Paul A. Reichelt Co.

In the Matter of EDWARD F. REICHELT, ROBERT J. HILL AND RUSSEL J. JENSEN, DOING BUSINESS AS A CO-PARTNERSHIP UNDER THE NA31E AND STYLE OF PAUL A. REICHELT Co. and CHICAGO FUR WORKERS UNION, LOCAL No. 45 Case No. C-1031-Decided March 7, 19440 Fur Garment Manufacturing Industry Interference, Restraint, and Coercion: expressed determination not to deal with union ; replacing union employee with a new employee shortly after his discharge ; shut-down ; closing of shop and adopting indirect method of manufacture ; employing their own non-union em- ployees and others under guise of a fictional "independent contractor" relation- ship to conceal evasion of Act-Discrimination : lock-out and discharges pursuant to-Reinstatement Ordered: locked-out employees ; respondents not ordered un- conditionally to desist from system of contracting out work since respondents may be able to make reinstatements without such desisting -Back Pay: awarded- Employee Status: so called "independent contractor " and his employees whose purported independent operations are subject to respondents ' direction and con- trol are employees within the meaning of the Act ; contract purporting to estab- lish status not controlling-Unit Appropriate for Collective Bargaining: all the respondents' employees engaged in the manufacture of fur garments , excluding supervisory and clerical employees ; no controversy as to-RepI esentatives: proof of choice: union records and testimony by 12 employees that they were members-Collective Bargaining : lock-out of employees in reply to union's at- tempt to bargain held violation of Section 8 (5) ; respondents ordered to bargain with union. Mr. Stephen M. Reynolds, for the Board. Rat/tje & Connor, by Mr. Fred A. Rathnje and Mr. Oliver B. Opsahl, of Chicago, Ill., for the respondents. Mr. Abe Feinglass and Mr. Lew Goldstein, of Chicago, Ill., for the Union. Elizabeth W. Weston, of counsel to the Board. DECISION AND ORDER STATEMENT OF THE CASE Upon charges and amended charges duly filed by Chicago Fur Workers Union, Local No. 45, herein called the Union, the National Labor Relations Board, herein called the Board, by the Regional Director for the Thirteenth Region (Chicago, Illinois), issued and 21 N. L. It B., No 29. 262 EDWARD F. REICHELT 263 duly served its complaint dated August 6, 1938, against Edward F. Reichelt, Robert J. Hill,' and Russel J. Jensen, doing business as a copartnership under the name and style of Paul A. Reichelt Company, herein called the respondents, alleging that the respondents had en- gaged in and were engaging in unfair labor practices affecting com- merce within the meaning of Section 8 (1), (3), and (5) and Section 2 (6) and (7) of the National Labor Relations Act, 49 Stat. 449, herein called the Act. With respect to the unfair labor practices, the complaint alleged, in substance, that: (1) although a majority of their employees in an appropriate unit had designated the Union as their representative for the purposes of collective bargaining, the respondents on or about April 7, 1937, and at all tines thereafter had refused to bargain col- lectively with the Union; (2) on or about April 8, 1937, the respondents locked out and discharged and thereafter refused and failed to re- employ 13 named employees because said employees joined and assisted the Union and engaged in concerted activities for the purposes of col- lective bargaining and other mutual aid and protection; (3) by the foregoing acts, by questioning certain employees about their union affiliation, by employing manufacturing concerns to manufacture some of the finished products which the respondents sell and distribute, and by carrying on a substantial part of their necessary manufacturing operations through an agent or employee named Bernard Coy, the respondents interfered with, restrained, and coerced their employees in the exercise of the rights guaranteed to them by Section 7 of the Act. On August 11, 1938, the respondents filed their answer to the com- plaint, admitting certain allegations as to the nature of their business, denying that they had engaged in or' were engaging in unfair labor practices, and affirmatively alleging that on or about April 8, 1937, they ceased to manufacture fur garments and to employ the persons named in the complaint for the reason that the respondents were unable to manufacture profitably and that since that date they had not employed any employees or manufactured any garments. Pursuant to notice served upon the parties, a hearing was held in Chicago, Illinois, on August 15 and 16, 1938, before Tilford E. Dudley, the Trial Examiner duly designated by the Board. The Board and the respondents were represented by counsel. The Union was repre- sented by its duly authorized representative. All participated in the hearing. Full opportunity to be heard, to examine and cross-examine witnesses, and to introduce evidence bearing on the issues was afforded all parties. At the close of the Board's case, the Trial Examiner .' Before they were amended at the hearing , the charge and complaint erroneously named Paul A Reichelt as a partner in the respondents ' firm in place of Robert J Hill Paul A Reichelt is not a respondent , having retired from the firm in 1924 . Edward F. Reichelt, one of the respondents, is herein referred to as Reichelt 264 DECISIONS OF NATIONAL LABOR RELATIONS BOARD granted motions to conform the complaint and the answer to the proof with respect to spelling; dates, and names. During the course of the hearing, the Trial Examiner made a number of rulings on motions and objections to the admission of evidence. The Board has reviewed these rulings and finds that no prejudicial errors were committed. The rulings are hereby affirmed. On November 8, 1938, the Trial Examiner filed his Intermediate Re- port in which he found that the respondents had engaged in unfair labor practices affecting commerce within the meaning of Section 8 (1), (3), and (5) and Section 2 (6) and (7) of the Act and recom- mended that the respondents cease and desist therefrom, reinstate the 13 named employees to their former or substantially equivalent posi- tions with back pay and, upon request, bargain collectively with the Union. Thereafter, the respondents filed exceptions to the Intermedi- ate Report and submitted a brief in support of their exceptions. The Board has considered the respondents' exceptions and, save as they are consistent with the findings, conclusions, and order set forth below, finds them to be without merit. Upon the entire record in the case, the Board makes the following : FINDINGS OF FACT 1. THE BUSINESS, OF THE RESPONDENTS The respondents, Edward F. Reichelt, Robert J. Hill, and Russel J. Jensen, are copartners doing business under the firm name and style of Paul A. Reichelt Co., having their office and place of business at 19 South Wells Street, Chicago, Illinois. At this location the firm has offices, a vault, a showroom, and shop space, under lease. Since 1924, when Paul A. Reichelt retired, there has been no change in the mem- bership of the firm. The respondents' business consists, of purchasing skins and furs and other raw materials; manufacturing these materials into fur garments, or having them manufactured by outside furriers; and selling the finished garments at wholesale. The respondents annually purchase from $70,000 to $75,000 worth of raw materials, consisting principally of furs and skins. Approximately 50 per cent of these materials are purchased by the respondents outside the State of Illinois and trans- ported to their place of business in Chicago ; the remaining furs and skins, which are purchased by the respondents from Chicago dealers, originate outside the State of Illinois and are shipped into Chicago from the various points of origin. From 60 to 75 per cent of all the furs purchased by the respondents originate outside the United States. During the period from January 1, 1936, to April 1, 1937, the respond- ents purchased raw materials having a total value of approximately EDWARD F. REICHELT 265 $125,000; from April 1, 1937, to August 15, 1938, such purchases amounted to approximately $100,000 in value. During the period from January 1, 1936, to August 15, 1938, the respondents sold finished garments having an approximate total value of $225,000, 80 to 90 per cent in value of such sales being made to purchasers outside the State of Illinois. The respondents advertise their products in a trade journal of national circulation and their products are sold principally by two of the partners who act as salesmen in a territory covering the Middle West. H. THE ORGANIZATION INVOLVED Chicago Fur Workers Union, Local No. 45, is a labor organization chartered by International Fur Workers' Union of United States and Canada, which is affiliated with the Committee for Industrial Organization.2 The Union admits to its membership fur workers in the following crafts: cutters, operators, nailers, finishers, cleaners, ironers, and apprentices and errand boys. III. THE UNFAIR LABOR PRACTICES A. The chronology of events Immediately prior to April 8, 1937, the respondents, as they had for many years previously, manufactured in their shop all the fur gar- ments sold by them. They had 17 employees engaged in manufactur- ing operations, 3 of whom had been hired on and after March 29, 1937. On or about April 1, nearly all these employees received small increases in pay.