West Virginia Baking Co., Inc.

306 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD West Virginia Baking" Company, Inc. and Chauf- feurs, Teamsters, Warehousemen and Helpers, Local Union No. 175, affiliated with the Inter- national Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL- CIO. Case 9-CA-25261 • July 31, 1990 DECISION AND ORDER BY CHAIRMAN STEPHENS AND MEMBERS CRACRAFT AND OVIATT On March 13, 1989, Administrative Law Judge Wallace H. Nations issued the attached decision. The Charging Party filed exceptions and a support- ing brief, and the Respondent filed an answering brief. The Charging Party also filed a request for oral argument.' The National Labor Relations Board has delegat- ed its authority in this proceeding to a three- member panel. The Board has considered the decision and the record in light of the exceptions and briefs and has decided to affirm the judge's rulings, findings, 2 and conclusions 3 and to adopt the recommended Order. ORDER The recommended Order of the administrative law judge is adopted and the complaint is dis- missed. The Charging Party has requested oral argument. The request is denied as the record, exceptions, and briefs adequately present the issues and the positions of the parties. We adopt the judge's conclusion for the reasons set forth in his deci- sion, that the Respondent's statements to employees that they would be terminated if they did not buy a distributorship did not violate Sec. 8(a)(1). The judge found that there was no nexus shown between the statements and any union or protected activity. We find it unnecessary to pass on the merits of the 8(a)(1) violation, which our dissenting colleague would find. In our view, this theory was neither alleged in the complaint nor pursued by the General Counsel at any time. That theory is argued by the Charging Party in its exceptions, but a charging party is not free to expand the scope of the complaint without the consent of the General Counsel. See Winn-Dixie Stores, 224 NLRB 1418, 1420 (1976), affd. in pertinent part 567 Fid 1343, 1350 (5th Cir. 1978). In particular, we note that the complaint allegation is framed as a "threat of discharge" for not becoming "non union independent con- tractors," and we do not read the General Counsel's brief to the adminis- trative law judge as clearly presenting, in support of the independent threat allegation, the theory that Member Cracraft would rely on for finding such a violation. 3 We agree with the judge's conclusion that the Respondent did not refuse to bargain in good faith over the decision to convert its driver- salesmen to independent distributors and the effects of that decision and, in fact, did bargain in good faith over the decision and its effects until impasse and lawful implementation of the distributorship program. Ac- cordingly, we find it unnecessary to pass on whether the Respondent's decision to convert its driver-salesmen to independent distributors is a mandatory or permissive subject of bargaining. MEMBER CRACRAFT, .dissenting in part. I join my colleagues in all aspects of this deci- sion except in their conclusion that the Respond- ent's statements to its driver-salesmen employees that they Would be terminated if they did not par- ticipate in the independent distributorship program did not violate the Act. Regardless of the obliga- tion to bargain over the decision itself, the Re- spondent had a statutory duty to bargain over the effects of its decision to convert to an independent distributorship mode of delivering its product.1 The Respondent's duty to bargain over the ef- fects of its decision to convert "provides the Union with an opportunity to bargain in the employees' interest for such benefits as severance pay, pay- ments into pension fund, preferential hiring .. . at other [employer operations], and reference letters with respect to other jobs." 2 We have found that the parties in the instant case bargained in good faith over the effects of the Respondent's decision to convert, and reached agreement on such matters as bumping rights and priority hiring rights. Prior to this bargaining, William Rouse, the Re- spondent's Bluefield branch sales manager, told one employee that on the expiration of the contract the drivers would be required to buy their routes or "hit the streets." Referring to the distributorship program, Rouse told another employee that "[i]t'll either be Flowers' [the Respondent's] way or the highway." These statements, which conveyed the message that those driver-salesmen who chose not to participate in the independent distributorship program would be terminated, were not condi- tioned on the outcome of effects bargaining with the Union, and in fact were made to employees prior to the time the Union was informed of the Respondent's decision to convert to an independent distributorship program. Although the Respondent subsequently fulfilled its obligation to bargain over the effects of the decision to convert, Rouse's state- ments announced a fait accompli anticipating a breach of the duty to bargain over the effects of its decision. Such a statement cannot be afforded the protections of Section 8(c) simply because the Re- spondent later engaged in good-faith effects bar- gaining. 3 Accordingly, I conclude that the state- See First National Maintenance Corp. v. NLRB, 452 U.S. 666, 681-682 (1981). See Nathan Yorke v. NLRB, 709 F.2d 1138, 1143 (7th Cir. 1983), enfg. 259 NLRB 819 (1981) (trustee in bankruptcy's failure to give notice to the union and an opportunity to bargain over the effects of the deci- sion to .terminate the employer's operations violated Sec. 8(a)(5) and (1) of the Act). 3 See generally Safeway Stores, 266 NLRB 1124 (1983) (threat to sus- pend employee for contacting the union before discussing problem with management held unlawful, notwithstanding fact that employee was not suspended and was later told she had every right to contact the union; Continued 299 NLRB No. 37 WEST VIRGINIA BAKING CO 307 ments threatening termination violated Section 8(a)(1) of the Act respondent failed to meet the standards for effective repudiation of un- lawful conduct set forth in Passavant Meinonal Area Hospital, 237 NLRB 138 (1978)) Contrary to my colleagues, in my view no procedural obstacle exists with respect to my decision to find merit in the 8(a)(1) allegation of the complaint The complaint alleges that the Respondent failed to fulfill its 8(aX5) obligation to bargain about the decision to convert to an inde- pendent distributorship program and the effects of this decision In the General Counsel's bnef to the judge, the General Counsel treats the 8(a)(1) and 8(aX3) complaint allegations as part of his theory that the Re- spondent acted in derogation of its obligation to bargain about the deci- sion and its effects My finding that the Respondent's statements violated Sec 8(aX1) focuses on the duty to bargain over the effects of the decision to convert Although we have found that the Respondent did in fact meet its obligation to bargain regarding the effects of its decision to con- vert, the ments of the 8(a)(1) complaint allegation must be addressed The record establishes, and the judge found, that the Respondent made statements to its employees threatening termination if they chose not to participate in the independent distributorship program In these circum- stances, the theory that the Respondent unlawfully threatened termina- tion in derogation of its obligation to bargain over effects is reasonably encompassed in the complaint Vyrone Alex Cravanas, Esq , for the General Counsel John K Anderson and David H Grigereit, Esqs , of Atlan- ta, Georgia, for the Respondent Patrick J Szymanski, Esq , of Washington, D C, for the Charging Party DECISION STATEMENT OF THE CASE WALLACE H NATIONS, Administrative Law Judge Based on charges filed March 25, 1988, 1 and amended April 15, by Chauffeurs, Teamsters, Warehousemen and Helpers Local Union No 175, affiliated with Internation- al Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-CIO (Union), the Region- al Director issued a complaint and notice of hearing on October 24, alleging that West Virginia Baking Compa- ny, Inc (Respondent or Company), has been engaging in unfair labor practices in violation of Section 8(a)(1), (3), and (5) of the National Labor Relations Act (Act) Hear- ing was held in this matter on January 18-20, 1989, in Bluefield, West Virginia Briefs were received from all parties on or about February 22, 1989 Based on the entire record, and on my observation of the demeanor of the witnesses and in consideration of the briefs submitted, I make the following FINDINGS OF FACT I JURISDICTION Respondent, West Virginia Baking Company, Inc, is a corporation engaged in the production and distribution of baked goods at a plant located at Bluefield, West Vir- ginia Respondent has admitted the jurisdictional allega- tions of the complaint and I find that it is now, and has been at all times material to this proceeding, an employer All dates are in 1988 unless otherwise noted engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act II LABOR ORGANIZATION INVOLVED It is admitted and I find that the Union is now, and has been at all times material to this proceeding a labor organization within the meaning of Section 2(5) of the Act III ALLEGED UNFAIR LABOR PRACTICES A Introduction and Issues Presented The complaint in this proceeding alleges that Respond- ent West Virginia Baking Company, Inc violated Sec- tion 8(a)(1) of the Act by threatening that it would dis- charge its driver-salesmen if they did not agree to become "non union independent contractors" upon expi- ration of the then current collective-bargaining agree- ment, violated Section 8(a)(1) and (3) of the Act by dis- charging its driver-salesmen because of their union and concerted activities, and violated Section 8(a)(1) and (5) of the Act by failing and refusing to negotiate in good faith over its decision to convert its driver-salesmen to so-called independent distributors The primary issues presented for determination are as follows 1 Was the Respondent's decision to convert its driver- salesmen employees to independent distributors a manda- tory subject of bargaining? 2 Did the independent distributors remain statutory employees after the conversion and did Respondent un- lawfully withdraw recognition from the Union as their collective-bargaining representative? 3 If the decision to convert is a mandatory subject of bargaining, did the Respondent satisfy its burden of bar- gaining in good faith with the Union over that decision? 4 Did Respondent threaten its driver-salesmen em- ployees with discharge and then subsequently discharge them because of their union or protected concerted ac- tivities? B Facts and Discussion Relating to the Issue of Whether the Decision to Convert was a Mandatory Subject of Bargaining 1 Facts describing Independent Distributorship Program and the decision to implement it a Respondent's reasons for creating the program Flowers Industries, of Thomasville, Georgia, is the parent company of Respondent It has a number of sub- sidiaries, primarily in the Southeast, but has one as far west as California Each subsidiary is operated as a sepa- rate corporation and has a separate board of directors and officers Respondent operates a wholesale bakery with its headquarters in Bluefield, West Virginia Until the last 2 or 3 years, its product had been delivered to its customers by driver-salesmen who were employees of Respondent and represented by the Union in an appro- priate unit Such recognition had been embodied in suc- cessive collective-bargaining agreements, the most recent 308 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD of which was effective by its terms for the period March 31, 1985, until March 26, 1988.2 At the heart of this dispute is the decision by the Re- spondent to cease utilizing its driver-salesmen method of distribution and instead implement an "independent dis- tributorship" mode of delivery, The distributorship pro- gram utilized by Respondent originated with the parent company and is apparently used by some of its other sub- sidiaries. The decision to implement the program rested with the Respondent. Prior to the implementation of the distributorship program in Respondent's Bluefield oper- ation, it had been implemented at all other bakery loca- tions operated by Respondent. This would amount to 12 or 13 other warehouse locations. These other implemen- tations began in 1986 and had been completed by Janu- ary 1987. At that time, Respondent considered imple- menting a similar program in the territory involved herein. It did not do so because the other conversions were taking longer than anticipated and because Re- spondent had received legal advice that such a move might violate the subcontracting clause in the collective- bargaining agreement. Respondent has manufacturing facilities, referred to as bakeries and sales distribution centers. These distribution centers are where small trucks and salesmen are located. They will range in location from 1 mile from the bakery to as far as 100 miles. Product manufactured at the bakery is loaded on large tractor trailers and taken to the small distribution centers. There the product is offloaded into small distribution trucks and delivered to the cus- tomer by driver-salesmen. These salesmen have tradition- ally been employees of the Company, using trucks and other equipment owned and maintained by the Company. Respondent owns the distribution rights to its product brands in the areas served by the salesmen. The distribution method used by Respondent is called full rack service. An alternative system is the tractor- trailer drop. Under this system, customers themselves place their own orders with the bakery, which fills the orders, loads them on tractor-trailers and delivers them to the customers at night, dropping the orders in front of the store. The customer is responsible for its own staless and puts its own bread on its shelves. With this system the bakery experiences difficulty in having the customer order sufficient product. The customers also put up ragged displays. Additionally, the bakery might have 15 or 20 individual stores loaded on a single tractor-trailer. 2 The following employees of Respondent constitute a unit appropriate for the purposes of collective bargaining within the meaning of Sec. 9(b) of the Act: All hourly paid production and maintenance employees and trans- port drivers and all salaried or commissioned driver salesmen em- ployed by the [Respondent] at its Bluefield, West Virginia plant and at its relay stations located at Bluefield and Beckley, West Virginia and Keene Mountain and Radford, Virginia but excluding all stale shop employees, all gatemen, firemen, watchmen, nurses and all office clerical employees, guards, professional employees and super- visors as defined in the Act and all other employees, as certified by the National Labor Relations Board in Case 9-RC-8416. 