El Torito-La Fiesta Restaurants, Inc.

EL TORITO-LA FIESTA RESTAURANTS El Torito-La Fiesta Restaurants, Inc. and Hotel Em- ployees and Restaurant Employees Union, Local 100, of New York, New York and Vicinity, AFL-CIO. Case 2-CA-21049 June 15, 1989 SUPPLEMENTAL DECISION AND ORDER BY CHAIRMAN STEPHENS AND MEMBERS JOHANSEN AND CRACRAFT On June 26, 1987, the Board issued a Decision and Order in this proceeding,' finding that the Re- spondent violated Section 8(a)(5) and (1) of the Act by refusing to recognize and bargain with the Union and by refusing to honor a collective-bar- gaining agreement. Thereafter, the Respondent filed a petition for review and the Board filed a cross-application for enforcement with the United States Court of Appeals for the Ninth Circuit. On July 1, 1988, the court in an unpublished opinion remanded the case to the Board to clarify the reasons for, or to reconsider, its decision that the contract barred the Respondent from challeng- ing the Union's majority status. On August 9, 1988, the Board notified the parties that it accepted the court's remand and that they could file statements of position. The General Counsel, the Union, and the Respondent filed state- ments. The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has reconsidered the original deci- sion, the administrative law judge's decision, and the record in light of the court's remand and the statements of position, and for the following rea- sons has decided to reaffirm its original Order. I. BACKGROUND Until 1982 the Howard Johnson Company ran the Red Coach Grill, a restaurant serving primarily American cuisine. On May 15, 1981, Howard John- son entered into a collective-bargaining agreement with Hotel, Restaurant and Club Employees and Bartenders Union Local 6 affiliated with Hotel and Restaurant Employees and Bartenders International Union, AFL-CIO (Local 6), covering dining room, bar, and kitchen employees at the restaurant. The contract was effective from May 16, 1981, to Janu- ary 15, 1986. In late fall of 1982, Howard Johnson sold the Red Coach Grill to Exeter Equities. Exeter agreed '284 NLRB 518. 493 to assume the Local 6 bargaining agreement, and Exeter thereafter honored the agreement. Effective January 1, 1983, Local 6 was restruc- tured. Local 100, the Union, was formed to repre- sent restaurant employees formerly represented by Local 6. On May 6, 1983, Exeter sold the Red Coach Grill to the Respondent. From the date of its pur- chase, the Respondent intended to convert the res- taurant into an El Torito restaurant serving Mexi- can cuisine. The Respondent continued to operate the restau- rant as the Red Coach Grill and honored the col- lective-bargaining agreement from May 6 until De- cember 31, 1983, when it closed the facility for re- modeling into an El Torito Mexican food restau- rant.2 Before December 31, 1983, the Respondent informed the Union of the planned closing and re- modeling, and announced that all employees who were being laid off would be notified that they could reapply for and return to their jobs when the restaurant reopened . On December 31, 1983, the Respondent closed the restaurant and laid off all 72 employees. The remodeling, though expected to take only 5 or 6 months, was not completed for 14 months. In August 1984 and again in December 1984, the Re- spondent sent letters to the laid-off employees ex- plaining the reason for the delay and stating that the employees would be informed about recall pro- cedures. Eight of the 72 laid-off employees began work at the restaurant when it reopened on March 4, 1985, with a complement of 190-200 employees. On March 5, 1985, the Union demanded that the Respondent continue to recognize it as the bargain- ing representative of its dining room , bar, and kitchen employees and to apply the collective-bar- gaining agreement. The Respondent refused. The Board agreed with the judge's conclusion that the closing of the Red Coach Grill and the re- opening of the facility as an El Torito restaurant provided no justification for the Respondent's withdrawal of recognition. Citing Schmutz Foundry & Machine Co., 251 NLRB 1494, 1495-1497 (1980), enfd. 678 F.2d 657 (6th Cir. 1982), the Board held that the employees had a reasonable expectation of reemployment and therefore the temporary hiatus did not serve to break the continuity of the enter- prise or affect the Respondent's bargaining obliga- tion to its work force. Concerning the fact that only 8 former Red Coach Grill employees worked at the reopened El Torito restaurant, which had a 2 The Board found that the Respondent was estopped from challenging the Union's assumption of Local 6's representational rights . The court en- forced this finding El Torito-La Fiesta Restaurants v. NLRB, 852 F.2d 571 (9th Cir 1988). 295 NLRB No. 56 494 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 190-200 employee work force, the Board, citing Ocean Systems, 227 NLRB 1593, 1595 (1977), enfd. mem. 571 F.2d 859 (5th Cir. 1978), held that the mere occurrence of work force expansion and turn- over does not rebut the presumption of continuing majority status . Finally, the Board, citing Hexton Furniture Co., 111 NLRB 342 (1955), found that because the Respondent's contract with the Union did not expire until January 1986, the Union en- joyed an irrebuttable presumption of majority status when the Respondent withdrew recognition. II. THE COURT'S DECISION The Ninth Circuit found that the Board's reli- ance on Schmutz Foundry and Ocean Systems was confusing because neither case concerned the con- tract-bar doctrine but rather a conceptually distinct rule regarding presumed majority status during the year following an employer's initial recognition of a union. Concerning the irrebuttable presumption finding, the court stated that "this appears to be the sort of case in which the Board has in the past rec- ognized an exception to the contract bar rule: The employer shut down operations pending a major renovation of