- Late in March 1937, the Union had begun to solicit members among the employees, and -by April 6, all 17 except Bernard Coy, Marie Decaster, and Josephine Vetterick 4 had joined. On or about April 7 most of the employees wore union buttons in the respondents' shop. On April 7 Abe Feinglass, an organizer for the Union, called upon the respondents at their place of business, and informed them that a majority of their employees had joined the Union and desired to bargain collectively with the firm respecting hours, wages, and other working conditions. He proposed that the respondents arrange to negotiate with the Union respecting these subjects. The respondents did not reply directly to his proposal either that day, or the next, when Feinglass telephoned to inquire what decision they had reached. At 8:30 in the evening of April 8, however, the respondents sent 2 Now the Congress of Industrial Organizations 8 Reichelt testified that weekly increases of about $2 00 each were granted to "most everybody that was working . . . for us," about 10 days before April 8, 1937 Four of the employees testified that they had received increases of from $1 50 to $2.50 commencing on or about April 1. , Feinglass , the union organizer, who mistakenly believed that there were 18 employees, testified that 15 of them had joined the Union He identified the three non-members as Coy, Decaster, and Vetterick. There is no other evidence to indicate that one other employee, Marcia Tripoti , was a union member 266 DECISIONS OF NATIONAL LABOR RELATIONS BOARD telegrams to the 13 employees named in the complaint, at their homes, reading : YOUR SERVICES NO LONGER REQUIRED MAIL- ING YOUR CHECK.6 On April 9 the shop was closed, and the re- spondents' premises were guarded by the police, called by one H. F. Maloy, executive secretary of the Associated Fur Industries of Chi- cago and actuary of the Chicago Fur Manufacturers' Association, whom the respondents had consulted regarding the Union's proposal on the preceding day. None of the 13 union members was ever reemployed by the respondents. On or about April 15, 1937, however, the respondents hired a new errand boy,' and at about the same time they arranged to have their fur garments manufactured by three outside concerns. Cer- tain unfinished work which remained in the shop on April 8 was sent to these outside furriers for completion. From April 1937 until Feb- ruary 1938, the respondents' shop was idle. In February 1938, Bernard Coy, assisted by Vetterick and Decaster, and by two other fur workers not formerly employed by the respondents, began performing manu- facturing and repair work for the respondents, in the respondents' shop, using the respondents' equipment and office facilities. Coy's re- lations with the respondents will be more fully described below. At the time of the hearing, Coy and the employees working under his supervision, and the same three outside concerns with which the re- spondents had commenced dealing in April 1937, were performing all the respondents' manufacturing and repair work, using patterns and materials furnished by the respondents. The respondents do not deny the occurrences above described. Their contentions concern the interpretation of these events under the Act. The issues relate to: (1) the respondents' motive for discharging their employees and thereafter employing contract manufacturers; (2) whether or not the respondents have in fact discontinued the manu- facture of furs and the employment of workers in connection there- with; and (3) whether or not the respondents' conduct constituted a refusal to bargain with the Union. In their answer, exceptions, and brief the respondents contend, with respect to these issues: (1) that they discharged their employees on April 8, 1937, for the sole reason that the respondents were unable to manufacture profitably and con- cluded that they could reduce their operating expenses by employing outside concerns to manufacture their products for them; (2) that they are not engaged in any manufacturing operations, and that since April 8, 1937, "they have not employed any help"; and (3) that they nego- 5 Dave Wickstrom, Sam Schaps , Biuno Lorkiewicz , Charles Gilbert, Edith Westerlund, George Lechner, Anna Chaber , Matthew Wray, Harry Miller , Edward Pietrusiak , Evelyn Velvel, Edward Mrock, Leon Archer. 0 The telegram sent to Sam Schaps read : YOUR SERVICES NO LONGER REQUIRED MAILING STATEMENT OF YOUR ACCOUNT ' Two of the 13 discharged employees worked as errand boys or apprentices. EDWARD F. REICHELT 267 tiated with the Union up to the time when they decided to discontinue manufacturing and discharged all their employees. B. The lock-out and discharges: interference, restraint, and coercion 1. The shut-down and the respondents' motive therefor It is undisputed that on April 8, 1937, the respondents discharged, by telegram, the 13 union members named in the complaint; and that for several months thereafter they had no employees performing man- ufacturing operations in their shop at 19 South Wells Street. While it is not clear whether or not the remaining 4 employees were dis- charged with the 13 union members,8 it is implicit in the respondents' contention that the employment of these 4 was also terminated upon April 8, 1937. The Trial Examiner found that the reason for the shut-down was the respondents' desire to discourage membership in the Union, and to frustrate their employees' efforts toward self-organiza- tion and collective bargaining. This conclusion is substantiated by the evidence. It is significant that prior to the first week in, April 1937, none of the respondents' employees, with one exception,9 was a member of the Union in good standing. Nor were the respondents unaware of this fact. Coy, one of the oldest employees in term of service, was hostile to the Union, and testified without contradiction that Hill, the partner who appears to have been in charge of personnel, had long known that Coy was not a member.1° When Hill hired employee Sam Schaps, in February 1929, he inquired whether Schaps was a union member and Schaps replied that his membership had lapsed. Subsequently Schaps was instrumental in getting the respondents to hire Leon Archer and Dave Wickstrom. When Schaps recommended these workers to Hill, Hill asked Schaps about their union affiliation, and was informed that Archer was not a union member and was not "in- clined to want to belong to a union," and that Wickstrom was a former member who had allowed his membership to lapse. It is also clear that the respondents first learned, immediately prior to April 8, 1937, 9 Coy testified that he was discharged by telegram on April 8, 1937 , but in view of the general unreliability of his testimony and the facts stated in Section III , B, 2, tinfra, we cannot base a finding of discharge , as to him, upon his uncorroborated statement As to employees Vetterick, Decaster, and Tripoti , there is no evidence that they received tele- grams or other specific notifications of dismissal 9 Gilbert, a fur cutter, who had worked for the respondents during the 1936 season and was rehired in February or March 1937, testified that he had joined the Union about 1900, and that lie regularly attended meetings both before and after the time when he was hired by the respondents . Gilbert testified that he wore a union button on his coat but did not wear it openly while working in the respondents ' shop Of the remaining employees , Schaps and Wickstiom had formerly belonged to the Union but had allowed their memberships to lapse, and were reinstated in the Union on or about April 6, 1937. None of the others had ever belonged to the Union before that date 10 Respondents Hill and Jensen iNeie absent on vacation at the time of the hearing The respondents did not request a postponement of the hearing in order that Hill and Jensen might testify. 268 DECISIONS OF NATIONAL LABOR RELATIONS BOARD that a majority of their employees had joined the Union. Eleven of the 12 employees who testified at the hearing said that they wore their union buttons in the shop for the first time on April 6 or 7. Reichelt, the only respondent who attended the hearing, denied that he saw them wearing buttons, but he was contradicted by employee Edward Pietrusiak, who testified that on April 7, when he entered the shop, he overheard Hill and Reichelt remarking to each other that certain employees were wearing buttons, and that he noticed the re- spondents watching their employees carefully that day. Reichelt did not deny having had the conversation with Hill to which Pietrusiak testified. However, regardless whether Reichelt observed the sudden appearance of the buttons on April 6 or 7, he admitted that on or about April 7 he learned for the first time, by questioning employee Archer, that some of the employees were members of the Union. It thus appears that for several years prior to April 1937, the re- spondents had concerned themselves about the union affiliation of persons they employed; that in fact there was only one union member working in their shop until a date immediately prior to April 8, 1937, when they dismissed their employees; and that within 48 hours before they took this action the respondents first learned that a majority of their employees had joined the Union. That the respondents were opposed to their employees' organiza- tional efforts, and that this opposition was the true motive for their closing the plant, is evidenced by statements made by the respondents to certain discharged employees on and after April 8, 1937. On April 8, Reichelt told employee Archer that under no circumstances would the respondents recognize the Union, but that Archer