3 Respondent's bakery products are coded to ensure freshness. Such codes allow the driver to determine the age of the product and in effect tell the driver when to pull the product from the shelves. Most codes allow 2 or 3 days of shelf time. Product pulled from shelves as being beyond code is returned to the Company as "stales." If the truck would break down, the bakery would have to go out in the middle of the night and bring the truck back or bring a new truck. This meant that the product did not get into the involved supermarkets until late that day. Respondent's president, Richard Nolan, testified that one of the most successful bakery operations with which he is familiar is the one at the Holsum Bakery in Phoe- nix, Arizona. It utilizes an independent distributorship program which Nolan read about in trade journals. Re- spondent's parent corporation sent representatives to Phoenix to observe the program in action. In turn, the parent invited Nolan to go to Port Arthur, Texas, to see one of the parent's subsidiary operations that was in- volved in converting to independent distributorships. Nolan visited this operation and was impressed with it, including the reaction of the salesmen to the program. Upon Nolan's return, he sent the Company's vice presi- dent of sales to Port Arthur to observe the operation. Thereafter, the two met and discussed the pros and cons of the operation. These actions were taken in 1985. Nolan had also had experience with competitors utilizing such a program. Pepperidge Farm has a distributorship program and several of Nolan's salesmen had taken these distributorships and seemed pleased with the arrange- ment. Nolan testified that Respondent converted to such a program for several reasons. Its truck costs were exorbi- tant; it had trouble motivating its salesmen; and it wanted to come up with a way to recover some of its capital in- vestment. He felt the distributorship program answered these needs. Respondent's truck costs ran in excess. of $40,000 a week, a figure which includes parts, tires, fuel, and main- tenance. How much of this figure is attributable to the truck fleet used by driver-salesmen is not determinable from the record. However, the record does show that the Company once owned about 200 of the step vans used by the salesmen. The distributorship program took the Company out of the trucking business, insofar as it involved store deliveries. It eliminated the Company's parts inventory, fuel storage, and garage facilities. The Company's delivery trucks were sold to the distributors. Respondent believes the program provides greater sell- ing motivation because a distributor can make more money than an employee because his discount structure is greater. He could also build an equity in his territory which could be sold or passed on to heirs. Lastly, the Company could sell the territory in which it operated. The average price of a territory or route in the involved area would be $30,000-35,000. This price would be financed by Respondent at 12 percent. It would also sell its trucks, recovering a great deal of in- vested capital. The Respondent's controller testified that the Company had sold trucks to distributors in the area represented by the Union for a total of $134,043 and routes in this territory for a total of $995,180. In its entire operation, the Company collected a total of $970,781 for trucks sold to distributors and $4,618,882 for routes sold to distributors. WEST VIRGINIA BAKING CO 309 The first distributorship program instituted by Re- spondent was in Charleston and Logan, West Virginia, in 1986 ) By January 1987, all of the Respondents delivery routes had been converted to distributorships except those whose driver-salesmen were represented by the Union These routes are located in Bluefield, West Vir- ginia, and Radford, Keene Mountain, and Marion, Vir- ginia Since the Company started the conversion to dis- tnbutorships in 1986, it has made capital improvements to the bakery at Bluefield The cost of these improve- ments has been between $4 and $6 million In the in- volved operation, the Company has already sold 14 routes in Bluefield, nine in Keene Mountain, 5 in Rad- ford and 4 in Marion Throughout the rest of the Com- pany's operation, it has sold approximately 127 routes During contract negotiations for the latest collective- bargaining agreement, which will be discussed in detail later, the Union proposed an owner-operator method of distribution as an alternative to the independent distribu- torship proposal of Respondent Nolan testified that the Union's owner-operator proposal was discussed on sever- al occasions by management It addressed one of the Company's needs, reducing truck costs, but in Respond- ent's view would not aid in motivation nor would it pro- vide a way to recover invested capital (by this, Respond- ent generally means the purchase price it is able to secure for one of its territories or routes) Respondent did not feel that the Union's proposal was as good a mo- tivator as the distributorship plan because it did not pro- vide for equity to be built in the territory Respondent's program was also devised to enable a distributor to make more money than a driver-salesman In its presentation to the Union, the Company stressed only the needs to in- crease motivation and sales and cut truck expense as rea- sons for the program, choosing not to stress capital re- coupment as that feature of the program was of interest only to it b Evidence describing the operation of the program Several witnesses testified with respect to the details and operation of the independent distributorship program and this testimony is set out below under appropriate subheadings Additionally, the relationship between Re- spondent and the independent distributor is governed by a contract termed the Distributors' Agreement As this appears to be a valid, judicially enforceable contract, great weight is given to its description of the rights and obligations of the parties under it Clyde Joe Lester, who for 4 years was a driver-sales- man for Respondent at its Keene Mountain facility, testi- fied that he purchased a distributorship in June Lester's testimony gives in some detail how the distributorship program works as well as similarities with and differ- ences from the dnver-salesman operation previously uti- lized by Respondent At the time of his testimony, Lester was unhappy with the Company because of an ongoing dispute over problems with the Company increasing his product orders, resulting in his - route running high "stales"4 that cost him money * As an employee, Lester and other dnver-salesmen returned their stales for full credit and no charge against their Income was made by Re- Respondent's labor counsel and chief negotiator, John Anderson, also gave a description of some of the aspects of the distribution program from the Company's stand- point in the negotiation session of March 24 As that tes- timony has little relevance on the bargaining issue, it is included here to give a more complete picture of the program Respondent's president, Nolan, also described the program in some detail (1) Territories and financing Respondent took a defined geographical area and mapped out defined sales temtones or routes within that area which were sold to distributors who thereby ac- quired the exclusive distribution rights to Respondent's brands within that area The territories or routes sold do not necessarily correspond to previous routes serviced by driver-salesmen The routes to be sold were mapped out with the purpose of making them serviceable and reasonably profitable Lester purchased a route which was comprised of his old route and part of another one The financing plan called for him to make a $2000 downpayment, a $1000 security deposit, and to purchase a truck, presumably of his choice, from those available from Respondent Al- though the security deposit was initially to be paid by the distnbutor, the Respondent allowed Lester to finance it by paying Respondent $20 per week for 1 year The remainder of the route purchase price was financed by Respondent at what Lester believed was a 12 percent in- terest rate The downpayment was financed with the truck loan at Wachovia Bank of Salisbury, North Caroli- na, pursuant to an arrangement made with the bank by Respondent for all prospective distributors Licenses and tags for the truck purchased by Lester were furnished by Respondent For a few weeks, maintenance on the truck was performed by Respondent without charge, including providing three new tires and lights Since that time, ve- hicle maintenance has been Lester's responsibility The purchase price of a route or territory is 10 times weekly brand sales based on the average weekly sales for a 12- to 13-week period Those distributors who had pre- vious experience with the Company as route sales em- ployees received a 20-percent discount on this purchage price Company financing of the territory purchase price and the security deposit as well as the Wachovia Bank financing for the downpayment and truck loan were uti- lized by virtually all persons purchasing distnbutorships, though Respondent contends that the distributors were free to secure financing from any source they chose Similarly, company witnesses testified that a distributor could purchase a route truck from any source, but that if purchased from Respondent, the purchase price would include putting the truck in reasonable condition (2) Supervision Lester testified that when he was a driver-salesman, he was accompanied on his route by a company supervisor spondent Under the independent distnbutorship program, the distributor may return stales to the Company, however, he must bear a portion of the cost of the product so returned to the Company 310 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD about once every month or two The supervisor would check and see if the driver was picking up product on code, making proper distnbution, making a proper rack set, etc Since becoming a distributor, Lester is still ac- companied on his route by Respondent's supervisors, on a more frequent basis than before and for the same rea- sons Lester testified that though he is not sure, he may have the right to refuse to let a supervisor ride his route with him On the other hand, Lester considered the help of the supervisors to be useful I believe the best evi- dence establishes that the distributors do not have to accept company supervision unless they choose to do so Anderson testified that the distributor could tell the Company to stay off of his truck as it was his truck He also stated that the distributor could not tell the Compa- ny to stay out of his territory The Company still-had a relationship with the customers and had to do certain marketing to create a market for its product It was re- quired to do that under the distributors agreement Also, the Company reserved to itself the right to at least be able to examine the market and make sure that the dis- tributor was not leaving product out of code and stale Anderson also testified that if the distributor was losing business in his territory, the Company had the right to terminate his contract Nolan testified that there was no set standard where the Company would take this action, but that it just would have to be determined by the individual case (3) Uniforms, personal appearance, and vehicle appearance The Distributors' Agreement requires the distributor to maintain a clean and neat personal appearance consist- ent with the professional image customers and the public associate with the Company It also charges the distribu- tor with responsibility for truck sanitation and consistent with industry practice, requires the truck be kept clean at all times and maintained in such condition as to pro- vide safe, prompt, and regular service to all customers Lester testified that as a distributor, he is required to wear a uniform, however, on cross-examination he could not remember being told that this was a fact and the Dis- tributors' Agreement does not require the wearing of a uniform He continues to wear his old driver-salesman uniform although other new distributors who did not work for Respondent before have purchased uniforms from Respondent Respondent Territory Manager Steven Harris testified credibly that distributors are not required to wear a uniform and gave examples Lester testified that the Company can require a distrib- utor to clean his truck, which carries the Respondent's name, and gave an example of the Company requiring an extremely dirty truck to be washed He also testified that Sales Manager William Rouse told him to shave a beard he was growing, and he did so, though not as fast as Rouse told him to Nolan testified that distributors are not required to wear a uniform and are only required to be "clean" He further testified that beards were not allowed for sales- men, but are permitted for distributors and many sport them Although I have no reason to doubt Nolan's testi- mony on this point, the word clearly has not gotten to Rouse as his testimony reflects that he discourages the wearing of beards by distributors Anderson testified that the Company had no dress code for its distributors, but that they would be expected to abide by "industry standards" Anderson testified that in his opinion, the matter of what is proper attire is a matter between the Company and the individual distribu- tor in the event a dispute arises Nolan testified on this point that if the Company felt that a distributor did not maintain a neat and clean appearance, it would first just mention it to the man If the distributor ignored the re- quest, the Company would consider this a curable breach of the Distnbutors' Agreement and the person would have 10 days to cure his breach At that point, if nothing had been done, the Company would give the man a warning and if he had enough warnings, it would take back his territory This decision would be subject to ju- dicial review (4) Accounting Accounting for Lester's operation is done by a CPA firm from Charleston He pays part of their fee and Re- spondent pays a part The firm used by Lester was rec- ommended by Respondent and is used by many distribu- tors Lester also testified that some distributors use other accounting firms Under the distributorship agreement between the Company and distributor, the company pays $500 of the distributor's accounting costs for the first 3 years of the agreement Bookkeeping is the distributor's responsibil- ity (5) Product purchasing and returns At the time of the conversion to the distributorship program, driver-salesmen were compensated by base pay of $200 per week and an 8-percent commission on brand name products and a 4-percent commission on private label products The distributor's net income is his gross income less his operating and capital expenses The dis- tributor purchases products for his territory from the Company and title to the product passes to the distribu- tor at the time he receives it Title did not pass to the driver-salesmen The Company discounts the price it charges the distributor for the product by a variety of percentages The distributor's gross income is based on the difference between the price he charges his custom- ers and the discounted price charged by the company Although the company has suggested prices to be charged to the distributor's customers, the distributor may change these prices up or down, except in the case of large chain accounts The Distributors' Agreement states that products will be sold to the distributor at terms and prices established by Respondent, and that Respondent will furnish sug- gested retail prices Bid prices will be jointly established I cannot find that the agreement speaks to the matter of product ordering The distributor must pay his weekly expenses such as fuel, casualty insurance, truck repair and tires, warehouse rent, and other operating expenses WEST VIRGINIA BAKING CO 311 Nolan testified that the distributor orders his own product Driver-salesmen were responsible for ordering product, but if he did not order enough as a salesman then it was the responsibility of his district manager to see that he got the product A distributor does not have that situation, he is responsible for ordering his own The Company contends that it corrects clerical errors such as ordering product on a day of the week on which it is not available or ordering a quantity of product which is in- consistent with the amount available on trays Respond- ent contends that it does not have the authority to m- crease a distributor's order The Company may recom- mend an increase to a distributor If the distributor is not immediately available, the change will be noted on the order Respondent contends that in this situation, it con- tacts the distributor and discusses the order The distrib- utor may then refuse the additional order Such recom- mended changes occur where sale items for large chains are involved or the Company has information of which the distributor is unaware With respect to sale items, the Company suspends the stale allowance on such items and recommends additional orders so a large chain account will not run out of sale product Distributors may still refuse extra product Lester testified that as a distributor, he must order from Respondent what the accounts on his route were accustomed to receiving and additionally, more of cer- tain products on occasion to