the restaurant and reopened later with almost entirely new employees."s The court concluded that it could not properly review the Board's action because the Board 's decision did not explain why the instant case did not fall within this exception to the contract-bar rule. III. DISCUSSION The Board's contract-bar rule is designed to pro- mote stable collective-bargaining relationships and, at the same time, afford employees a reasonable op- portunity to change or eliminate their bargaining representative. East Mfg. Corp., 242 NLRB 5 (1979). The Board has considerable discretion in the formulation and application of the contract-bar rule. Bob's Big Boy Family Restaurants v. NLRB, 625 F.2d 850, 853-854 (9th Cir. 1980). Thus, the Board may waive or apply the rule in order to ef- fectuate its policy underpinnings. NLRB v. Circle A & W Products Co., 647 F.2d 924, 926 (9th Cir. 1981), cert. denied 454 U.S. 1054 (1981). For the reasons set forth below, we find the contract-bar rule applicable to the instant matter and we reaf- firm our previous finding that the Respondent vio- lated Section 8(a)(5) and (1) of the Act by with- drawing recognition from the Union and by refus- ing to honor the collective-bargaining agreement. In the absence of unusual circumstances, the con- tract-bar rule provides as follows: 3 As authority for that proposition , the court cited General Extrusion Ca, 121 NLRB 1165, 1167 ( 1958); Montgomery Ward & Ca, 137 NLRB 346, 350-351 (1962); and Harte & Co., 278 NLRB 947, 948 (1986). [T]he Board will not entertain a representation petition seeking a new determination of the employees' bargaining representative during the middle period of a valid outstanding col- lective-bargaining agreement of reasonable du- ration. [Hexton Furniture Co., 111 NLRB at 344.] The Board has recognized, however, the following exception: [A] contract does not bar an election if changes have occurred in the nature as distin- guished from the size of the operations be- tween the execution of the contract and the filing of the petition, involving . . . [a] re- sumption of operations at either the same or a new location, after an indefinite period of clos- ing, with new employees . [General Extrusion Co., 121 NLRB at 1167.] The Board's development of this contract-bar rule exception in General Extrusion was premised on the Board's earlier decision in Sheets & Mackey, 92 NLRB 179, 180 (1950). In Sheets, an employer had indefinitely shut down its sawmill operations for business reasons and terminated its employees. The employer reopened many months later with a new work force. The Board determined that no contract bar existed based on the employer's indefi- nite shutdown of operations and the new work force. The contract-bar rule exception discussed above was also considered in Montgomery Ward, a case cited by the court. In Montgomery Ward, an em- ployer terminated its retail store operations on a Saturday and reopened as a catalog store at the same location on the following Monday. The changeover did not require considerable employee training and terms and conditions of employment remained the same. The Board, emphasizing the similarity of the retail and catalog store operations and the unchanged character of the bargaining unit, found that the opening of the catalog store did not relieve the employer of its obligations under an existing collective -bargaining agreement. We draw the following principle from the above cases. In each case, a key factor in applying the contract-bar rule or the exception was whether the employer's shutdown of operations was indefinite. An indefinite shutdown indicates that employees have no reasonable expectation of reemployment and that the continuity of the bargaining unit no longer exists. Thus, in Sheets the shutdown was in- definite, so in order to protect the Section 7 rights of those newly hired employees who might not have desired representation at the new workplace, EL TORITO-LA FIESTA RESTAURANTS the Board applied the contract-bar rule exception; in Montgomery Ward, the shutdown was tempo- rary, so the Board considered the unchanged nature of the unit and applied the contract -bar rule. This key factor of the nature of the shutdown of operations was recently considered by the Board in Coastal Cargo Co., 286 NLRB 200 (1987). In that case, an employer with a collective -bargaining agreement ceased operations at two ports and re- leased its employees due to lack of work . Approxi- mately 9 months later, during the term of the con- tract, the employer began performing essentially the same type of work for a new customer at one of the two ports. The Board rejected the General Counsel's contention that the collective-bargaining agreement became a nullity when the unit employ- ees were released . Stressing the fact that the em- ployer continued to seek unit work during the shutdown period , the Board found that the termi- nation of operations was only temporary and the employees were not discharged. Consequently, the Board concluded that "the bargaining unit contin- ued at all times relevant to this proceeding ." Id. at 204. Citing Hexton Furniture, supra, the Board held that the collective-bargaining agreement remained in effect for its duration and that the union enjoyed an irrebuttable presumption of majority status.4 Here, the Red Coach Grill employees were told that they would be recalled when the restaurant re- opened as an El Torito Mexican food establish- ment.5 All parties knew about the reopening, and the Respondent's shutdown of operations was only temporary. While the remodeling did not proceed as quickly as originally estimated , there was no doubt that the Respondent would ultimately reopen and unit work would once again be available. Thus, the employees had a reasonable expectation of reemployment and the bargaining unit therefore remained intact . We believe that applying the con- tract-bar rule here, as in Montgomery Ward and Coastal Cargo, when the shutdown in