might work for the respondents "under open shop conditions" if he so de- sired. Reichelt did not deny making these statements. In August 1937 employee Schaps went to the respondents' premises to get. his tools, and on that occasion asked respondent Hill whether there would be any "settlement" of the lock-out. Hill replied that there would be no settlement with the Union, but that he and Reichelt would have no objection to rehiring Schaps himself. Hill further asked Schaps why Schaps had not told him that the employees were organizing; and Jensen remarked that the firm had made a mistake in retaining its employees for any length of time because it gave them an oppor- tunity "to get together." Again, when employee Matthew Wray went to the respondents' premises in September or October 1937 to get his tools, respondent Jensen told him, in Hill's hearing, that he "would have had a nice job if the union didn't butt in." The respond- ents neither denied the testimony of these witnesses nor attempted to impeach their credibility. We find that the statements attributed by them to the various respondents were made as described in their testimony. EDWARD F. REICHELT 269 The respondents' employment of a new errand boy to replace one of the two they discharged on April 8, 1937, affords further evidence that the shut-down was directed against their employees' union affilia- tions and activities. Reichelt admitted on the stand that one of the discharged errand boys was replaced by a new employee. He testified initially that the new errand boy was not hired until approximately 2 months after the shut-down, but upon being referred to the respond- ents' pay-roll records, he admitted that the new employee was actually hired on April 15, 1937, just a week after two admittedly competent errand boys were discharged. Both the discharged errand boys, Bruno Lorkiewicz and Edward Mrock, had worked for the respondents for a substantial period; both had joined the Union on or about April 6, 1937; and both had worn union buttons in the plant on the day before that on which they were discharged. Interrogated as to why these employees were replaced, Reichelt testified that the firm replaced them at a lower wage than they had been receiving; that they had each been earning approximately $17.50 a week-Moo much money to run errands," whereas the new employee was hired at $12.50. He testi- fied, however, that the $12.50 job was not offered to either of the dis- charged errand boys, and, upon being referred to documentary evidence, he finally admitted that Bruno Lorkiewicz was actually earn- ing only $12.00 a week at the time of his discharge." Upon being asked again why Lorkiewicz was replaced, Reichelt replied : Bruno was discharged with the rest of them at the time we decided to quit manufacturing. After we decided we needed an errand boy, the thought never came into our minds to rehire Bruno. The respondents' decision "to quit manufacturing" does not explain their failure to rehire the one employee whose job remained. We find that Lorkiewicz was discharged, and was not rehired, because he had joined and assisted the Union. Finally, Reichelt virtually admitted that the respondents in closing their shop were motivated by antagonism toward their employees arising out of the fact that the Union had successfully organized them. Asked why they dismissed all their employees at once, leaving semi- finished work in the shop, instead of laying off the employees gradually as the work was completed, Reichelt said : "We decided definitely to quit manufacturing, and made a clean break." The record continues : Q. Why did you fire the errand boy also? A. Because we decided to get rid of everybody that had been working for us. [Italics added.] Again, immediately following testimony by him that the respondents discontinued manufacturing because of excessive operating expenses, u Mrock was earning $16 00 a week when be was discharged. 270 DECISIONS OF NATIONAL LABOR RELATIONS BOARD the dissatisfaction of their employees, and a desire to reduce labor costs,12 Reichelt was asked by the respondent's attorney whether he could recall any other reasons for sending out the telegrams on April 8, 1937, and he replied; "I just don't know what you are driving at." The record continues : Q. Was there anything in connection with any information that you received from the Union on that date which caused you to send those telegrams * * * A. Just that Mr. Feinglass had informed us that he was organ- izing the shop. [Italics added.] From the foregoing evidence we conclude that the union activity of the respondents' employees, made known to the respondents on or about April, 7, 1937, induced their decision to close the plant. That this union activity was the only factor motivating the respondents' conduct on and after April 8, is demonstrated by an analysis of the evidence which the respondents offered to support their explanation that they acted for business reasons. The respondents attempted to prove by the testimony of Edward Reichelt that they decided to dis- continue manufacturing because: (1) the respondents were unable to earn profits because of high production costs, and could have their manufacturing performed more cheaply by outside contractors than in their own shop, and (2) the respondents were "informed" that their employees were dissatisfied and wanted higher wages and shorter hours, and the respondents could not afford to meet this prospective increase in the cost of production. The evidence offered by the re- spondents discredits these assertions. As to the respondents' contention that they had been losing money on their manufacturing operations and that they reduced expenses by having their manufacturing performed by outside contractors, we find Reichelt's testimony 13 wholly unconvincing. Reichelt was unable to particularize regarding the manufacturing losses which, he testified, the partners had suffered for 18 months prior to the shut-do«n. The existence of these losses, he asserted, was ascertained by the use of time studies, made annually about the first of February when the manu- facturing season began. The respondents introduced no documentary evidence of these cost studies.14 Reichelt described the studies as 12 This testimony is discussed infra 13 The respondents offered no other evidence to support this contention. ' On p 273 of the record, Reichelt testified : Q * * * you state that you made the computation of the loss from the work records that the workers made when they made on [sic] the coats Do you have those records here? A. No, I never keep them Q. You throw them away? A. Yes Elsewhere he testified that he thought that all the respondents' time cards had been destroyed and that all the studies made in February or March 1937 were discarded EDWARD F. REICHELT 271 computations of the total number of hours spent by the several em- ployees in performing their respective shares of the work on each sample coat produced. Though the witness professed personal famil- iarity with the cost studies, and testified at one point that those made in February or March 1937 were "as accurate as I knew how to make them," he confessed complete inability to determine why or wherein the respondents' labor costs were "too high." He denied that the reason for the losses could have been that the respondents had too many employees or insufficient work; and when asked whether the employees were inefficient, he replied : "I have, never really been able to determine the reason for the shop losing money. I still don't know." With respect to the savings allegedly achieved by manufacturing through outside contractors, Reichelt testified that before April 8, 1937, the respondents incurred a cost of $37.50 for manufacturing a Hudson seal coat,15 while at the time of the hearing they were paying their contract manufacturers approximately $32.50 to make such coats. But the testimony of the firm's former employees, who stated on the stand the number of hours each of them had required to complete his share of the work on a Hudson seal coat, indicated that, at the wages which the respondents had been paying before the shut- down, their actual labor cost to produce a coat of this type was only slightly over $18.00.16 Reichelt denied that his employees had 15Reichelt stated that a Hudson seal coat "would be a good coat to take as an example." 