satisfy store specials Re- spondent has required him to take more of certain items and take different items than those that Lester ordered on his own He testified that if he refused to accept this nonordered product, he would "stale" it the next week "Stales" are returned to Respondent for credit or partial credit on the distributor's account For a period of time, the Company took back stales from its new distributors and gave full credit However, pursuant to a preexisting agreement, that has changed to a situation where only partial credit is given Lester testified that with respect to the forced orders he takes, he sets only the partial credit if the product has to be "staled" Based on a dis- pute between Lester and the Respondent regarding the stale allowance on order increased by Respondent, I credit Lester's testimony that a distributor can be forced to take extra product and face at least a partial liability if it is staled 5 Though the Distributors' Agreement does not speak directly to this point, it does require the dis- tnbutor to adhere to all promotions and feature pricing with respect to the major and chain accounts in his terri- tory Thus, it appears to me that the distributor can be forced to take extra product, but only in connection with a promotion involving a major or chain account Harris testified that distributor's orders are changed primarily to correct errors He noted one instance of a promotion at a chain store wherein the quantity of prod- uct to meet the demands of the promotion was in ques- tion In this case, he had the distributor take a larger order than he wanted, with the proviso that the Compa- 5 This dispute does tend to support Respondent's contention that It cannot unilaterally impose its views on the distnbutors and control their conduct Lester has refused to pay the charge for stales made against him and if not settled by mutual agreement, presumably the matter will be judicially settled ny would accept responsibility for the stales resulting from the order Respondent has what it calls authorized accounts which are generally the bigger accounts With respect to these accounts, the company extends credit and does bill- ing and collecting Lester believes that if an authonzed account reneges on payment it will be charged back to him, and is unsure whether he can cancel an authonzed account The Distributors' Agreement would indicate that the Respondent is responsible for the accounts it creates or approves, not the distributor Lester cannot extend credit for Respondent although he can extend credit to customers personally, if he chooses (6) Social Security Lester testified that he pays half of his social security obligation and Respondent pays half He is allowed to in- corporate so long as he maintains majority ownership in himself (7) Employee assistance When Lester was a driver-salesman, if he were sick or on vacation, a company supervisor would run his route As a distributor, it is his responsibility to get someone to run the route if he is unable to do so He believes the supervisors might do so, but are not obligated to He tes- tified that District Manager Troy Byers delivered some product at one time for distributors Anderson testified it was the distributor's responsibility to get someone to cover his route if he is off He can hire one of the territory managers to service the route that day and would be required to pay the Company for the manager's time Some distributors had obtained re- tired distributors or salesmen to cover the route for a day Some distributors have hired helpers Nolan testified that a salesman could not use helpers and were subject to discipline if he had an unauthorized person on his truck, in comparison with the distributorship situation (8) Physical operations Lester works out of the same location as a distributor that he did as an employee and has the same supervisor As an employee, he reported to work at the warehouse at 3 a m to pick up product ordered approximately a week before Lester testified that the Company set his work schedule as an employee and still does as a distrib- utor and to change his schedule, he must get company approval As an employee, Lester ran his route in an order that was dictated by common sense, taking into ac- count geography and his load factor He does the same as a distributor It would also appear from his cross-ex- amination and the testimony of Harris that Lester has re- fused scheduling suggestions and that he is free to set up his own schedule and route and change it without com- pany approval At an account, Lester would check the bread rack for stales and new product needed as a personal responsibil- ity and take appropriate action As an employee he was required to keep a route book, and wnte receipts or tick- ets for product taken from a store or brought in His pa- perwork as a distributor is the same in this regard, al- 312 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD though Lester is not sure that be is required to maintain a route book. The route book spelled out many of the procedures the salesman had to follow or be subject to disciplinary procedures. Nolan testified that a distributor checks in once a week. He turns in his authorized charges daily. He does not turn in his cash into the Company as he did in the past, it is now his responsibility. Settlement takes place once a week. As a salesman, it was three times a week. The Company sends the distributor a statement for what he bought last week and he receives that settlement on Tuesday and then sends the Company a check that it is to receive by the following Friday. Nolan also testified that a distributor can sell other company's products so long as they are not competitive with Respondent's products. Harris testified that distributors are not required to use route books, though most do, and cited an example of one distributor who had chosen not to use such a book. As an employee, when a customer had a problem, the customer usually called Respondent's Bluefield facility. Lester testified that the same is true in his operation as a distributor; although, his testimony on cross-examination indicates to me that he is unsure on this point. The Com- pany's position is that the distributor handles customer problems, though this position is also at odds with its right to call on the distributors and its customers to ensure the distributor is performing satisfactorily. 2. Was the Respondent's decision to convert to independent distributors a mandatory subject of bargaining? During negotiations, Respondent stated to the Union that its decision to convert to an independent distributor- ship method of delivery was not a mandatory subject of bargaining; citing, inter alia, the decision of the Regional Director for Region 9 in Case 9-CA-23141. The Region- al Director determined after investigation not to issue a complaint based on a charge that Respondent had violat- ed the Act by refusing to bargain over its decision to im- plement its distributorship program at another of its fa- cilities where the driver-salesmen were represented by the United Steelworkers. In his letter decision, the Re- gional Director stated: Pursuant to the distributorship system, the distribu- tor purchases the exclusive right to distribute the Employer's product in a specific area and provides the truck, fuel, licenses, insurance and labor neces- sary for delivery. The distributor is paid a commis- sion on baked goods sold. The Employer's decision to discontinue its own distribution system and rely on independent distributors involved a fundamental change in the nature and direction of the Employ- er's operations. In this connection, the evidence showed that the Employer was motivated by a desire to increase its sales and share of the baked goods market rather than factors, such as labor costs, over which the Union has control. The deci- sion to convert to a distributorship system, there- fore, involved a nonmandatory subject of bargain- ing over which the Employer was not required to bargain. Otis Elevator Co., 269 NLRB 891 (1984). Based on its analysis of the Supreme Court's opinion in First National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981), the Board established the principles for determin- ing an employer's collective-bargaining obligation over decisions such as the one at issue in this case in Otis, supra. Although all four Board members agreed that the employer's decision in Otis was nonmandatory, they ap- plied different legal analyses. The Otis plurality opinion applied a two-factor test: whether the decision turned on a change in the nature or direction of the business or whether it turned on labor costs. Member Dennis applied a two-step test: (1) whether the decision was amenable to resolution through the collective-bargaining process, and if so, (2) whether the benefits for labor-management rela- tions and the collective-bargaining process outweighed the burdens placed on management. The evidence in this case establishes that the Respond- ent converted its employees to distributors for three rea- sons unrelated to labor costs. The Board's decision in Collateral Control Corp., 288 NLRB 41 (1988), puts into question whether the plurality's labor cost test is still of importance and seems to stress the approach of Member Dennis. To the extent that this question is still viable, the evidence in this case establishes that Respondent's deci- sion was not motivated by labor cost savings, for its pro- jections at the time of implementation were that the inde- pendent distributorship conversion would increase its labor costs. 6 Additionally, a goal of the program was for the distributors to make more money than route sales employees. It is Respondent's contention that its decision to con- vert was for reasons unrelated to labor costs and turned on a change in the nature and direction of its business. For the reasons set forth below, I agree with this conten- tion. The first reason for the Respondent's decision was to increase sales. The independent distributorship pro- duced increased sales incentives in two ways. The dis- tributor's discount rate is higher than the route sales driver's commission rate. In addition, the distributorship is valued based on 10 times weekly brand sales. There- fore, a $100-per-week increase in sales would increase the distributor's equity in his distributorship by $1000. This equity incentive was also intended to increase sales. Though not argued by the Company, it is also obvious that a slackening in sales would have an adverse impact on 'equity and present more of a threat to the distribu- tor's independent business than it would have had on him as an employee, as he no longer enjoys any base pay and benefits. The second reason for the Respondent's conversion to distributorships was to get out of the truck business. As the delivery trucks were sold, the Company began to 8 A self-explanatory analysis of the projected labor cost impact of the conversion at the time of implementation is appended to this decision as Appendix A. This analysis is supported by the record evidence and sup- ports the conclusion that labor cost savings were not a motivating factor in Respondent's decision to implement the conversion to independent dis- tributorships. WEST VIRGINIA BAKING CO 313 enjoy significant savings by eliminating parts inventories, garage facilities, maintenance equipment, gasoline storage tanks, and other costs associated with vehicle mainte- nance and repair Finally, the distributorship decision was motivated by a desire to create or recoup capital resources and reallo- cate them from distribution to production The distribu- torship conversion produced approximately $5 5 million in capital through the sale of trucks and territories Since beginning its withdrawal from the distribution part of its business, the Company has invested approximately $4 to $6 million in the production aspect of its business It is this reason for converting that most convinces me that the decision was entrepreneurial in character and repre- sented the Company's desire to improve its competitive position by modernizing its production facility while likely improving its sales position as well It is also this reason that convinces me that the deci- sion to convert was not really amenable to resolution through collective bargaining As will be discussed in the section of this decision dealing with the collective bar- gaining between the Union and Respondent, the Union proposed a distribution system based on the driver-sales- men becoming owner-operators of their equipment, leas- ing the equipment to the Respondent and working on a 100-percent commission basis This proposal, which was considered by Respondent, would take Respondent out of the delivery truck business and would have provided incentive for increased sales effort ,on the part of the driver-salesmen It offers nothing, however, to address Respondent's desire to generate capital from existing re- sources (the value of brand names and sales territories) and allocate this capital to improving its production effi- ciency I agree with Respondent that it has made a fundamen- tal change in the nature and direction of its business Al- though I do not agree that it removed itself totally from the business of distnbution of its products, it did remove itself from this function to a very significant degree I be- lieve that the degree of divestment of its distribution function is sufficient to bring Respondent's conversion into the ambit of the Otis plurality's view of the Board's earlier decision in Adams Dairy, 137 NLRB 815 (1962), enf denied in relevant part 350 F 2d 108 (8th Cir 1965), cert denied 382 U S 1011 (1965), and distinguish it from the Board's recent holding in Collateral Control Corp, supra In recognizing that a distributorship conversion may constitute a fundamental change in the nature and direction of a company's business, the Otis plurality ex- plained In contrast, if Adams Dairy [citation omitted] were before us today, we would hold that decision to "subcontract" is not subject to Section 8(d), be- cause the employer's decision there to discontinue its distribution operation and to contract out that function turned upon a fundamental change in the scope and direction of the enterprise The employer retained no control over the equipment or the em- ployees in the subcontractors' distribution system Further, no alter ego or other sham devices were employed to disguise a unilateral reduction in labor costs in an operation over which the employer maintained surreptitious control As the Court of Appeals said "[T]here is a change in basic operat- ing procedure in that the dairy liquidated that part of its business handling distribution of milk product 269 NLRB at 893 In Collateral Control Corp and cases cited with ap- proval therein, the Board has continued to adhere to the view that distributorship conversions such as that in Adams Dairy are nonmandatory subjects of bargaining because they involve a fundamental change in the nature and direction of the business If this case is analyzed under the two-step test of Member Dennis in Otis, the same conclusion is reached Member Dennis described the critical inquiry in the first step of her analysis as follows Is a factor over which the union has control (e g, labor costs) a significant consideration m the em- ployer's decision? A factor over which the Union has control is a "significant consideration" if the union is in a position to lend assistance or offer con- cessions that reasonably could affect—i e, make a difference in—the employer's decision If the deci- sion is not based on a factor over which the union has control, or if such a factor is at best an insignifi- cant consideration in the employer's decision, the analysis ends, and bargaining is not required 269 NLRB at 897 I have already found that labor costs were not in- volved in Respondent's decision to convert Other fac- tors over which the Union has significant control were just part of the reason for Respondent's decision to con- vert to independent distributorships The overriding reason for this decision in my opinion was the desire to recoup or create significant capital through the sale of