operations is temporary and the bargaining unit remains intact, lends stability to the collective -bargaining relation- ship at a time when it is appropriate to do so.6 4 See also Sterling Processing Corp, 291 NLRB 208 (1988) The employ- er closed its operations due to economic hardship during the term of a collective-bargaining agreement with the union . Although the employer and the union were in substantial contact during the closedown, the re- opening of the facility was never guaranteed by the employer The Board found that when the employer closed its facility indefinitely, the employ- ees did not have a reasonable expectation of reemployment . Thus, the employer had no obligation to bargain with the union prior to reopening the facility. When the employer rehired substantially the same work force after the hiatus, the Board determined that the employer had a bargaining obligation See the discussion in our original decision 284 NLRB 518-519 s In Fall River Dyeing Corp. v. NLRB, 482 U.S 27 (1987), the Supreme Court stated that the development of stable bargaining relationships fur- thers the "overriding policy of the NLRA (ofl 'industrial peace,"' quot- 495 We recognize, however, that no case is precisely on point and that the instant matter could reason- ably be analogized to the Harte case cited by the court. In Harte, an employer relocated a plant to a new site approximately 30 miles away. After ap- prising the union of the relocation, the employer invited employees to transfer to the new plant. In determining that the employer correctly applied the existing collective-bargaining agreement to the new workplace, the Board stated: [A]n existing contract will remain in effect after a relocation if the operations at the new facility are substantially the same as those at the old and if transferees from the old plant constitute a substantial percentage-approxi- mately 40 percent or more-of the new plant employee complement . Westwood Import Co., 251 NLRB 1213, 1214 (1980), enfd. 681 F.2d 664 (9th Cir. 1982); General Extrusion Co., 121 NLRB 1165, 1167-1168 (1958). See also Marine Optical, 255 NLRB 1241, 1245 (1981), enfd. 671 F.2d 11 (1st Cir. 1982). [Harte & Co., 278 NLRB at 948 (1986).] We are reluctant, however, to extend the Harte re- location situation to cover temporary shutdowns and reopenings at the same location. Unlike a tem- porary shutdown, a relocation, by definition, in- volves a new work situs and a greater likelihood of significant changes in the composition of the work force due to the possible unwillingness of employ- ees to transfer to the new facility. Thus, the Board developed the 40-percent rule in relocation cases to ensure that the rights of the new employees and the transferees would be properly balanced. Harte, supra, 278 NLRB at 950. In the absence of a relocation, we find another analogy to be more apt. In a seasonal industry, em- ployees work for a portion of the year and are then laid off. The employees are advised, however, that they will be recalled to work when the season begins anew. The pattern of layoff and recall re- peats itself year after year. Although no employees are normally working in a bargaining unit during the off-season when there is a temporary shutdown in operations, the collective-bargaining agreement remains in effect during the hiatus. If this were not the case, the viability of collective-bargaining agreements in seasonal industries would be quite ing Brooks v. NLRB, 348 U.S. 96, 103 (1954) The Court noted that during a transition between employers, a union is in a vulnerable position and needs a presumption of majority status to safeguard employee rights and develop a stable relationship with the successor employer Similarly, when faced with the uncertainties stemming from a temporary shutdown of operations , a union and the employees it represents need the protec- tions afforded by an existing collective-bargaining agreement if the na- tional labor policy of industrial peace is to be furthered. 496 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD rare and industrial stability in these industries would be practically nonexistent. In the instant matter, the shutdown of the Red Coach Grill restaurant and subsequent reopening as an El Torito Mexican food establishment at the same location was merely a temporary closing and, like the employer in a seasonal industry, the Re- spondent stressed to employees that they would be recalled when work was available once again. As we determined in our prior decision, the nature of the El Torito restaurant did not substantially change from the Red Coach Grill. Under these cir- cumstances, we believe that, on balance, the poli- cies of the Act would be better served by requiring an employer who closes temporarily and reopens at the same location with substantially the same busi- ness to honor an existing collective-bargaining agreement with a union.7 Otherwise, employers r Our decision promotes stable bargaining relationships without sub- stantially impairing employee free choice . If, after the Respondent com- could readily escape their collective -bargaining ob- ligations without justification by merely instituting a temporary shutdown of operations. Accordingly, we reaffirm our previous decision and find that the Union had an irrebuttable pre- sumption of majority status during the term of its collective-bargaining agreement with the Respond- ent. Consequently , the Respondent violated Section 8(a)(5) and (1) of the Act when it refused to recog- nize and bargain with the Union, and refused to adhere to the collective-bargaining agreement. ORDER The National Labor Relations Board reaffirms the Order entered in this proceeding on June 26, 1987, and reported at 284 NLRB 518. plies with our Order, the employees at the El Torito restaurant in the contractual unit desire to disavow the Union, they may file a petition for decertification at an appropriate time. NLRB v. Grssel Packing Co., 395 U.S. 575, 613 (1967).