1e The operations comprising the process of manufactui ing a fur coat, after the furs are tanned , are cutting the skins and nailing them to a board on which the pattern has been drawn, performed by cutters and nailers ; joining and sewing the skins, performed by operators ; and inserting linings and stays, performed by finishers . Bernard Coy, who had worked in the fur trade performing all operations for 25 years , estimated on the stand the number of hours required by each craftsman to complete his job on a single coat as tollows : cutter and nailer , 8 hours ; operator, 7 hours ; finisher , 6 to 8 hours ('A hour for staying ) Coy stated that the glazing process would require an additional 15 minutes The respondents ' discharged employees also testified as to the amount of time each of them had required to complete his task on a single Hudson seal coat Gilbert cut and squared a coat in 8 hours ; Wray required h/2 to 2 hours to do the nailing Archer did the operating and joining in 51/2 to 61/2 hours Velvel finished and lined a coat in 8 hours Goldstein , the Union 's representative at the healing, who has worked in the industry as cutter , operator , nailer, squarer, and, glazer for 20 years, also testified as to the time required for each of these operations , corroborating the statements of Coy and the respondents ' other employees On the basis of the highest estimates given by any of these witnesses , at the highest wage for the particular type of work being paid by the respondents on April 8 , 1937 , the respondents ' labor costs appear to have been those shown in the following tabulation Costs for each operation at the union « age scale, as stated by Goldstein, are shown in parallel columns Operation Total hours Respond- ents' wage Union wage (35-hour Respond- Cost at required (40-hour week) ents' cost union scale week) Cutting _____________________________ 8 $40 00 $57 00 $8 00 $13 04 Nailing______________________________ 2 18 50 43 00 925 2 40 Operating___________________________ 7 30 00 50 00 5 25 10 01 Finishing____________________________ 8 20 00 37 00 4 00 8 48 Total costs -------------------- ------------ ------------ ------------ 18 175 33 93 272 DECISIONS OF NATIONAL LABOR RELATIONS BOARD worked as rapidly as they claimed in their testimony and reiterated that, although the time studies showed that the cost of producing such a coat should have been only $32.50, respondents' actual labor- cost to produce a Hudson seal coat had been $37.50. However, the respondents adduced no evidence tending to corroborate this state- ment, and Reichelt's unsupported testimony on the subject is un- convincing. Inconsistent with Reichelt's professed knowledge of the exact cost incurred by the respondents in producing a single Hudson seal coat in the shop are his statements : "I never figured it down to, one particular coat. I figured it over a period of a week or 2 weeks, computed on the entire pay roll for the time"; and "the computations have been made over a period of weeks, not on one particular coat."' Furthermore, Reichelt admitted that the respondents' employees, prior to the shut-down, customarily spent part of their time on repair work, for which no time studies were made, and that the cost of such repair work was included in the $37.50 figure 17 which, he claimed, is comparable to the contract cost figure of $32.50. Since the $32.50' figure represents only labor expended in the manufacture of a single Hudson seal coat, the comparison, claimed to prove a savings of $5.00 per coat is obviously fallacious. Finally, Reichelt was unable to enumerate the component elements entering into the respondents' alleged production cost of $37.50. He denied that his former cutter, Gilbert, had ever cut the furs for a Hudson seal coat in 1 day, as- Gilbert testified he had done, but Reichelt admitted that he did not know the labor cost of the cutting operation on a Hudson seal coat, and offered no production records which might have contradicted Gilbert's estimate 18 In the absence of more detailed, consistent, and coherent testimony regarding the respondents' time studies and costs, we disregard Reichelt's testimony concerning them as a basis for testing the- veracity of the respondents' claim that their manufacturing costs were so excessive as to compel them to discontinue operating their shop. Nor can we credit Reichelt's statement that by changing its 17 At p. 289 of the record, Reichelt's testimony on cross-examination was as follows Q. Did your employees do some repair work at the same time they were doing some of this manufacturing work'+ A. Yes Q How (lid you make allowances for the repair work that was done? A It was all figured in what was turned out of the shop. Q Then you figured in the repair items along with the costs on the actual manufacture of the coat? A 'rhat's right, the entire production of the whole shop was figured. Q How can you say that part of the labor cost that went Into repair work was reflected in the manufacture of the Hudson seal coat? A Well, it was a figure that was arrived at, that is how it was arrived at I couldn't tell you today. I don 't know. L1 In another connection Reichelt testified that the respondents never kept daily produc- hon records EDWARD F. REICHELT 273 mode of operation the firm saved $5.00 on the manufacture of the single coat which he mentioned as typical. If the costs of producing a Hudson seal coat are in fact typical, we must infer that the re- spondents have increased rather than decreased their labor costs by having their manufacturing performed by others. Reichelt denied, but did not refute, the showing that the labor on such a coat actually cost the respondents approximately $18.00 before April 8, 1937, as compared with the $32.50 which the respondents were paying their contract manufacturers at the time of the hearing. The Trial Ex- aminer concluded that the respondents had increased their manuf_c- turing costs by adopting an indirect method of manufacture, and we agree with this conclusion. In their exceptions to the Trial Examiner's report, the respondents complain that this finding ignores savings they have achieved in rental, light, power, interest on equipment investment, depreciation, up-keep, and other incidentals, by discontinuing the operation of their shop. But the respondents offered no evidence to support this argu- ment, raised for the first time after the close of the hearing. Reich- elt, in his testimony, did not mention overhead expenses as a factor contributing to the respondents' alleged operating losses. Nor does the record reveal wherein the respondents, who still have their shop space under lease and still own their equipment and furnish light and power for Coy's operations 19 could have effected any substantial re- duction in overhead costs to offset the demonstrated increase in labor costs. Reichelt's testimony was no more credible when he turned from a discussion of specific manufacturing costs to the assertion that for 18 months prior to April 8, 1937, the respondents had considered dis- continuing the manufacture of fur garments because they had been losing money, on their operations.as a whole. In his testimony as to this, too, Reichelt's particular statements contradict his general asser- tions. After testifying that " * * * we have always considered that we have lost money in our shop," he explained that, by this, he meant that the respondents' income was insufficient to cover all ex- penses. Although he claimed at first that these losses had been suffered for 18 months prior to April 8, 1937, he later said that the respondents had not realized any profits since 1931, that in the years between 1931 and 1937 they "either lost money or broke even, or something of that sort," and that he believed that they "broke even" in 1936. That there was no sudden change for the worse in the respondents' financial condition, in the early months of 1937, is evi- denced by Reichelt's statement, on direct examination, that the pro- duction losses shown by the firm's records had varied only slightly 19 Discussed in Section III, B, 2, infra 274 DECISIONS OF NATIONAL LABOR RELATIONS BOARD during the last several years. Evidently the respondents' claimed losses were not so severe as to deplete substantially their cash reserves or require them to reduce their drawing accounts. Reichelt testified that in 1931 the respondents had a cash reserve of from $10,000 to $20,000, and that in 1936 their cash reserve amounted to about $15,000. In the intervening years each of the partners had twice contributed about $500 to the business. Meanwhile, each partner had drawn a salary of from $250, to $300 or more per month. Reichelt testified that the respondents kept books and prepared financial statements as of February 1 each year, but these statements, which, presumably, would have reflected the claimed unprofitableness of the respondents' operations, were not produced. Moreover, Reichelt admitted that for 5 years before the hearing the respondents had sold their goods at a profit over and above labor, material, and overhead costs.20 Further belying Reichelt's claim that, owing to manufacturing losses and the firm's bad financial condition, the respondents had long considered closing their shop, are the facts, admitted by the respond- ents, that within 10 days prior to April 8, 1937, and after time studies had, according to Reichelt, been completed on samples of part of the line of coats to be produced in 1937, the respondents hired three additional employees and granted a general increase in wages. With respect to the latter, Reichelt testified that the respondents thought that their employees were dissatisfied and that it would be "good business" to grant increases so that the employees would turn out the work better and the respondents "would make more money." And when asked to explain why the respondents had hired more employees at a time when they purportedly planned to close their shop, he replied : ". . . we probably did so because we intended to continue manufacturing for the balance of 1937, . . . We didn't know whether we were going through the whole year or what we were going to do, but we were producing at that time, and could use more help, and put them on." [Italics added.] The employee last hired was Anna Chaber, a finisher, who testified that she began to work on April 5. Faced with his own admission that the respondents intended to continue operating their shop as late as that date, Reichelt explained, on cross-examination, that the respondents began to change their minds on April 6, when the dissatisfaction of their employees was evidenced by an alleged sudden slow-down of work. But he admitted that the respondents kept no production records which might have proved this statement and that he had made no com- plaint to the employees on account of the alleged slow-down in production. 