its existing saleable assets, territories, and the reallocation of that capital to the production function Over this impor- tant factor in this Respondent's decision, the Union had no control nor was it really in a position to lend assist- ance or offer concessions that could have made a differ- ence in Respondent's decision Although under Member Dennis' approach, the second step would not be addressed given a negative finding on the first, I feel constrained to do so in light of the Board's reasoning in Collateral Control Corp, where the Board has analyzed the facts of that case giving consid- eration to many of the factors considered important by Member Dennis in her second-step analysis Member Dennis described the second step as follows The second step in the analysis, therefore, in- volves weighing the fact that the decision is amena- ble to resolution through the bargaining process ("the benefit") against the constraints that process places on management ("the burden") As outlined in First National Maintenance, the burden elements to be examined include, without limitation, the fol- lowing 314 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD (a) extent of capital commitment, (b) extent of changes in operation, (c) need for speed, (d) need for flexibility, (e) need for confidentiality Of these elements, the first two appear to be the most important in later Board decisions To some degree the element of need of confidentiality is also present in the instant proceeding The evidence reflects that during ne- gotiations the Company's competitors attempted to take advantage to the situation, contacting the Company's route sales drivers in an attempt to hire them away as a means to enter the involved market Respondent's argu- ment that speed was an element is somewhat weaker as the evidence would indicate that its competitors could have anticipated that it was seriously considenng con- verting to a distributorship program for the Bluefield driver-salesmen since it converted all of its other facili- ties 2 years before The elements of capital commitment and extent of changes in operations will be discussed below Member Dennis in Otis found that the burden imposed on management by requiring collective bargaining over distributorships outweighed the benefit to labor-manage- ment relations and collective bargaining Adams Dairy illustrates the burden elements of extent of changes in operations and extent of capital commitment A dairy decided to change its existing distribution system by replacing its driver-salesmen with independent contractors The independent dis- tributors took title to the products at dockside and were solely responsible for selling them Trucks used previously by driver-salesmen were sold to the independent distribujors The Adcptisz;Fourt said that the case did not in- volve "just 'She substitution of set of employees for another Ikm [T]here is a change in basic operating procedur Ain that the dairy liquidated that part of its business handling distribution of milk products [T]here was a change in the capital structure of Adams Dairy which resulted in a partial liquidation and recoup of capital investment" 350 F 2d at 111 Where the burden elements in a particular case are weighty, as illustrated above, it is likely that the decision at issue will not be a mandatory subject of bargaining 269 NLRB at 898-899 The Board and the courts have consistently recog- nized that where a significant reallocation of capital is in- volved in such a decision, management's need for pre- dictability outweighs any possible benefit of collective bargaining General Motors Corp, 191 NLRB 951 (1971), petition for review denied UAW v NLRB, 470 F 2d 422 (D C Cir 1972) In the instant case the Respondent shifted almost $6 million in capital assets from its distri- bution business to the production aspect of its business In Collateral Control Corp, there was no capital invest- ment or shift of significant capital from the function sub- contracted to another function of the company involved Both Member Dennis in Otis and the Board in Collat- eral Control Corp considered the extent of changes in op- erations In Collateral Control Corp, the Board stated In Fibreboard, as summarized in the Supreme Court's 1981 decision in First National Corp v NLRB, supra, an employer's decision to subcontract unit work was held to be a mandatory subject of bargaining for three reasons First, no alteration oc- curred in the company's "basic operation" The maintenance work still had to be performed in the plant No capital investment was contemplat- ed, the Company merely replaced existing employ- ees with those of an independent contractor to do the same work under similar conditions of employ- ment Therefore, to require the employer to bargain about the matter would not significantly abridge his freedom to manage the business [379 U S at 213] The guard services that were contracted out are an integral part of the Respondent's business and were performed under the subcontract as before [Footnote comparing Century Air Freight, 284 NLRB 730 (1987), with Adams Dairy omitted ] Moreover, the record indicated that the Respondent retained some control over the subcontractor's em- ployees in issuing written instructions to Wackenhut (subcontractor) about the performance of guard duties under the subcontract In finding no alteration in the Company's basic oper- ation, the Board in Collateral Control Corp relied upon four factors (1) the employer's management performed the same functions after it enlisted the aid of a subcon- tractor as it has when it employed people to perform the subcontracted work itself, (2) the work contracted out continued to be an integral part of the employer's busi- ness and was performed under the subcontract as it had been performed previously, (3) the employer retained control over the subcontractor's employees by issumg written instructions about the performance of guard duties under the subcontract, and (4) there was no signif- icant investment or withdrawal of capital Contrary to Collateral Control Corp, there are changes in management functions under Respondent's independ- ent distributorship program Previously all of the factors governing profit and loss in the distribution of the Com- pany's products were controlled by management Most, though not all, of those factors have not been transferred to the distributors The distributor sets the pnce at which he will sell his product to most customers, though not the large chain customers He makes the final decision on ordering product, though management still has input, and some control, especially with promotions arranged with large chain customers The distributor sets his own work schedule and route, may extend credit (though not with- draw credit from a customer to which Respondent has already extended it), sell noncompetitive product and re- solves customer complaints The distributor must control stales and bears half the risk of loss for stales above 10 percent of his gross sales That Respondent retains any financial responsibility for WEST VIRGINIA BAKING CO 315 stales and can require a distributor to accept promotional orders are indicators that its distributors are not quite as independent as those in Adams Dairy I do not find that these two elements make the instant case sufficiently less like Adams Dairy to find that it calls for the Board's holding in Collateral Control Corp or Century Air Freight There are more significant differences between the instant proceeding and Collateral Control Corp than there are similarities, and conversely more significant si- milarities between it and Adams Dairy than significant differences For example, other changes in management functions under the independent distributorship plan include the requirement that the distributor also bear the complete responsibility for his truck and bear the risk of loss even if damage occurs on company property All of the above factors were totally the responsibility of management previously In addition, the distributor exercises substantial control over his operating expenses which previously were con- trolled by management The distributor is free to hire employees to assist in his business, is responsible for his terntory in the event he cannot personally service it, and is free to negotiate the various other costs of operating his business such as liability insurance, accounting serv- ices, etc Previously all of these factors were under the control of management Management previously exercised strict control over how a route sales employee performed his job In areas such as personal appearance, truck cleanliness, route order, ordering of product, and day-to-day on the job performance, management dictated how the job was to be performed Now, with a few exceptions, management can only make recommendations to distributors on run- ning their business The distributor is free to accept or reject these recommendations Serious disagreements are subject to judicial resolution, not Respondent's unilateral determination To the extent financial statements are required of the distributor, they are limited to two purposes which fail to indicate an exercise of company control First, they are used for company-distributorship settlement on a weekly basis The more detailed financial data involving operating expenses is required so the Company can make FICA calculations as it is required to do under Federal regulations governing independent contractors The factor of whether the function being subcontract- ed or converted (distribution function) is no longer an in- tegral part of the company's business was discussed in Collateral Control Corp, with the Board noting this com- parison contained in Century Air Freight, supra at fn 9 In Adams Dairy, the employer employed drivers to deliver its product and also sold its product to in- dependent distnbutors who took title to the product at the loading dock The employer decided to get out of the distribution business altogether, unilater- ally discontinued its delivery operations, and ar- ranged to sell all its products to independent distrib- utors Thus, its responsibility for and control over its product ended at the loading dock The Otis plu- rality stated that it would find that decision to sub- contract not subject to mandatory bargaining be- cause the decision involved a fundamental change in the scope and direction of the enterprise In that case, however, the employer retained no control over the equipment, the employees, or the product, or over the distribution of its product In contrast, in the present case, the trucking services are an inte- gral part of the business Moreover, the record indi- cates that the Respondent retained some control over the subcontractor's employees and operations and had ultimate control over responsibility for the shipping process The Court in Adams Dairy described the fundamental change in the basic operating procedure as follows After the decision was made by the dairy to sell its products dockside to the independent distribu- tors, all of the trucks used previously by driver- salesmen were sold to independent distributors Adams Dairy did not finance the sales nor in any way arrange for such financing The routes driven by the independent distributors, though covering a similar territory, did not correspond to the previous routes of the driver-salesmen The independent dis- tributors took title to the products at dockside and Adams, thereafter legally had no concern with what was done with the products The distributors were solely responsible for selling the products The work done by the independent contractors, contrary to the situation in Fibreboard, was not primarily per- formed in the Adams plant for the benefit of the dairy Adams was not directly concerned with whether or not any given distributor sustained a profit or loss, as would have been the situation with the driver-salesmen The only major restrictions that Adams placed upon the independent distribu- tors by contract related to sanitation matters and to the maintenance of high product standards and the maintenance of good will Contrary to the situation in Fibreboard, then, there is more involved m Adams Dairy than just the substitution of one set of employees for another In Adams Dairy, there is a change in basic operating procedure in that the dairy liquidated that part of its business handling distribution of milk products Unlike the situation in Fibreboard, there was a change in the capital structure of Adams Dairy which resulted in a partial liquidation and recoup of capital investment To require Adams to bargain about its decision to close out the distribution end of its business would significantly abridge its free- dom to manage its own affairs I agree with the Respondent that its conversion to dis- tributors is practically identical to that in Adams Dairy in all controlling respects First, as in Adams Dairy, title to the product passes to the distributor at dockside The company legally has no concern or control over what the distributor does with the product Should the distrib- utor choose to do so, he may return a certain percentage of the product to the Respondent and receive a stale 316 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD credit In addition, however, the distributor may dispose of that product in other ways Further, as in Adams Dairy, the trucks previously used by driver-salesmen were sold to the independent distributors The responsi- bility and control over every aspect of the truck is the distributors' The instant case is stronger than Adams Dairy in that the Company had sold to the distributors the nght to dis- tribute its brands within a defined geographic area Al- though the Company did not finance the sale of the trucks, it did provide an option through Wachovia Bank by which the distnbutors could finance the sale The Company also offered to finance the territories itself Both of these appear to be arm's-length transactions with significant interest involved Moreover, the distributors were free to find different financing if they chose to do so I do not believe that the financing options made available, or the Respondent's stale policy or its promo- tion ordering policy are an insufficient mdicia of control or continuity in the basic operating procedure to take this case out of the Adams Dairy precedent As was the case in Adams Dairy, the Respondent here changed its basic operating procedure in that the distribution busi- ness has been liquidated and a fundamental change in the Company's capital structure has taken place since capital has been reallocated from the distribution function to the production process For all of the reasons set forth above, I find that the instant case is governed by the Board's decision in Otis Elevator and its holding in Collateral Control Corp is not applicable Accordingly, under the guidelines set forth in Otis Elevator, I find that Respondent's decision to con- vert its driver-salesmen employees to independent distrib- utorships was not a mandatory subject of bargaining and Respondent was not obligated to bargain over the deci- sion C Did the Independent Distributors Remain Statutory Employees After the Conversion and Did Respondent Unlawfully Withdraw Recognition from the Union as their Collective-Bargaining Representative' General Counsel argues that Respondent retained suffi- cient control over the method of distribution of its prod- uct and sufficient control over the distributors to negate their status as independent contractors Thus, Respond- ent's alleged refusal to bargain over its employees' method of distribution constitutes an unlawful unilateral change in terms and conditions of employment In support of this position, General Counsel asserts that the record shows that Respondent waived the cash downpayment for the routes, providing virtually all of the financing and accounting for the distributors, pays $500 of the cost of such accounting services during the first 3 years of the distributorship, purchased the requi- site licenses and tags, provided free maintenance and re- pairs on the vehicles purchased by the distributors, re- quires the distributors to wear uniforms and to maintain an