 Pride Industries is another nonprofit organization that operates fa cilities for the mentally retarded or developmentally disabled Giessmger testified that he is not affiliated with Pride Industries 123 might be in competition with the Employer As for Giessinger's relationships with Promoters and NDHCA, and his status as owner and administra tor of Garrison Nursing Home, the record estab lashes that he had terminated his relationship with them prior to the hearing We find no conflict of interest based on relationships that no longer exist 12 The Employer's other contention is that a con- flict of interest exists because of the financial rela- tionship between the Employer and Giessinger as the holder of the Employer's promissory note for $220,000 The note calls for the Employer to pay Giessinger 95 monthly payments of $2,123 05 be- ginning February 1, 1986, and to make a final "bal- loon" payment of $179,771 97 on January 1, 1994 The note is secured against default by the guaran- tee of the Employer's corporate parent, but not, apparently, by any specific assets In addition, the Employer is contractually entitled to an offset of approximately $77,000 against the amounts it owes Giessinger pursuant to the note 13 Although there is no dispute that the Employer is entitled to the offset, at the time of the hearing Giessinger and the Employer were still negotiating over the method of implementing it The Acting Regional Director found that no conflict of interest could arise as a result of the creditor/debtor relationship between Giessinger and the Employer He based his finding on the fact that the purchase and sale that engendered that re- lationship was an arm's length transaction, on the fact that the Employer's interests are protected re gardless of the outcome of any dispute between DSC and the State, and on the fact that the Em- ployer's debt to Giessinger is guaranteed by the Employer's corporate parent We disagree with the Acting Regional Director We find that the financial relationship between Giessinger and the Employer is fraught with the possibility that negotiations between them concern- ing the payment of the note, including the terms of the offset, might affect the collective-bargaining iz National Food Stores 186 NLRB 127 128 (1970) Quality Inn Wa, k1ki v NLRB 783 F 2d 1444 1449 (9th Cir 1986) That Giessinger once owned and operated the facility in question supervised its employees and even opposed unions does not create a present conflict of interest As for NDHCA s leasing office space from Giessinger (even if contrary to indications in the record the lease was renewed after August 31) we think it highly unlikely that such a relationship could be used effectively to undermine collective bargaining between the Employer and the Peti tioner Although we can envision instances in which either Giessmger or the NDHCA might attempt in the course of negotiations over office space to force the other to act to the benefit or detriment of the Em ployer in collective bargaining we find such scenarios insufficiently plau sible to be taken seriously 13 The offset arises because the State deducted a like amount from money it owed the nursing home to recapture excess depreciation alleg edly taken on the facility by DSC Inc 124 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD process Certainly, in negotiating over the manner of structuring the offset, the Employer would be in the position to offer more or less favorable terms to Giessinger, depending on whether he proved to be more or less tractable in collective-bargaining ne gotiations We can even imagine the Employer's predicting it might default on the note (thereby forcing Giessinger to undergo the trouble, expense, and uncertainty of bringing suit against a large, fi nancially powerful corporation to recover the amounts due him) unless he accepted terms that were less favorable to the employees represented by the Petitioner 14 In these circumstances, we find, contrary to the Acting Regional Director, that Giessinger's personal financial relationships with the Employer create a conflict of interest that could impair the Petitioner's effectiveness in repre- senting the nursing home's employees Because, as the Acting Regional Director found, Giessinger currently occupies a position with the Petitioner of sufficient authority that he could subordinate the interests of the employees to further his own finan- cial interests, we find that it would be inappropri- ate to certify the Petitioner as the bargaining agent for employees of the Employer as long as Gies- singer occupies such a position As we have noted, however, the Petitioner is not absolutely foreclosed from representing the Em ployer's employees Instead, we shall direct the Re- gional Director to open and count the ballots and, if the Petitioner receives a majority of the votes cast, to withhold certification until he is satisfied that within a reasonable time, not to exceed 6 months, Giessinger has relinquished any position with the Petitioner that would enable him to 14 In this respect this case differs from Anchorage Community Hospital 225 NLRB 575 (1976) Bridgeport Jai Alai Inc 227 NLRB 1519 (1977) and NLRB v David Buttnck Co 399 F 2d 505 (1st Cir 1968) In all of those cases the unions held loans that were secured by specific assets of the company which could have been foreclosed on in the event of a de fault pursue his own interests at the expense of those of the employees 15 If, however, within that time Giessinger should demonstrate to the satisfaction of the Regional Director that he has terminated his fi- nancial relationship with the Employer, his holding any position with the Petitioner would not be an impediment to certification 16 DIRECTION It is directed that the Regional Director for Region 18 shall, within 10 days from the date of this decision, open and count the ballots cast in the election held on August 28, 1987, prepare and serve on the parties a tally of ballots, and take such further action as may be necessary in accordance with this decision and with the Board' s Rules and Regulations is Harlem River Consumers Cooperative supra 16 Should an otherwise valid petition be filed during this 6 month in tenm period by any labor organization seeking to represent the employ ees of the Employer that petition should be dismissed Our withholding certification may well engender some uncertainty among all concerned including the employees of the nursing home con cerning when if ever the Petitioner will be certified as the employees bargaining agent To limit that uncertainty and in the interest of bringing these proceedings to a close we are requiring Giessinger to divest him self of his financial conflict (or the Petitioner to divest itself of Gies singer) within 6 months otherwise we shall dismiss the petition In this regard we note that the Board in Harlem River indicated that it was without statutory competence to effect a blanket disqualification of a union because of the personal activities of one of its agents 191 NLRB at 319 We do not think the Board meant to imply by that statement that it was without authority to direct that the uncertainty arising from its with holding certification be resolved within a reasonable time by the parties- here the Petitioner and Giessinger-with the ability and the incentive to do so Member Johansen unlike the majority would find that should an oth erwise valid petition be filed the petition here should be dismissed As noted by the majority the Board in Harlem River indicated that it lacks statutory competence to direct a blanket disqualification of the union seeking to represent an employer s employees because of the personal ac tivities of the union s agent Member Johansen reads this to mean that the Board is without the authority to direct a blanket disqualification at any time including after a reasonable period of time The union and its agent that caused the conflict of interest however have the ability to resolve it and cannot be permitted to bar the employees right to select a qualified bargaining representative Dismissing the petition here in the event of a new valid petition reasonably accommodates all legitimate interests