20 Asked to explain why the respondents thought that they were manufacturing at a loss while selling at a profit, Reichelt testified , at p 330 of the record "we knew we were losing money in our shop but figured we were making it upon our sales " EDWARD F. REICHELT 275 In view of the showing that the respondents actually increased their manufacturing costs by adopting an indirect method of manu- facture, and in view of Reichelt's admissions and frequent self-con- tradictions on the stand, we find it impossible to believe that the respondents were induced to close their shop either because of busi- ness losses due to excessive labor costs, or because of economies to be effected by having outside contractors perform their manufacturing. The additional explanation of the shut-down offered by Reichelt, namely, that the demands of the respondents' employees entailed an increase in operating expense which the respondents could not afford to incur, is equally implausible. The respondents cannot have been motivated solely by apprehension of increased production costs, since, immediately following the shut-down, they initiated a mode of operation which was more costly than their former manufacturing system and which, in fact, entailed approximately the same increase in labor costs as the respondents would have incurred by adopting the standard union scale of wages and hours in their own shop. In view of the uncontradicted evidence showing that the respond- ents'first discovered their employees' union affiliation and activity on or about April 7, 1937, that on that date the respondents were first approached by a union organizer, that the respondents thereafter expressed to Schaps and Archer their determination not to deal with the Union, that shortly after discharging Lorkiewicz, a -union mem- ber, the respondents hired a new employee to replace him, and that the respondents indicated their willingness to reemploy Schaps and Archer independently of any settlement with the Union, and in view of the complete failure of the respondents' efforts to prove that they changed their method of operation on April 8, 1937, for busi- ness reasons, we conclude that the respondents closed their shop and thereafter employed outside contractors to manufacture their prod- ucts for the sole purpose of frustrating their employees' union activities and discouraging membership in the Union. 2. The respondents' mode of operation subsequent to April 8, 1937: Bernard Coy The foregoing conclusion with respect to the respondents' change of manufacturing methods is further substantiated by the evidence relating to the respondents' conduct subsequent to April 8, 1937, par- ticularly in relation to Bernard Coy and his "employees." As stated above, the respondents contend that after April 8, 1937, they wholly ceased to manufacture their own products and adopted a system of employing independent contractors to perform this work for them. However, it is clear that at least as to that portion of the manufac- turing work which, at the time of the hearing, was being performed 276 DECISIONS OF NATIONAL LABOR RELATIONS BOARD by Coy and his "employees," the respondents' adoption of a coat ract- manufacturing system was only colorable. At the time of the hearing, Coy and his assistants were perforniilig about 90 per cent of the respondents' repair work, and from 15 per cent to 25 per cent of their manufacturing of new garments. The remainder of the manufacturing and repair work was being per- formed by three Chicago furriers referred to in Reichelt's testimony as Sugarman Brothers, Miller Fur Company, and Haugen Furs. The record contains virtually no evidence concerning these establishments. Reichelt testified that the respondents' arrangements with them were consummated entirely by telephone. There is no evidence indicating whether or not these "arrangements" consisted of binding contracts for services to be rendered to the respondents for any agreed period of time. With respect to Coy and the four people working under his supervision, the record is more informative. Coy himself had worked for the respondents for approximately 25 years. prior to the hearing. He had once joined the Union, and had participated in a strike against the respondents' firm in 1924, but at that time he had become antagonistic toward the Union and since 1924, as the respondents knew, he had not been a member of the organization. Coy testified that on April 8, 1937, he received a tele- gram of dismissal, couched generally in the same terms as those sent to the other employees, but he could not describe its language spe- cifically. His conduct immediately following his alleged discharge was not that which would normally be expected of an old employee, discharged without fault of his own and without any previous notice, after 25 years' service. Het left Chicago on April 9 and remained away from the city for a week, on vacation. He then returned to Chicago, and worked for several months for the Bishop Company, a fur house. Coy testified that he had not the slightest idea why he was discharged by the respondents; that he was "more than sur- prised" to receive the telegram; but that, nevertheless, he did not communicate with the respondents to ascertain the reason for his discharge. He testified that he first returned to the respondents' place of business in January 1938;91 at which time he called upon respondent Hill and asked if he could obtain a sub-lease of the re- spondents' factory space and do some of their work under contract. When questioned as to why he did not, at that time or earlier, at- tempt to obtain reinstatement to his old job, Coy testified that he knew that there was "not a chance" of the respondents' reemploying him because "What can one man do alone?" After his interview 21 Schaps testified that lie saw Coy and Vetterick in the respondents' premises on a Sat- urday afternoon late in August 1937, and Reichelt testified that he "believed " that he had seen Coy once or twice between April 1937 and January 1938 and that one or two of the respondents had attended Coy's wedding in the summer of 1937. EDWARD F. REICHELT 277 with Hill in January, further negotiations between Coy and the respondents resulted in his beginning to work for them early in February 1938. Coy's relations with the respondents from that time until the time of the hearing were purportedly governed by a sub-lease and contract dated February 1, 1938, each signed by Coy and by Reichelt for the respondents. The sub-lease granted to Coy the use of the respond- ents' factory space, reserving to the respondents and their employees the right to use this space for ordinary purposes not interfering with Coy's use, with light and power to be furnished by the respondents, at a rental of $65 per month. It also granted to Coy the privilege of storing materials in the respondents' vault, respondents retaining control thereof. The term of the sub-lease was for 12 months from February 1, 1938, unless sooner terminated by the respondents upon their giving Coy 5 days' written notice. The contract, to be in effect for the same period as the sub-lease, provided that Coy should manu- facture to the order of the respondents "any and all garments which they desire," during the life of the contract, for a mutually satisfac- tory price on each garment manufactured, remodeled, or repaired, "to be determined in accordance with the usual terms for such work in the trade." Ninety per cent of amounts thus falling due were to be paid to Coy weekly, 10 per cent being retained by the respondents until the termination of the contract "to cover any incidentals or disputes that might arise between the parties." The respondents agreed to furnish Coy with enough work to keep him "reasonably busy" during the term of the contract. The operative provisions of this instrument conclude with the following language : "Bernard Coy shall be considered under this contract as an independent con- tractor and carry his own insurance and other protections necessary for himself and employees." While Reichelt testified that these instruments expressed all the relations existing between Coy and the respondents at the time of the hearing, further evidence on this subject indicates the contrary. Coy, according to his testimony and that of Edward Reichelt, en- joyed the privilege of using the respondents' telephone; his calls were taken and his books were kept by the respondents' stenographer. Coy had no office equipment of his own except a single filing cabinet. He did not reimburse the respondents for the use of their telephone, office facilities, or stenographer's time. Questioned about his ar- rangement regarding the stenographer's services, Coy testified that there was no definite understanding respecting her compensation but "that at the end of the year, I can pay her so-and-so." The evidence further indicates that-the respondents retained con- trol of Coy's books and decided for him what disbursements he should make. Coy could not remember, when he testified, on Mon- 283032-41-vol 21--19 278 DECISIONS OF NATIONAL LABOR RELATIONS BOARD day, August 15, 1938, whether or not he had paid his rent for July and August 1938, although the respondents subsequently introduced in evidence Coy's cancelled check for $130, dated August 12. Reichelt testified that this check was drawn by Coy in payment of his July and August rent. Questioned as to whether or not he had