appearance acceptable to Respondent, regularly in- structs distributors regarding vehicle maintenance and upkeep, regularly assigns supervisors to ride with distrib- utors, checking stock rotation and displays, reimburses distributors for stale stock, prohibits distributors from selling stale items, requires distributors to purchase cer- tain products, and exercises final approval of sales of routes by distributors Citing Roadway Package System, 288 NLRB 196 (1988), and Mission Foods Corp, 280 NLRB 251 (1986) I disagree with this position both on factual as well as legal grounds In the two cases cited, the Board clearly states that neither the jobber arrangement in Mission Foods nor the MD driver arrangement in Roadway ex- hibited entrepreneurial or proprietary characteristics found in true independent contractor relationships In the instant case, the independent distributors have purchased territories wherein they have the exclusive distribution rights to Respondent's brands, pay upwards of $35,000 for these rights The rights may appreciate if the distribu- tors' business increases from the date of purchase and such rights may be sold The Distributors' Agreement states that the distribution rights are owned by the dis- tributor and may be assigned, transferred or sold, in whole or in part, by the distributor, subject to the writ- ten approval of the assignees', transferees' or purchasers' qualifications by the Company The Company also re- tained the right of first refusal under the same terms of- fered by a potential purchaser I do not believe that these conditions inhibit the salability of the routes nor detracts from the proprietary Interest of the distributor With respect to vehicle maintenance, it is clear that the distributor is responsible for this aspect of his busi- ness, and the Company merely put the vehicles sold to distributors into proper operating condition before trans- ferring them to the distributors Again, the distributors purchased these vehicles from the Company and have an unfettered right to sell them whenever and to whomever they please Loans which they secured from the Wacho- via Bank are their loans and not the Company's loans The payment of the first $500 of accounting costs for the first 3 years of the agreement appears to me to be nothing more than a means to get around the reluctance of a prospective purchaser of a distributorship who may not know the cost of accounting services This induce- ment does have a 3-year limitation, and the choice of ac- countants is up to the distnbutor I find this similar to the startup stale policy, which was much more generous than the ongoing stale policy I cannot find from the record that Respondent can re- quire distributors to wear uniforms although it may en- courage this practice Likewise, I cannot find that the Company regularly instructs distributors on vehicle maintenance and upkeep I cannot find that the Company regularly assigns supervisors to ride with distributors, though it may request that they do so and a distributor may agree I find that the distributors can refuse to allow a supervisor to ride with him The Distributor's Agreement prohibits the sale of stale stock to the general public, but otherwise authorizes the sale of such merchandise to purchasers who are not com- petitors of the Company Compare the facts of this case as set forth immediately above and in the preceding section of this decision with the factual situation in Mission Foods, a company also in WEST VIRGINIA BAKING CO 317 the business of producing and selling food items As found by the Board at 252 The Employer alone sets and makes adjustments to the jobbers' routes, sometimes after requests by the jobbers and at other times over the objections of jobbers [compare with the instant case where routes and stops are set by the distnbutor without need of company approval], determines the frequency of calls upon major (chain store) accounts, which con- stitute approximately 90 to 95 percent of the dollar volume in each territory [the responsibility of the distributor in the instant case], and gives detailed in- structions regarding servicing and stocking of each account [the responsibility of the distributor, with at most company advice], sets all prices [herein Re- spondent suggests retail pnces which can be changed except for promotional and feature pricing for chains, in which case the distributor receives a special discount], adds unordered merchandise to the jobber's order which the jobbers are required to sell [herein only for promotions], and often has switched jobbers back and forth between company driver and jobber status according to what it felt was most advantageous to the Company at that par- ticular time [not the case herein] The Employer also disciplines the jobbers through written warn- ings and threats of loss of loading privileges [in the instant case, the Distributor's Agreement governs disputes and unilateral discipline is not part of the agreement] Further, although the jobbers may pur- chase or lease their trucks, if they lease they must do so through the employer The Employer retains the option of repurchasing any trucks it "sold" to the jobber in the event the jobber leaves [not the case herein] Although the jobbers are responsible for their own vehicles and, with some restrictions exercised by the Employer, may hire and use help- ers on their routes, they do not have a proprietary interest in those routes as they cannot sell them, and the Employer may change them unilaterally and without notice to, or further recourse by, the affect- ed jobbers [emphatically not the case herein] For the reasons stated, I believe that the cases relied upon by General Counsel on this point, Roadway and Mission Foods, are inapposite I agree with Respondent on this point that independent contractor status of its dis- tributors is established when the facts of this case are viewed in light of the Board's decisions in Bellacicco & Sons, 249 NLRB 877 (1980), and Gold Medal Baking Co, 199 NLRB 895 (1972) D Regardless of Whether the Decision to Convert is a Mandatory Subject of Bargaining Did the Respondent Satisfy Its Burden of Bargaining in Good Faith with the Union over that Decision, 1 Events leading to negotiations Douglas Church, the union business representative re- sponsible for servicing the Respondent's involved unit for much of the term of the 1985 to 1988 contract, testi- fled that in June or July 1986, he met with Nolan and Respondent's personnel director, Paul Dearfield Nolan informed him that the Company wanted to sell routes to the drivers, that the Company would draft individual contracts for each driver who would purchase his truck, and buy the product Church replied that if the Compa- ny did this, the Union would strike Church inquired why the Company wanted to go to this plan Nolan said m effect that the drivers were content and not sufficient- ly motivated They had no incentive to sell more prod- uct Church testified that he believed that the Company was going to implement the distributorship plan in the very near future at the time of this conversation He had had discussions with the drivers and had heard reports that the Company had gone to such a program in other areas Church also indicated that the Union had a dis- agreement with the Company over insurance, which would result in a strike if it were not solved Both Nolan and Dearfield tesified about this meeting with the only significant difference being a lack of detail Both testified that the meeting ended abruptly when Church learned of its purpose and voiced his adamant objection Nolan then stated that Respondent took no steps to implement the distributorship program after that meeting and before negotiations began He also stated the supervisors were not instructed by the Company to meet with driver-salesmen about the program before ne- gotiations started and supervisors were not told prior to negotiations that the Company had reached a decision with respect to the plan as no such decision had been reached Nolan, as did Dearfield and Anderson, testified that such a decision was reached on March 22 Steven Harris, currently a territory manager for Re- spondent, was employed as a driver-salesman from Octo- ber 1985 until his promotion to a management position in March 1988 He testified that in March 1987, he attended a meeting at the Bluefield warehouse with the driver- salesmen assigned to that location and Union Steward L T Miller and Doug Church Miller and Church told the drivers that the Company was planning to sell their routes at the expiration of the current collective-bargain- ing agreement and that the only way to prevent it was to stick together and join the Union The assembled drivers were told that the Company had sold the routes in all of its other areas and would sell the Bluefield routes upon expiration of the agreement Church mdicated that the Company should not sell the Bluefield routes and that if need be, the Union would shut the bakery down to pre- vent their sale Michael Woodbndge, a former employee of Respond- ent, testified that he had a conversation with Respond- ent's Bluefield Branch Sales Manager William Rouse when he was hired in July 1987 Woodbndge stated that Rouse told him that he should be aware that the Compa- ny was going to distributorships when the current con- tract expired Employee Ben Bailey III testified that prior to June 1987, Rouse asked him if he was going to purchase a route Bailey replied that he had heard nothing about this Rouse told him that he would receive information 318 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD and that it could be one or two things, "It'll either be Flowers' [Respondent's] way or the highway" William Smith, a 17-year employee of Respondent and a union steward, testified in this proceeding At the time of hearing, he had been on sick leave for some time and had been employed as a driver-salesman at Respondent's Keene Mountain warehouse prior to going on leave Smith testified that in the fall of 1987, around the end of October or the first of November, Bill Rouse informed him that as of contract time, the driver's routes would be sold and the salesmen would either have to buy their routes and become independent distributors or they would have to hunt for a job Smith stated that he asked Rouse if he were sure about this and Rouse said he was very sure, and that if a driver did not buy a route, he would have to "hit the streets" Rouse testified that he did not learn until April 1988 that the Company was going to implement the independ- ent distnbutorship program in his territory, which is the territory involved in this proceeding He testified that there was a lot of talk going on prior to that and he passed on what he heard to higher management He had been instructed not to comment on rumors because he did not know the answers He admitted having discus- sions with route salesmen during the 1988 negotiations and told them that no decision had been made about the program He testified that prior to October 1, 1987, no one had asked him about the distributorship conversion With regard to the Smith conversations, Rouse said he told Smith that a decision had not yet been made and that as of that time, he did not know what the Company was going to do He also told Smith that as of that time, the Company was not working on anything He denied the statements attributed to him by Smith Smith testified he received similar information from his district manager, Troy Byers, who said to him, "if you want your job, you'll buy your route" Around the first of February 1988, Smith stated that Charlie Thomas, Re- spondent's Bluefield district manager, came to the Keene Mountain facility to ride the drivers' routes and remap them Thomas told Smith that Rouse had sent him to remap so they could split the routes up so they would be profitable when they sold them Smith also related a conversation he heard between Rouse and extra man Eddie Wells at the time of Wells' hiring in November or December 1987 One of the ques- tions Rouse asked Wells was whether he would buy a route in March With respect to this conversation, Rouse testified that Wells said he had heard rumors about the distributorship program and Lasked Rouse about it Rouse told him that at that time the Company did not know what avenue it was going to take with the program Wells then said he wanted to know because he did not; want to leave his present job and go into a new one blind Rouse told him that the program was something that had gone on in the northern end of the State of West Virginia, but for his group, he did not know Rouse also testified that he started working on route restructuring, which resulted in the routes sold to distrib- utors, in the first part of October 1987 He testified that the restructuring was done because there was a lot of overlapping in the existing routes and they needed to be restructured, presumably for efficiency He also worked up sales figures for the routes which were used to devel- op the pro forma performance analyses shown to pro- spective distributors Rouse testified that the restructur- ing process was similar to ones done in the past and was done to improve service and profitability He acknowl- edged that Troy Byers was involved in the route restruc- turing in a purely advisory capacity and gave Rouse no hint that the restructuring information was going to be used to set up the distnbutorship routes About 2 weeks prior to the beginning of negotiations, Rouse asked Smith whether he thought any of the Keene Mountain drivers would buy routes and Smith replied that none of the 10 drivers or the extra man were inter- ested Rouse then said that if they were not going to buy the routes, they should go ahead and quit so he could get replacements With respect to the various conversations set forth above wherein Rouse is involved, I credit the employees' versions of the conversations I did not consider Rouse to be particularly credible and found his testimony with respect to the reasons for route restructuring and gather- ing of associated financial data to be patently unbeliev- able I am not sure whether the testimony involved was intended, inter aim, to support the only 8(a)(1) violation alleged in the complaint, to wit, that on or about March 1988, Respondent threatened the dnver-salesmen in the unit with discharge upon expiration of the contract unless they agreed to become "non union independent contractors" In the event that the involved testimony is intended to support this complaint allegation, I find that no violation occurred even though I do find that the drivers were threatened with termination in the event they did not purchase a distributorship There has been no antiunion ammus shown on the part of Respondent and there has been no nexus shown between the threats of termination and any union or other protected activity There is cer- tainly no testimony or other evidence that any driver- salesman was threatened with discharge unless he agreed to become a "non union" independent contractor Simi- larly, the Respondent's decision to implement the distrib- utorship program and its ultimate implementation, which resulted in the termination of unit employees as driver- salesmen, has not been shown to have been motivated in any way by antiunion animus or because of the employ- ees' union or other protected activity Rather, I find that Respondent took the action it did for the legitimate busi- ness reasons that it has given in this record 2 Negotiating sessions and events surrounding them January 25 Session Ken Hall, business representative and chief negotiator for the Union, testified that the first meeting over con- tract negotiations for the current collective-bargaining agreement was held on January 25 This was a meeting between Hall and John Anderson, Respondent's inde- pendent labor attorney and chief negotiator At this meeting, dates were set for negotiations and Anderson asked Hall what the most important issues were from the WEST VIRGINIA BAKING CO 319 Union's position Hall replied that insurance would be the prime issue Anderson replied that he believed that the proposed shift from driver employees to independent route salesmen would be the