paid his rent for April, May, or "last month," Coy was uncertain, testified that he would have to look at his books, and then said: "I don't think I paid it last month, but I have a record of it. I don't get a chance, hardly, to see my books." [Italics added.] A copy of the entries in Coy's cash book for the period from February 23 through June 13, 1938, was introduced in evidence, and Coy testified to its accuracy. However, it is evident that he had insufficient knowledge of his busi- ness affairs to know whether or not the books were correct. He was wholly unable to testify, by referring to his original books, as to entries subsequent to June 13 , 1938. Stating that there was an entry of $150.50 on June 20, 1938, he could not say what that figure repre- sented, nor did he state whether it was a receipt or disbursement. He was asked whether he ever checked the bookkeeper's entries, and replied: "I think I just look them over, what little I know. I don't know much about it. . . . I depend on her for e-verything." [Italics added.] Coy displayed similar ignorance with respect to other matters affecting his business operations and his relationship with the respondents. He testified that he had drafted the sub-lease and the contract described above, but Reichelt testified that these instru- ments had actually been drafted by two of the respondents, after a conference between Coy and the respondents in which proposed terms were discussed. Coy could not remember that anything was said at this conference about such fundamental matters as the re- spondents' cancellation privilege and the provision whereby the respondents were empowered to retain 10 per cent of the amounts due Coy. When asked whether he was aware that the contract con- tained this latter provision, Coy testified : "Not that I know of." Again, although Coy testified, with a positiveness born of his long experience in the trade, as to the number of hours required to com- plete each operation in the manufacture of a Hudson seal coat, he was vague about the labor costs which he incurred in manufacturing such a coat, and wholly unable to state how much profit he made on each. He admitted that his personal income from his shop averaged approximately $10 per week less than the wages he had been earning in the respondents' shop ; that he was "in a hole" at the time of the hearing; and that he had had difficulty at one time in meeting his pay roll, but had "got hold of" some money of his own on that EDWARD F. REICHELT 279 occasion and paid his employees.22 Notwithstanding these unfavor- able financial factors, concerning which an independent businessman, newly embarked on a commercial venture of his own, would normally be solicitous, Coy had no exact knowledge concerning his liabilities, could only "guess" at the amount of his weekly pay roll, and, as discussed below, did not know when a debt he had incurred for working capital would mature. It is evident that Coy's operations could not have been undertaken and could not continue without the respondents' patronage and the use of their resources. Coy does not own any manufacturing equip- ment but uses the sewing machines, nailing boards, drum, and tables belonging to the respondents, which are located in the factory space where Coy's work is conducted.23 Coy admitted that he had insuf- ficient capital with which to start his business in February 1938. The respondents assisted him at that time by giving him a 2 months' rent concession-to which there is no reference in the sub-lease-and. Edward Reichelt lent him $300 on an unsecured note. Coy testified that this note was clue "next year," but there is no evidence indicating its exact maturity date. Coy testified that he performed "just a little" work for customers other than the respondents, and that he had "a lot in view," but when he was asked to name the "maybe one or two persons" who, lie asserted, had given him orders since Febru- ary 1938, he said that he could not remember their names and in- quired whether this information Was not shown in his books. Told that he could refer to his books to refresh his memory, Coy testified again that he was not familiar with his books. The record of his receipts through June 13, 1938, which is in evidence, contains no memoranda of payments to Coy by any persons other than the re- spondents. It is thus obvious that from February 1938 to the time of the hearing, Coy had not had any outside customers, and that he was entirely dependent upon the respondents' work for his income. Coy's four employees, at the time of the hearing, were an operator and an apprentice with whom lie had had no acquaintance before they Went to work for him, and two finishers formerly employed by the respondents. Coy testified that so far as lie knew, none of his employees belonged to the Union, a fact which it is clear from other u Compaie Coy's testimony, at p 114 of the iecoid. in connection with his approach to the respondents in January 1938 Q Why did you think, if they let you out in April, they might be willing to give you some work the following Janua,y, 1938? A Well, tl•at is when I went after it I don't know what is next year going to happen , so I went after it , after I got laid off I had to have some woik I was down and out [Italics supplied ] 23 There is no reference to this equipment in either the sub-lease or the contract Coy testified that the use of the equipment formed part of the consideration for his obligation to pay $65 nent; and both Coy and lteiche] t testified that Coy had undertaken to keep the machinery in repair 280 DECISIONS OF NATIONAL LABOR RELATIONS BOARD evidence is true with respect to Decaster and Vetterick, the finishers, since they, together with Coy, were the only employees of the respondents, prior to April 8, 1937, who did not belong to the Union. Coy testified that he had asked Decaster and Vetterick to work for him because he had known them and worked with them a long time and "they Were nice people." He did not, however, select his operator on the same basis of long familiarity. His operator, Zaffaras, was hired through Maloy, executive secretary of the As- sociated Fur Industries of Chicago, and actuary of the Chicago Fur Manufacturers' Association, an association of which the respondents' firm is a member. Coy's explanation of why he called Maloy when he needed an operator was obviously false. He testified that he telephoned to Maloy because Maloy was a "friend" of his, but admitted that he had not previously been acquainted with Maloy.=4 From the foregoing, it is clear that Coy's "independent" operations are financed and supported by the respondents, are conducted on their premises through the use of their tools of production, and are necessarily subject to their direction and control. The work per- formed by Coy and his assistants is an integral part of the respondents' business enterprise. In view of these considerations, we conclude that Coy and his employees are in reality employees of the respondents within the meaning of the Act. The fact that the con- tract between Coy and the respondents labels Coy an "independent contractor" does not preclude this conclusion. As we had, occasion to point out in Hatter of Seattle Post-Intelligencer Department of Hearst Publications, Inc. and Seattle Newspaper Guild, Local No. 82,25 the definition of "employee" contained in Section 2 (3) of the Act is not a technical one. In that case we said : "The matter is not conclusively determined by a contract which adverts to and purports to establish the status of such person other than as an employee. Public interest in the administration of the Act permits an inquiry into the material facts and substance of the relationship." We find that the respondents have attempted to invest their relationship with Coy with -indicia of the relation of "independent contractor" as a device to evade their duties under the Act, and to conceal the fact 24 Coy's testimony as to this is typical of his general evasiveness and incoherence Q * * • why did you say be [Maloy] was a friend of yours? A. Well, he was, then he gave me the man Q That is the reason you called, because he was a friend of yours after you got the man , is that it? A Yes. 259 N. L. R. B. 1262 See also Matter of The Connor Lumber & Land-Co and Interna- tional Woodworkers of America, Local No 125 (C. I 0.), 11 N L R. B. 776; Matter of Washsngton Branch of the Sun Life Insurance Company of America and Industrial and Ordinary Insurance Agents Union No. 21354, Industrial and Ordinary Insurance Agents Council, 15 N. L R. B 817 EDWARD F . REICHELT 281 that after locking out their employees they rehired those who were not members of the Union and resumed manufacturing operations in their shop on a reduced scale. 