most important Anderson stated that though he was not certain at that time, he be- lieved that the Company intended to implement the pro- posed change All of the above recitation is based upon Hall's version of the meeting Anderson testified in general similarly He also stated that Hall indicated at this meeting that the distributorship program would be a major problem from the Union's standpoint, that they were not interested in the system Anderson denied that he told Hall that Respondent in- tended to implement the plan, stating that he did not know as of the 25th whether the plan was even going to be part of the Respondent's proposals He had a meeting scheduled the following day to determine with company management what the Company's proposals would be Anderson also testified that Doug Church stopped by the meeting for a few minutes and related that he hoped the Company was not thmkmg about trying the distributor- ship program To the extent a credibility determination is necessary, I credit Anderson's testimony that he did not indicate at this meeting that Respondent was going to implement the distributorship program Prior to the 25th, Hall testified that he had heard rumors that the Company was interested in going to the independent distributorship program, but had not re- ceived clear notification from the Company of its inten- tions February 25 Session The first actual negotiating session was held on Febru- ary 25 The Union bargaining committee consisted of Hall, Grover Marion, president of Local 175, and several employee bargaining committee members, including Bill Smith and L T Miller Respondent's committee consist- ed of Anderson, Dick Nolan, president of Respondent, Paul Dearfield, Company personnel manager, and Steve Avers, an mhouse counsel for Respondent The meeting began with the parties exchanging pro- posals The Union proposed some 38 changes from the old contract while the Company proposed 8, including the change in driver status 7 Both sides explained their proposals to the other and the Union indicated that al- though it opposed all the company proposals, its major concerns were with the Company's insurance proposal, part-time employee proposal and the proposal to change the driver-salesmen to independent distributors The Union indicated that it wanted the status of the driver- salesmen to remain the same and had no interest in the distributorship program Anderson testified that he replied that the Company felt the program was in its best long-term interests and that the Company would hold small group meetings with the employees to explain the program He mentioned 7 The record contains a great deal of testimony descnbmg each negoti- ating session Much of this testimony relates to matters in negotiation which are not at issue in this case Although this evidence, as with all evidence presented, has been considered on the matter of credibility, It is not recited here unless It bears directly on an issue in question that because the proposal was a complex one it was not fair for the Company to expect the Union, at some point, to explain the proposal and that the Company would ex- plain it to the employees Hall does not remember any notice of such meetings being given and none of the par- ties notes of the February 25 session reflect such notice Under the circumstances, I do not find that notice of the employee meetings was given There was no substantive discussion at this meeting March 11 Session o According to Hall, the next meeting, held March 11, began with the Union offering two additional proposals One was a proposal to increase the holiday pay for the driver-salesmen and the other was to add a new classifi- cation in the sanitation department Hall also told Ander- son that it was his policy to present in writing for ratifi- cation any agreement reached during negotiations For that reason, he felt that negotiations must be concluded in time for the Company's final offer to be put in writing by March 24 so the Union could hold a ratification vote on March 25 The Company then responded to the union proposals, discussing its reasons for disagreement Hall testified that there was no discussion of the independent distributor proposal and related proposals as the Company took the position that it had decided to implement the independ- ent distributorship plan and saw no need to discuss the proposals relating to driver-salesmen Hall testified that at the meeting's end, Anderson said that he recognized that the independent distributorship proposal was a major issue to the Union, but that management had made a decision to implement the plan In response to the Union's question as to why this decision had been made, Anderson replied that management felt it was in the best interest of the Company The Union registered its objec- tion and Anderson informed the Umon that Respondent did not have to negotiate on this issue, that the only reason that the issue was on the table was as a courtesy to let the Union know that the Company was going to implement it because of the historical good relationship between the parties The Union presented no alternative proposals to the independent distributorship program at this meeting nor did it take a position with respect to the Company's assertion that it was a nonmandatory subject of bargaining Anderson gave a slightly different version of how the meeting began and the order of presentation On the matter of the distributorship program, Anderson testified that Bill Smith said that employees in Keene Mountain had already been contacted by one of Respondent's com- petitors in an attempt to get the driver-salesmen to work for them if Respondent went to a distributorship system, and break the Keene Mountain market Anderson also testified that because of the Union's adamant opposition to the distribution proposal, to create some type of bar- gaining, he tried to convey that the proposal was a non- mandatory subject of bargaining He indicated that Re- spondent had received three different decisions regarding the proposal But, that even though it was a nonmanda- tory subject of bargaining, because of the longstanding 320 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD good relationship between the parties, Respondent had wanted to bring it to the table so that the parties could have a full opportunity to review the proposal and let the Union have whatever input it thought appropriate Anderson testified that at this point, the Company had not made a final decision as to whether it was going to be implemented He denied telling the Union on March 11, that the Company had already made a decision to go to the independent distributorship program In his testi- mony, Dearfield also said that no one from the Company indicated on this date that a final decision had been reached with respect to the program Anderson appears to me to be a careful and truthful person and I credit his testimony that he did not specifi- cally tell the Union at this session that the Company had decided to implement the plan On the other hand, the entire tenor of his comments could easily lead a rational person to believe that the Company had made such a de- cision Hall could well have believed that he heard in this session that the decision to implement the plan had been made, although I believe that he actually just drew this inference from Anderson's statements Also at this meeting, the Company presented its insur- ance proposal, which the Union rejected, insisting on the Union's own health and welfare plan Unilateral Meeting of Company Officials with Driver-Salesmen Hall testified that he held a membership meeting for the purpose of requesting strike sanction from the Inter- national Union in the event a stnke was deemed neces- sary At that meeting, Hall was informed that Respond- ent had called the dnver-salesmen to meetings where it presented them with documents relating to the independ- ent distnbutorship program Hall learned of these meet- ings on or about March 15 Hall indicated at one point that management may have given notice of its intention to meet with the driver-salesmen, but could not recall His notes of bargaining sessions do not reveal such notice being given 8 Church testified that in the negotiations leading to the 1985 contract, the Company had made various proposals regarding Insurance and had met with the employees to explain these proposals without objection Anderson tes- tified that these meetings were held during negotiations without prior notice to the Union Employee William Smith testified that the Company had scheduled a meeting for driver-salesmen in Vanzant, Virginia for a Wednesday in March to discuss the dis- tributorship program, but that no drivers showed up Later that month, Nolan and Dearfield met with the Keene Mountain drivers following a Nolan request of Smith that he get the men to talk with him Nolan said he wanted to explain the distributor program to the men At the meeting, Smith stated that Nolan explained to the men that the Company was going to sell the routes and 8 Although the amended charge alleged direct dealing with employees, this was not alleged in the complaint, nor was It litigated by the General Counsel Accordingly, this Issue is not before the Board Koons Ford of Annapolis, 282 NLRB 506 (1986), Electrical Workers 1BEW Local 1186, 264 NLRB 712 (1982) gave them various documents explaining the program (G C Exhs 2-8) Smith testified that at this meeting Nolan did not attempt to require anyone to make com- mitment Driver-salesman Ben Bailey III testified he attended one of these meetings where Nolan said that the routes would be sold, but did not ask anyone present to pur- chase a route Former driver-salesman Robert Nipper testified that he attended such a meeting, which was also attended by Joe Lester Nipper testified that in response to his inquiry of Nolan of what would happen if he was not interested in becoming a distributor, Nolan told him to check with Dearfield about his unemployment benefits He testified that Dearfield told him that he would be on unemploy- ment status Dearfield denied this conversation occurred I credit Dearfield's denial This testimony is contrary to other testimony relating to these meetings given by em- ployees attending them and nothing was asked of Lester about it, though he appeared as a witness It was also al- legedly made at a time when Respondent was uncertain what the status would be of driver-salesmen who did not purchase a route, as indicated by statements made in ne- gotiations Nolan and Dearfield were present at the employee meetings and testified about them They stated that at the beginning of each meeting, Nolan explained to the as- sembled employees that management was there to ex- plain the distributorship program This was a proposal that the Company had made to the Union, that it was in negotiations and that a final decision had not been made on the program No one would be asked to make a com- mitment or sign anything After this opening statement, Nolan explained the dis- tributorship agreement in detail He passed out various documents relating to the program as he discussed them Nolan would then go over the financial pro forma pre- pared for each driver-salesman These documents would show the employee what he had made for a particular period as an employee and show a breakdown of project- ed income and expenses for a like period as a distributor When this document had been explained, Nick Fadero, Respondent's controller, would explain how the territory purchase, including the truck purchase, could be fi- nanced Financing with the Company was available for the territory purchase price and was the overwhelming choice of new distributors, however, a distributor was free to pay the purchase price in cash or with other fi- nancing Financing of the truck purchase was available through the Wachovia Bank After this presentation, Dearfield would explain an available truck insurance package, a business insurance package, and a health in- surance package Then, a CPA who works with a number of distributors would explain how to go into business as a sole proprietorship, partnership or corpora- tion, giving the various advantages and disadvantages of each form He also would go into how one could set up bookkeeping At this point, the meetings would end WEST VIRGINIA BAKING CO 321 March 22 Session Hall testified that at the next negotiating session, held March 22, the majonty of the union proposals were still on the table and the parties went through them The Company refused to respond to the union proposals re- garding driver-salesmen stating that it was not interested in driver-salesmen proposals as it had a proposal for in- dependent distributorships Hall stated that there was no give-and-take on this issue, although there was move- ment on other issues The Union's position on the driver- salesmen issue was to retain that status and it offered no other alternative to the Company's distributorship pro- gram at this time Anderson testified that Hall made the first reference to the distributorship program on this date, stating that the Union was opposed to the independent distributorship system and that it was not there to negotiate members' jobs away He also testified that Nolan gave a very de- tailed explanation of the program to the Union at the meeting, including how the territories or routes were de- termined and pnced He stated the Union had few ques- tions The Union did object that the Company did not have anything to sell as it did not own store shelf space Nolan explained that the Company was selling the exclu- sive distribution rights to products and labels that it did own, analogizing it to a McDonald's type of franchise Anderson testified that Miller raised an objection that the territories were not large enough, that there was not enough room to grow Nolan responded to this and ulti- mately, Miller's objection was addressed in the next ne- gotiating session The parties' positions on insurance remained fixed March 23 Session Anderson testified that Ater the March 22 session, he met with company officials and told them that they had to make a decision with respect to the distributorship program and its implementation Given the Union's op- position to the plan, if the Company was not going to implement it, he wanted to know so that he could use the withdrawal of the proposal to the Company's strate- gic advantage He said the Company decided then to go ahead with the program, that they were prepared to stay with it At the next session, held March 23, Hall testified that Anderson opened the meeting by informing the Union that the independent distributorship program proposal would be in the Company's final offer During the meet- ing, the Union and the Company stated that this proposal would be a strike issue for the Union as well There was quite a bit of discussion at that meeting relating to the proposal, and Nolan was asked if he had met with the driver-salesmen regarding the independent distributorship program Nolan acknowledged that he, Dearfield, and other members of management had presented the pro- gram to the employees The Union also inquired what would be the status of the driver-salesmen if they did not buy a route Accord- ing to Hall, Anderson said the Company was not sure at that point, but they would be in layoff status, voluntary quit status or terminated Hall testified that Nolan ac- knowledged that he had made' statements to the driver- salesmen to the effect that there were outsiders waiting to buy the routes Anderson testified that the Company had a list of persons who had made inquiries about pur- chasing a route that had been converted to a distributor- ship elsewhere in the ompany's operation Hall said Nolan told L T Miller, a bargaining committee member and a present driver-salesman that, "You have a decision to make on Saturday (the old contract expiration date) " Marion testified that at this meeting, Nolan acknowl- edged that he had discussed the distributorship program with outside people, that the routes would be sold and that the drivers would have to make a decision by the end of this contract whether they were going to buy a route Hall testified that the Union from the beginning had sought bumpmg nghts into the unit for the driver-sales- men In the expinng contract, the sales and production departments were separate and sales employees could not bid or bump into the production department After discussion on independent distributorship pro- gram, Hall testified that it was clear that the Company was not going to negotiate on the issue and he informed the Company that the Union felt the Company was not bargaining in good faith and the Union was contemplat- ing filing charges with the NLRB To this, Hall said An- derson replied, "I've fought this battle before, and I'm ready to fight it again" Hall stated that Anderson's justi- fication for this statement was that he had discussed the distributorship program with the Union Marion testified that Anderson said that he did not have to talk to the Union about this issue, that he had been through this before, and it was a nonmandatory bargaining issue An- derson stated that Respondent had Board decisions that indicated that the distributorship conversion was a non- mandatory subject of bargaining, that despite those deci- sions, Respondent had brought the issue to the table, that it had not precluded discussion on any issue but, that the Union had not been interested in discussing it Anderson testified that the distributorship program was kept as a proposal and included in the Company's final offer for two reasons First, he stated the Union was treating it as a proposal and had identified it as a strike issue He testified it needed to be resolved through nego- tiations Second, Anderson was concerned that the sub- contracting provision of the old contract could be inter- preted in arbitration as prohibiting the Company's ac- tions Additionally, a proposal in the current negotiations called for all products produced in the bakery to be de- livered by bargaining unit employees Anderson felt this provision could be interpreted as covering the dnver- salesmen On cross-examination, Hall stated that there had been a discussion of what the Company would do with regard to the routes in the event of a work stoppage at the expi- ration of the contract The Company indicated that it would run them with management personnel Respond- ent did not say it would implement the distributorship program At this meeting, the insurance issue was also identified by the Union as a strike issue 322 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD March 24 Session The next session was held on March 24 and according to Hall opened with Anderson informing the Union that he did not agree with it filing unfair labor practice charges, but that the Union had that right and to go ahead if that is the way the Union felt Anderson provid- ed the Union with a copy of the Regional Director's de- cision that the subject of distributorships was a nonman- datory subject of bargaining The decision dealt with the same program as was being proposed in the contract ne- gotiations which Respondent had implemented in its Charleston, West Virginia operation over the objection of its union employees Anderson testified that at about this point he indicated that the program was a nonman- datory subject of bargaining, that the Company had put the proposal on the table and that it had been prepared to discuss any and all aspects of the proposal He further indicated that it did not need the Union's agreement as the matter was a business decision There was then discussion of the status of drivers who did not purchase a route, with Anderson indicating that they would be in layoff status The Company indicated that it was willing to give these drivers priority hiring rights, but they would have no seniority when hired, except for vacation and holidays Hall testified that the Union then asked for a copy of the independent distributorship program and was told that the Company did not have one at the meeting, but that driver-members of the bargaining committee had copies and the Union could get one from them Marion testified that this request was made at the previous meet- ing on March 23 I believe the parties' notes of the ses- sions conclusively establish that March 24 was the actual date of this request This request was not renewed throughout the remainder of negotiations I do not view the Respondent's response as any indication of bad faith as the fact was, it did not have a copy of the program and some of the union committee members did have one In response to an inquiry, the Company said it would not pay health, welfare, and pension benefits for the in- dependent distributors as they would not be employees Marion testified that Anderson said that the distributors would not belong to the Union as they would not be em- ployees Anderson's version of this was that the distribu- tors would not be members of the bargaining unit as they were not employees, whether they stayed members of the Union was their decision to make He testified that Hall said the Teamsters would not allow them to remain members if they were not covered by the collective-bar- gaining agreement A number of specific inquiries about the details of the distributorship program were made during this session Though the responses to these questions may well be rel- evant on some issues, they are not in the context of this bargaining session, except to note that the Company did attempt to answer the Union's questions about the plan Detail about the Company's responses will be found in that portion of this decision dealing with the operation of the plan After a caucus, the meeting ended with the Company giving the Union its final offer (J Exhs 6(a), (b), and (c)) After a further caucus, the Union informed the Company that it would recommend the offer to the em- ployees if the Company would accept the union insur- ance proposal and drop the independent distributorship proposal The Company responded, no To this point in negotiations, neither party had moved at all on their original positions with respect to driver-salesmen vs in- dependent distributors Nor had any significant move- ment occurred with respect to the insurance issue Anderson testified that as of March 24, the Company was and had been willing to discuss any and all aspects of the distributorship proposal By "discuss," Anderson said he meant to open the topic of conversation up for any type of negotiations, questions, or positions that the parties wanted to make Ratification Vote of March 25 On March 25, the Union filed the instant unfair labor practice charge contending the Company had violated the Act by directly dealing with unit employees and bar- gaining to impasse over a nonmandatory subject of bar- gaining Also on this date, the employees voted 121 to 29 to reject the Company's final offer A strike began on March 27, which lasted until May 14 During the period of the strike several more negotiating meetings were held April 11 Session At the request of a Federal mediator, Phil Bradley, the parties met again on April 11 Bradley asked the parties to bring him up to date on the status of bargaining, with Anderson telling him the two big issues were insurance and the independent distributorship program According to Hall, Anderson told the mediator that the program was a nonmandatory subject of bargaining The Union gave the mediator as remaining proposals and he asked the parties to separate Bradley met sepa- rately with the parties for about 2 hours According to Hall, he told the Union that the Company was not going to move on the issues, that the only reason the independ- ent distributorship proposal was still on the table was be- cause the Union had questions about it Anderson testi- fied similarly, pointing out that the mediator had told the company representatives that the Union was adamant on the insurance and distributorship issues Anderson indi- cated that the Company discussed the matter for a while and then put its final offer back on the table for an addi- tional 5-day period The meeting then ended On April 15, the Union filed an amended unfair labor practice charge contending that the Respondent had re- fused to bargain in good faith over its decision to imple- ment the distributorship plan and the effects of such de- cision, and further that the Respondent had implemented a system of independent distnbutorships and terminated the route salesmen on March 27 April 18 Session On Apnl 18, the parties again met, both in a fairly pn- vate session between the primary negotiators and later with the full negotiating committees The record is not totally clear when certain events occurred on this date, though on the whole, there is agreement that they did WEST VIRGINIA BAKING CO 323 occur According to Hall, he began the meeting by in- forming the Company that its final offer had again been turned down Hall testified that there were a number of questions about the independent distributorship program The Company again said it would not pay pension or health and welfare benefits for the distributors The Company also stated, according to Hall, that it must maintain certain controls over the distributors, indicating that there would be supervisors on the routes with the distributors to maintain freshness and shelf stock The Company indicated that its reason for going to the inde- pendent distributors was to give the people more incen- tive to increase sales The Union inquired how sales could increase as the Company presently controlled about 95 percent of the market The Company responded it did not know what percentage of the market it con- trolled At this meeting, the Union asked if the Company would supply the driver-salesmen with a truck and assign them a territory The Union also indicated that it was willing to move on the matter of more incentives for the driver-salesmen to increase sales It proposed de- creasing their base pay and increasing commissions The Company indicated that that was not what it had in mind The Company again said that it did not have to bargain over the independent distributorship program and put its final offer of March 24 back on the table Anderson testified about this meeting and to the extent his testimony differs from that of Hall and Marion, or adds to it in some relevant way, it will be noted Ander- son indicated that at this meeting the Union cited him to) a Board decision which to the Union established that the distributorship program was a mandatory subject of bar- gaining Anderson said he had not read the case and pointed out he had a decision from the involved Board Region directly on point Anderson also took the position that if the distributor- ship program had been a mandatory subject of bargain- ing, that the Union had had the opportunity to bargain about it The Union took the position that the program was a fait accompli at the time the Company presented it Anderson denied this Anderson testified that at this meeting the subject of implementation had come up He advised the Union that the Company had chosen not to implement the system up to that point, but that it did have a legal right to do so and that it could not hold off doing so mdefimtely He also indicated that before the Company did start to im- plement that he would contact Hall and advise him of that decision As of April 18, the routes were being run by management personnel and no irreversible action had taken place The meeting ended April 19 Session On April 19, the parties met again, with according to Hall, the Union indicating its seriousness at ending the strike It proposed that the driver-salesmen become owner-operators whereby they would purchase trucks, lease them to the Company, and all of their income would come from commissions The Union believed that this would address the Company's incentive concern as well as a concern of the Company that employees did not take good care of the company trucks Hall testified that Anderson said the Company would look at this pro- posal, but hoped it was not the Union's last proposal on the issue because he could not recommend it to his client The Union also reurged its proposals on bumping rights and the Company indicated it would reconsider its position on these issues Hall testified that the Company also proposed to change the term of the new contract, which had been a proposed 3-year one, to a 4-year con- tract Anderson testified about this meeting and his testimo- ny was similar to Hall's He did note that at this meeting that he volunteered to delay implementation of the dis- tributorship program for 6 weeks to let the effects of the strike settle The meeting ended April 20 Session According to Hall, on April 20, the parties met with the Company reducing its proposed term of contract to 42 months and the Union urging its owner-operator plan Hall testified that the Company was concerned about this proposal because a salesman would not have an in- centive to build up his territory by getting new stops and increasing sales because he would be afraid that once he did, the Company would take some of the stops off his route and put them another salesman's route The Union indicated it would be willing to negotiate terms whereby the Company could assign a salesman a specific territory just as it would under the distributorship plan Hall stated that Anderson said that the Company did not want to pay health, welfare, and pension because these things were already calculated into the distributorship plan Hall said that Anderson indicated that the Compa- ny was going to the independent distributorship plan and had sold over a thousand distributorship routes through- out the country At another point in the record, Ander- son agreed that this figure may be 50 percent of the routes of Respondent nationwide Hall said he then told the Company that the Union had been willing to move significantly on the driver- salesmen matter, but that the Company had made no movement At the close of the day, the Company pre- sented an offer involving a 3-year contract with the same wage increase, the distribution program, and the bump- ing rights with the exclusions proposed by the Union The insurance was still as proposed by the Company The meeting ended April 21 Session This meeting began with the Union making a counter- proposal to Judge's Exhibit 7, the Company's strike set- tlement offer The Union agreed with the bumping rights proposal, term of contract and wages It still disagreed with the insurance proposal With respect to the distribu- torship proposal, the Union stood by its owner-operator proposal and the Company rejected it, with Anderson stressing its lack of equity incentive The Company agreed to give certain employees, including driver-sales- men who did not buy a route, limited bumping rights into production At this meeting union committee 324 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD member L T Miller inquired about one of the provi- sions of the distributorship program relating to the con- sequences of the death of a distributor Miller may have asked to have the provision amended, but the Company attempted to assure him that his fears about the provision were groundless The meeting ended with the Company presenting the Union with a strike settlement offer having a deadline of April 26 This date was subsequent- ly extended to the April 27 April 27 Vote On April 27, the employees voted to proceed with the unfair labor practice case against the Respondent and not to vote on the strike settlement proposal May 5, 11, and 12 Sessions The parties again met on May 5 No positions changed at this meeting and the Federal mediator suggested that the Union have the employees vote on what they could accept On May 11, the employees again voted, but this time voted to accept the Company's stnke settlement offer and return to work, with the proviso that the NLRB charges not be dropped On the May 11 the em- ployees presented themselves for work, but the Company refused and said the Union must speak with Anderson Hall and Anderson met on May 12 Hall said Anderson indicated that the Company was not going to implement the distributorship program for 6 weeks for the routes that had not been sold Anderson testified that this agree- ment had been made on April 19 or 20, as noted earlier Hall testified that Anderson had called him on April 28 and