3. Conclusions with respect to the lock-out and discharges; the closing of the plant; and the respondents' subsequent conduct Upon the basis of the foregoing, we find: (1) that the respondents, by locking out and discharging the 13 employees named in the complaint, discriminated in regard to the hire and tenure of employment of said employees. and thereby dis- couraged membership in the Union ; (2) that by the foregoing acts of discrimination, by expressing to Schaps and Archer their determination not to deal with the Union, by replacing Lorkiewicz with a new employee shortly after dis- charging him, by indicating their willingness to reemploy Schaps and Archer independently of any settlement with the Union, by closing their shop and adopting an indirect method of manufacture, and by employing their own non-union employees and others under the guise of a fictional "independent contractor" relationship, the respondents interfered with, restrained, and coerced their employees in the exercise of the rights guaranteed in Section 7 of the Act. C. The refusal to bargain collectively 1. The appropriate unit The complaint alleges that the unit of the respondents' employees appropriate for the purposes of collective bargaining, within the meaning of Section 9 (b) of the Act, consists of all the respondents' employees, excluding supervisory and clerical employees. All the employees constituting the unit thus described are engaged in the production of fur garments, and all are eligible to membership in the Union. The respondents have no maintenance employees. At the time of the alleged refusal to bargain, April 7, 1937, respondent Hill supervised the work of the employees in the respondents' shop; at the time of the hearing, Coy appeared to be acting in a supervisory capacity. In addition to the employees engaged in fur production in their shop, the respondents have only one other employee, an office girl, whose exclusion from the unit is not disputed. The respondents have raised no issue with respect to the appropriate unit. We find that the employees of the respondents, exclusive of super- visory and clerical employees, constitute a unit appropriate for the purposes of collective bargaining and that said unit will insure to employees of the respondents the full benefit of their right to self- 282 DECISIONS OF NATIONAL LABOR RELATIONS BOARD organization and to collective bargaining, and otherwise effectuate the policies of the Act. 2. Representation by the Union of the majority in the appropriate unit At the time of the alleged refusal to bargain, there were 17 employees in the appropriate unit. At the hearing, 12 of these employees testi- fied that they were members of the Union and had joined the organ- ization on or before April 6, 1937. Their membership, as well as that of George Lecliner, an employee who did not testify, was further evidenced by the testimony of Feinglass and by the records of the Union.26 The respondents did not controvert this evidence. We find that on April 6, 1937, and at all times thereafter, the Union was and that it is the duly designated representative of the majority of the respondents' employees in the appropriate unit. Pursuant to Section 9 (a) of the Act it was and is, therefore, the exclusive repre- sentative of all the employees in said unit for the purposes of col- lective bargaining in respect to rates of pay, wages, hours of employ- ment, and other conditions of employment. 3. The refusal to bargain collectively The complaint alleges that on or about April 7, 1937, and at all times thereafter, the respondents refused to bargain collectively with the Union as the exclusive bargaining representative of all the re- spondents' employees within the appropriate unit. It is undisputed that on April 7, 1937, the Union, through Feinglass, attempted to enter into negotiations for an agreement with the respondents respect- ing their employees' wages, hours of work, and other conditions of Employment. The respondents claim that prior to April 8, 1937, and up to the time of the discontinuance of their manufacturing business, they negotiated with the Union. However, as we have found, the discontinuance of the respondents' manufacturing operations con- stituted an unfair labor practice. Such discontinuance, therefore, did not excuse the respondents from the performance of their duty to bargain collectively. Moreover, the record shows that the re- spondents did not, in fact, negotiate in good faith with the Union prior to the lock-out. Feinglass testified that when lie visited the respondents at their place of business on April 7, 1937, he was introduced to Hill, who called in Reichelt and Jensen. Feinglass informed the respondents that a 26 There was no evidence respecting the union affiliation of a fourteenth employee, one Marcia Tripoti, except that Feinglass testified , without contradiction , that all the 17 ex- cept Coy , Decaster, and Vetterick , had joined the Union EDWARD F. REICHELT 283 majority of their employees had joined the Union and desired to bar- gain collectively with them concerning wages, hours, and other working conditions. He requested the respondents to arrange for a later con- ference with himself and a committee of the employees to negotiate the terms of an agreement covering these subjects. Reichelt denied that the Union represented a majority of the employees, but upon Feinglass' suggesting that the employees in the shop be questioned, this subject was dropped. Hill then inquired what conditions the Union demanded, and Feinglass replied that he would prefer not to formulate specific de- mands until the respondents' "special problems" had been considered in a subsequent conference. Thereupon, Hill asked to see the Union's standard contract. Feinglass did not have a copy of the contract form with him and objected to showing it to the respondents on the ground that the contract was "a rigid document" and that the Union was will- ing to negotiate with the firm. At Hill's insistence, however, Feinglass agreed to mail a copy of the Union's contract to the respondents. Hil l then said that he wanted time to think over the natter, and would like to consult Paul Reichelt.27 Hill suggested that Feinglass call him the following day, and the interview terminated. Reichelt's testimony, in the main, corroborates Feinglass' account of the April 7 interview .211 Although he first asserted that Feinglass de- inanded a 35-hour week and increased wages, Reichelt admitted, in his testimony, that no specific wage terms were discussed and that it was one of the respondents who introduced the discussion of the Union's standard contract. On April 7, after leaving the respondents' office, Feinglass mailed to them a mimeographed copy of the Union's standard contract form, in which blanks for the date and names of the contracting parties were not filled in, together with a letter reading as follows : Pursuance to our conversation of April 7, I am hereby enclosing a copy of our regular Union contract for your information. [Italics added.] The Union wishes to request of you an iii, , nediate conference [italics added] for the purpose of bargaining collectively for the people in your shop who are all members of the Chicago Fur Workers' Union, Local No. 45, and who have asked us to act in their behalf. Expecting an immediate reply, we are . . . The respondents did not reply to this letter except by closing their shop. Although as stated above, Reichelt testified that the respondents closed ^ Paul Reichelt is not a respondent , having retired from the partnership in 1924. 21 Asked to recount what happened at that conference , Reichelt testified "Mr Feinglass stated that he had organized our shop , wanted us to sign a union agreement, and we stated that we wanted time to think it over . . I believe that takes care of practically the entire conversation , as far ns I recall it" 284 DECISIONS OF NATIONAL LABOR RELATIONS BOARD their shop for the reason, among others, that they could not afford to meet their employees' demands, it is clear that up to this point the Union had not made any uncompromising demands, nor given the respondents reason to believe that negotiation would be futile. On April 8, about 6 p. in., Feinglass telephoned the respondents. He spoke to Hill and asked what decision the respondents had reached; and Hill, who acknowledged receipt of Feinglass' letter, said that he had not yet contacted Paul Reichelt and would notify Feinglass later of the respondents' decision. At the time of the telephone conversation, according to Reichelt's testimony, the re- spondents had already decided to discharge their employees that night, although the telegrams effectuating this decision were not dispatched until 8: 30 o'clock. On the following day the respondents' plant was closed and Maloy had summoned a police guard- to- avert, possible "labor difficulties." On April 9 Feinglass, having been authorized by the union mem- bers to collect their wages, went to the respondents' office accompanied by another representative of the Union, with the object of terminat- ing the lock-out if possible. His interview on that occasion, as he described it, was brief : ". . . Mr. Robert Hill said he would mail the wages to the workers at their homes, and he was very non- comnmittal, so we walked out." It thus appears that the respondents met the Union's attempt to bargain collectively by a hastily planned lock-out and by subsequent conduct evincing a determination on the part of the respondents to avoid dealing with the Union at any cost. We find that on April 7, 8, and 9, 1937, and at all times thereafter, the respondents refused to bargain collectively with the Union as the representatives of their employees in an appropriate unit in re- spect to rates of pay, wages, hours of employment, and other condi- tions of employment, and that by such refusal the respondents inter- ferred with, restrained, and coerced their employees in the exercise of the rights guaranteed in Section 7 of the Act. IV. THE EFFECT OF THE UNFAIR LABOR PRACTICES UPON COMMERCE We find that the activities of the respondents set forth in Section III above, occurring in connection with their operations described in Section I above, have a close, intimate, and substantial relation to trade, traffic, and commerce among the several States, and tend to lead to labor disputes burdening and obstructing commerce and the free flow of commerce. EDWARD F. REICHELT V. THE REMEDY 285 We have found that the respondents have engaged in unfair labor practices. We will order them to cease and desist therefrom. In addition, we will order the respondents to take certain affirmative action which we find necessary to effectuate the policies of the Act. We have found that the respondents locked out and discharged the 13 employees named in the complaint, thus discriminating against them with respect to hire and tenure of employment within the meaning of Section 8 (3) of the Act and discouraging membership in the Union. We shall, therefore, in order to effectuate the policies of the Act, order the respondents to offer reinstatement to their former or substantially equivalent positions to these employees. We shall further order the respondents to make whole each of the discharged employees for any loss of pay such employee may have suffered by reason of his dischaige, by paying to him a sum equal to the amount lie normally would have earned as wages, from April 8, 1937, to the date of the respondents' offer of reinstatement, minus his net earnings 29 during said period. Although we have found that the respondents' adoption of a sys- tem of manufacturing through independent contractors constituted, under the circumstances of this case, interference with and restraint and coercion of their employees in the exercise of the rights guaran- teed in Section 7 of the Act, we shall not order the respondents un- conditionally to desist therefrom. This course of conduct constitutes an unfair labor practice on the part of the respondents only in so far as, and for the period that, it is used as a device to enable the respondents to continue to discriminate against their 13 discharged employees. The respondents may find it possible to reinstate all those employees who still desire reinstatement, without disturbing their relations with the independent contractors who now perform work for them. It does not appear, however, that, even if compliance with our order should require the respondents to interrupt their course of dealing with these persons, any breach of contract will be involved. There is no indication in the record that the respondents' arrangements with the three outside manufacturers are embodied in contracts effective for any agreed term. The respondents' contracts 29By "net earnings " is meant earnings less expenses such as for transportation, room, and board incurred by an employee in connection with obtaining work and working else- where than for the respondent, which would not have been incurred but for his unlawful discharge and the consequent necessity of his seeking employment elsewhere. See matter of Crossett Lumber Company and United Brotherhood of Carpenters and Joiners of Amer- sea, Lumber and Sawmill Workers Union, Local 2590, 8 N L R. B 440 Monies received for work performed upon Federal, State, county, municipal, or other work-relief projects ale not considered as earnings , but as provided below in the Order, shall be deducted from the sum due the employee, and the amount thereof shall be paid over to the appropriate fiscal agency of the Federal, State, county, municipal, or other government or governments which supplied the funds for said work-relief projects 286 DECISIONS OF NATIONAL LABOR RELATIONS BOARD with Coy were entered into in furtherance of their unfair labor practices and have now expired. Any renewal thereof since the date of the hearing would necessarily be subject to our determination herein, since both Coy and the respondents had notice in these pro- ceedings that the legality of their relationship, under the Act, was in question. Having found that the respondents on April 7, 8, and 9, and at all times thereafter refused to bargain collectively with the Union as the designated representative of their employees in the appro- priate unit, we shall, in order to effectuate the policies of the Act, order the respondents, upon request, to bargain collectively with the Union as such representative. Upon the basis of the foregoing findings of fact and upon the entire record in the case, the Board makes the following : CONCLUSIONS OF LAW 1. Chicago Fur Workers Union, Local No. 45, is a labor organiza- tion, within the meaning of Section 2 (5) of the Act. 2. By interfering with, restraining, and coercing their employees in the exercise of the rights guaranteed in Section 7 of the Act, the respondents have engaged in and are engaging in unfair labor practices, within the meaning of Section 8 (1) of the Act. 3. By discriminating in regard to the hire and tenure of employ- ment of the 13 employees named in the complaint, thereby discourag- ing membership in the Union, the respondents have engaged in and are engaging in unfair labor practices, within the meaning of Section 8 (3) of the Act. 4. The employees of the respondents, exclusive of supervisory and clerical employees, constitute a unit appropriate for the purposes of collective bargaining, within the meaning of Section 9 (b) of the Act. 5. Chicago Fur Workers Union, Local No. 45, was on April 6, 1937, and at all times thereafter has been, the exclusive representative of all the employees in such unit for the purposes of collective bar- gaining, within the meaning of Section 9 (a) of the Act. 6. The respondents, by refusing to bargain collectively with Chi- cago Fur Workers Union, Local No. 45, as the exclusive represent- ative of their employees in an appropriate unit, have engaged in and are engaging in unfair labor practices, within the meaning of Sec- tion 8 (5) of the Act. 7. The aforesaid unfair labor practices are unfair labor practices affecting commerce within the meaning of Section 2 (6) and (7) of the Act. EDWARD F. REICHELT ORDER 287 Upon the basis of the above findings of fact and conclusions of law, and pursuant to Section 10 (c) of the National Labor Relations At, the National Labor Relations Board hereby orders that the respondents, Edward F. Reichelt, Robert J. Hill, and Russel J. Jensen, individually and as copartners doing business under the name and style of Paul A. Reichelt Company, Chicago, Illinois, their agents, successors, and assigns shall: 1. Cease and desist from : _ (a) Discouraging membership in Chicago Fur Workers Union, Local No. 45, or in any other labor organization of their employees, by discharging, locking out, or refusing to reinstate any of their employees because of their membership in or activities in behalf of any such labor organization; (b) Refusing to bargain collectively with Chicago Fur Workers Union, Local No. 45, as the exclusive representative of their em- ployees, exclusive of supervisory and clerical employees; (c) In any other manner interfering with, restraining, or coercing their employees in the exercise of their rights to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, or to engage in con- certed activities for the purpose of collective bargaining or other mutual aid or protection as guaranteed in Section 7 of the National Labor Relations Act. 2. Take the following affirmative action which the Board finds will effectuate the policies of the Act : (a) Offer to Dave Wickstrom, Edith Westerlund, Harry Miller, Leon Archer, Sam Schaps, George Lechner, Edward Pietrusiak, Bruno Lorkiewicz, Anna Chaber, Evelyn Velvel, Charles B. Gilbert, Matthew Wray, and Edward Mrock immediate and full reinstate- ment to their former or substantially equivalent positions, without prejudice to their seniority and other rights and privileges; (b) Make whole the said employees for any losses of pay they may have suffered by reason of their respective discharges by pay- ment to each of them of a sum of money equal to the amount said employee normally would have earned as wages from April 8, 1937, to the date of the respondents' offer of reinstatement, less his net earnings 30 during said period; deducting, however, from the amount otherwise due to each of the said employees, monies received by said employee during said period for work performed upon Federal, State, county, municipal, or other work-relief projects, and paying over the amount so deducted to the appropriate fiscal agency of the S0 See footnote 29, supra 288 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Federal, State, county, municipal, or other government or govern- ments which supplied the funds for said work-relief projects; (c) Upon request, bargain collectively with Chicago Fur Workers Union, Local No. 45, as the exclusive representative of • their em- ployees, exclusive of supervisory and clerical employees, in respect to rates of pay, wages, hours of employment, or other conditions of employment ; (d) Post immediately in conspicuous places in and about their shop at 19 South Wells Street, Chicago, Illinois, notices to their employees, and maintain said notices for a period of at least sixty (60) consecutive days from the date of posting, stating that the respondents will cease and desist in the manner set forth in para- graphs 1 (a), (b), and (c), and that they will take the affirmative action set forth in paragraphs 2 (a), (b), and (c) of this Order, that the respondents' employees are free to become or remain members of Chicago Fur Workers Union, Local No. 45, and that the respondents will not discriminate against any employee because of membership or activity in that organization; (e) Notify the Regional Director for the Thirteenth Region in writing within ten (10) days from the date of this Order what steps the respondents have taken to comply herewith.