informed him that the Company was going to start selling routes Hall wrote Anderson on May 28 stating the Union's objection and warning the Company that it inform prospective purchasers of routes of the pending NLRB litigation May 13 Settlement On May 13, the parties agreed to the terms of the set- tlement and the employees returned to work the next day May 27 Letter On May 27, Hall sent a letter to Dearfield complaining that the Company was implementing the distributorship program without waiting 6 weeks as agreed and stating that this would be a violation of the strike settlement agreement 3 Did Respondent bargain in good faith over the decision to convert and the effects of that decision? General Counsel did not allege nor litigate the Compa- ny's overall bad faith in negotiations I find no evidence of bad-faith bargaining on the part of Respondent in the negotiations in question To the contrary, there is abun--, dant evidence of the Company's good faith, including numerous concessions to reach agreement, appearance at 15 formal and informal negotiating sessions, the parties' good-bargaining relationship, a 95-cent-per-hour wage proposal over 3 years, and the parties' ultimate agree- ment Indeed, the parties engaged in hard bargaining over the admittedly important insurance issue and man- aged to reach agreement, with Respondent's position prevailing I do not believe that the distnbutorship issue was in a materially different posture From the recitation of events leading to the negotia- tions, two things appear clear First, the Respondent was very seriously considering implementing the conversion and probably intended to do so Second, the Union had clear notice of the Respondent's desire to convert the driver-salesmen to independent distributors, and had ex- pressed its adamant opposition to such conversion to the Company From the very outset of negotiations, the par- ties' positions - on this issue were relatively fixed, Re- spondent proposing- conversion and the Union insisting on maintaining the employee status of the driver-sales- men To the date of the filing of the unfair labor practice charge giving rise to this proceeding, the Respondent had not moved from its position nor had the Union moved from its position No alternatives to the conver- sion plan were offered by either party until well into the strike, and after the filing of all unfair labor practice charges In spite of the Respondent's belief that the matter of conversion to independent distributorships was a non- mandatory subject of bargaining, it brought the issue to the table as a proposal and repeatedly expressed its will- ingness to discuss any and all aspects of the proposal This willingness was not really tested by the union nego- tiators From February 25 through March 22, the Union did not offer alternatives or even ask questions regarding the distributorship plan This was in spite of the fact that Nolan had described the program in detail on March 22 After March 22, the Union did ask questions although it proposed no alternatives until April 19, almost a month into the strike, which was brought about by the parties' disagreement on at least the insurance issue as well as the distributorship issue The record is uncontradicted that the Company answered all of the Union's questions As I have heretofore found, the Company did not announce its intention to have the distributorship program in its final offer until the March 23 meeting, almost a month after the negotiations began When the Union did offer an alternative on April 19 and 20 (the owner-operator proposal with 100-percent commission), the Company considered the proposal during caucuses and gave a rea- sonable explanation for rejecting the proposal it failed to provide the equity sales incentive and it did not result in recouping the capital it felt was inherent in its territories and brand names It is uncontradicted that the Respondent placed the distributorship issue on the table as a proposal on Febru- ary 25 There is no real contention that as of that date, the Company had reached a final decision on its distribu- torship proposal Although I have found that this deci- sion was announced at the March 23 session, even the Union does not contend that it was announced before March 11 On bnef, neither General Counsel nor the Union argue that the distributorship program was a fait _ accompli when the negotiations began and I find that it was not Although the Respondent was arguably in a po- sition to implement the plan at about that time (it had WEST VIRGINIA BAKING CO 325 tentative territories, Pro formas, available financing and Distributors' Agreements in hand), it had not signed up a single distributor In fact no implementation took place until on or after April 28 I cannot find that the Company's failure to change its position on the distributorship issue during negotiations is proof of bad-faith bargaining or a refusal to bargain over the issue In all the circumstances, adamant insistence on this proposal does not constitute bad-faith bargaining or a refusal to bargain In Atlanta Hilton & Tower, 271 NLRB 1600, 1603 (1984), the Board stated It is necessary to scrutinize an employer's overall conduct to determine whether it has bargained in good faith "From the context of an employer's total conduct, it must be decided whether the em- ployer is lawfully engaging in hard bargaining to achieve a contract that it considers desirable or is unlawfully endeavoring to frustrate the possibility of arriving at any agreement" D Lunsford Plumbing, 254 NLRB 1360, 1370 (1981) quoting from West Coast Casket Co, 192 NLRB 624, 636 (1971) enfd in relevant part 469 F 2d 871 (9th Cir 1972) ] A party is entitled to stand firm on a posi- tion if he reasonably believes that it is fair and proper or that he has sufficient bargaining strength to force the other party to agree NLRB v Ad- vanced Business Forms Corp, 474 F 2d 467 (2d Cir 1973) [A]n adamant insistence on a bargaining position is not of itself a refusal to bargain in good faith, Neon Sian Corp v NLRB, 602 F 2d 1203 (5th Cir 1979) I believe it is clear that the parties achieved impasse in their negotiations prior to the Company's implementation of the distributorship proposal on April 28 By that date the parties had met in 12 formal and informal sessions and spent approximately 25 hours on the distributorship issue At their last session on April 21, the Union insisted on its owner-operator proposal and the Respondent in- sisted on the distributorship proposal, reiterating its ra- tional reasons for rejecting the owner-operator plan There is no evidence of bad-faith bargaining by Re- spondent during the course of negotiations The employ- ees had rejected the distributorship proposal twice and refused even to vote on it a third time on April 27 Clearly, the parties were at impasse and the Company lawfully implemented the distributorship proposal Team- sters Local 688 (Air-Ways Cab), 277 NLRB 1518, 1526- 1527 (1986), Taft Broadcasting Co, 163 NLRB 475 (1967) It is equally clear that the Company met its duty to bargain in good faith over the effects of the distributor- ship program As noted above, the Union was advised of the distributorship proposal on February 25 The Union's reaction to this proposal was to insist on driver-salesmen employee status On March 23, the Union through its bargaining committee member L T Miller said it was unfair for an employee with a number of years of service simply to be out of work Anderson replied he was will- ing to listen to any proposal the Union had on that issue On the same day, the Union asked what would happen to those drivers who chose not to buy a distributorship Anderson replied that no decision had been made, but they would probably be on layoff status The Union pre- sented no proposals at that point The Company's offer the next day included priority hiring rights for route sales employees who did not select distributorships This offer was included in the Company's final offer made later that day After rejec- tion of the final offer by the Union, the parties continued to negotiate over the effects of the distributorship pro- posal As a result, the Company made certain additional proposals regarding the effects For example, the Union suggested a delay in implementation of the distributor- ship proposal to give the business an opportunity to build back up to its prestrike and preumon boycott levels The Company agreed with this and mcluded a proposal for a 6-week delay in implementation in its April 21 final offer The Union also requested bumping rights for those em- ployees who chose not to purchase a distributorship The Company agreed to bumping nghts as proposed by the Union The parties ultimately achieved agreement on the effects issue D Ultimate Conclusions with Respect to the Issues Based on the fmdmgs set forth above and for the rea- sons stated, I find and conclude that Respondent's deci- sion to convert its driver-salesmen to independent distrib- utors was not a mandatory subject of bargaining, that the independent distributors did not remain statutory em- ployees after the conversion and Respondent did not un- lawfully withdraw recognition from the Union as their representative, that Respondent did not refuse to bargain in good faith over the decision to convert and the effects of that decision and in fact, did bargain in good faith over such decision and its effects until impasse and lawful implementation of the distributorship program, and that Respondent did not threaten its driver-salesmen with discharge and ultimately discharge them because of their Union or other protected activity In sum, I find that Respondent did not violate Section 8(a)(1), (3), and (5) as alleged in the complaint 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 Respondent has not engaged in any of the unfair labor practices alleged in the complaint On these findings of fact and conclusions of law and on the entire record, I issue the following recommend- ed9 9 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 326 WEST VIRGINIA BAKING CO ORDER The complaint is dismissed in its entirety Appendix A The projected labor cost impact of the conversion at the time of implementation can be calculated by totalling the cost to the Company of all payments to the distribu- tors and subtracting from that the distributors' operating expenses formerly incurred by the Company Thus, those costs which have simply been transferred from the Com- pany to the distributor should be reduced from the dis- tributors' total receipts to determine the net effect of the conversion on the Company's labor costs The distributor's principal and interest payments for the truck and the territory, however, should not be de- ducted Unlike operating costs incurred by the distribu- tor, the Company receives no concomitant reduction in its expenditures as a result of the distributors' investment in the territory and truck Although the principal and in- terest for the territory and principal for the truck is paid back to the Company, the Company in return had sold its capital assets to the distributors The result of the transaction is that these capital assets pass from the Com- pany to the distributors at the Company's expense Should the Company ever decide to return to the distri- bution business, it would be necessary to repurchase the temtones and purchase additional trucks Thus, the net effect of the increased discount rate which enables the distributors to purchase the territory and truck from the Company is to increase the Company's labor costs The calculation of the net effect of the conversion on the Company's labor costs is as follows Total yearly cost to the Company of the distributor- ship—$1,438,356 Total Weekly Gross Income (C 12-14) X 52 weeks = $1,422,356 $500 per year accounting costs (T456) X 32 distributors =$16,000 Total yearly savings to the Company from the dis- tributorship conversion (labor costs and other costs transferred to distributors)= $1,248,136 85 Route gross earnings (C 12-14) X 52 weeks= $811,408 00 Vacation Pay (C 10) 49,097 59 Holiday Pay (C 10) 12,840 00 A&S and Sick Leave (C 10) 2,22000 Health Insurance $137,640 00 ($31000 (T 383) 1 X 37 employees X 12 months) - $21,509 28 (total weekly employee $116,130 72 contributions X 52 weeks) (C 11, T 347) Pension $95 33 (T 343) X 37 42,326 52 employees X 12 months Jury Duty (T 343) 000 Life Insurance (C 10) 000 Workers Compensation West Virginia Warehouse $1 55 rate X $72 75 (weekly route gross earmngs/100) (C 14, T 449) X 52 Weeks $5,863 65 Virgima Warehouses $ 43 rate X 83 29 (Total Vir- ginia Warehouses weekly route gross eammgs/100) (C 12-13, T 449) X 52 weeks= $1,862 37 Total $7,726 02 Uniforms $24800 X 13 periods (T 449) 3,22400 Casualty Insurance $3000 X 52 weeks X 34 Distributor (GC 12-14) 53,040 00 Truck Costs Fuel Fuel Adjustment2 (T 447-48), C 12-14 1 This is the cost of Teamsters' Option 3 coverage which is the most expensive available Although not all of the route sales employees pur- chased the most expensive coverage the precise breakdown is not avail- able For the purpose of calculating the labor cost impact of the distribu- torship program, however, the cost savings to the Company of the health insurance will be assumed to be the maximum 2 The fuel adjustment is an additional amount paid by the Company to those drivers whose vehicles are driven over 400 miles per week to com- pensate them for additional repairs required due to the additional mile- age The fuel and fuel adjustment numbers were based on an actual study of Company costs for its fleet of vehicles which included labor, material, and all other costs and is, therefore, an accurate reflection of the Compa- ny's savings as a result of the transfer of these costs to the distnbutors The fuel adjustment figure is deducted from the fuel figure because the adjustment is an additional payment by the Company to the distributor Thus, the Company's actual fuel cost transferred to the distributor is the net figure DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 327 Keene Mountain Warehouse $466-$63=$403 X 52 weeks=$20,956 Radford and Marion Warehouses $521-$163=358 X 52 weelcs=$18,616 Bluefield Warehouse 3 The Tires and Repairs costs were based on an actual study of Com- pany costs for its fleet of vehicles which Included labor, material, and all other costs and is, therefore, an accurate reflection of the Company's sav- ings as a result of the transfer of these costs to the distributors • The miscellaneous expenses cover those expenses transferred by the Company to the distributors such as licenses and business franchise fees 5 The warehouse expense is paid by the distributors to the Company to defray the Company's cost of heat, light, etc in providing a warehouse to the chstnbutors ° At the hearing, the Company presented evidence that it reduced the number of routes in Bluefield from 17 to 14 As there were 37 mutes pre- viously, and only 32 distributorships, the fate of two routes is not clear in the record The reduction in Bluefield, however, was considered neces- sary by Respondent regardless of the conversion to distributors There- fore, any savings attributable to this reduction was not a savings resulting from the Company's decision to convert to distributors However, even if $690-$180=$582 X 52 weeks=$30,264 Total $69,836 00 Total Tires and Repairs Costs3 (C 12-14) X 52 weeks= $47,476 00 Miscellaneous4 3,328 00 (C 12-14) X 52 weeks Warehouse3 (C 12-14) X 52 weeks 29,484 00 Net Increase in the Company's labor Costs— $190,219 156 the wages and benefits from those additional five drivers is factored Into the above calculation, the Company's labor costs still increase as a result of the conversion The benefit costs calculated above include the five ad- ditional drivers The route gross earnings for the five additional drivers can be accurately estimated by dividing the total route gross earnings on Company Exhibits 12 through 14 by 32 distributors and multiplying that figure by five route sales employees The resulting route gross earnings arguably saved by the Company is $126,782 50 Thus, the net labor cost Increase to the Company, even including the reduction in the number of routes, is $63,436 65