Olympia Shingle Co.

In the Matter Of OLYMPIA SHINGLE COMPANY, CAPITAL SHINGLE CO. INC. and SHINGLE WEAVERS LOCAL UNION 2546 Case No. C-857.-Decided August 26, 1940 Jurisdiction : lumber manufacturing industry. Unfair Labor Practices In General One corporation held not to be an instrumentality of another, or controlled by those controlling the other corporation, despite a certain amount of over- lapping of stockholders and directors where the corporations operated as distinct entities. Discrimination Sale of business held not to be motivated by a desire discriminatorily to get rid of certain employees where there existed business reasons or reasons of economy of operation for the sale, distinct and apart from any anti-union motive. Persons active in union affairs held discriminatorily refused employment by an employer who purchased the business of their previous employer where- the successor's employees were selected chiefly from among the employees of the predecessor. Application for employment with a successor employer held not necessary where successor employer actively undertook to solicit workers from among employees of predecessor employer and diverged therefrom in failing to solicit particular persons because of their membership or activity in the union. A request by these persons for employment would have been, and was known by them to have been, idle and futile. Remedial Orders Discrimination in the form of a refusal to hire by imposing stock owner- ship in a new company as a'condition of employment held remedied by an order that the new company offer stock and employment to those discrimi- nated against, or in the alternative, offer regular employment without stock to those discriminated against. Persons who were refused employment and who, the record indicates, would not have worked for the employer thereafter because the employer was placed upon the union's "unfair list," not awarded back pay. Definitions That an employee may also have the rights and privileges of a stockholder is, of itself, not sufficient to debar him from availing himself, in his capacity as employee, of the rights and privileges of an employee under the Act. Mr. William A. Babcock, Jr. and Mr. Thomas P. Graham, Jr., for the Board. Mr. Thomas L. O'Leary, of Olympia, Wash., for Olympia. 26 N. L. R. B., No. 130 1398 OLYMPIA SHINGLE COMPANY 1399 Mr. A. G. Latin, of Tacoma, Wash., and Mr. Theodore D. Bruener, of Aberdeen, Wash., for Capital. Mr. Louis A. Roland, of counsel to the Board. DECISION AND ORDER STATEMENT OF THE CASE Upon charges and amended charges duly filed by Shingle Weavers Local Union 2546, herein called the Union, the National Labor Rela- tions Board, herein called the Board, by Elwyn J. Eagen, Regional Director for the Nineteenth Region (Seattle, Washington), issued its complaint dated July 20, 1938, against Olympia Shingle Company, Olympia, Washington, and Capital Shingle Co. Inc., Olympia, Wash- ington, herein sometimes collectively called the respondents,' alleging that the respondents had engaged in and were engaging in unfair labor practices affecting commerce within the meaning of Section 8 (1) and (3) and Section 2 (6) and (7) of the National Labor Relations Act, 49 Stat. 449, herein called the Act. Copies of the complaint, accom- panied by notice of hearing thereon, were duly served upon the re- spondents and the Union. The complaint alleged in substance that Olympia, after having entered into a collective bargaining agreement and a supplemental wage agreement with the Union, voted on December 15, 1937, to sell its plant and equipment and to lease its real estate to a corporation not yet organized but which Olympia decided to organize; that there- after on December 21, 1937, Olympia caused Capital to be incorpo-. rated, caused the aforesaid assets to be transferred to Capital, and im- posed stock-ownership in Capital as a condition of employment upon the employees of the respondents; that Capital was created by, is an instrumentality of, and is controlled and dominated by Olympia; that Capital was formed by and is operated, controlled, and dominated by persons who were and are in control of Olympia; that on or about December 21, 1937, the respondents discharged from their employ and have since refused to reemploy five named persons, have made stock-ownership in Capital a condition of continued employment and have refused- to permit these five named employees to purchase said stock, because of the membership and activity of these employees in the Union, thereby discouraging membership in the Union; and that by these and by various other acts and statements, the respondents interfered with, restrained, and coerced their employees in the exercise of the rights guaranteed them in the Act. On July 26, 1938, the re- spondents filed separate answers admitting certain allegations of the 1 Olympia Shingle Cofpany is herein called Olympia, and Capital Shingle Co. Inc., is herein called Capital. 1400 DECISIONS Or NATIONAL LABOR RELATIONS BOARD complaint as to the nature of the business and the sale of the plant, but denying that they had engaged in the alleged unfair practices. Pursuant to notice a hearing was held at Olympia, Washington, on August 4, 5, 6, 8, and 9, 1938, before Wright Clark, the Trial Examiner duly designated by the Board. The Board and the respond- ents were represented by counsel and participated in the hearing. Full opportunity to be heard , to examine and cross-examine witnesses, and to introduce evidence bearing upon the issues was afforded all parties. During the course of the hearing the Trial Examiner made various rulings on motions and on objections to the admission of evidence. The Board has reviewed the rulings of the Trial Examiner and finds that, although certain rulings were erroneous , no prejudicial errors were committed. The rulings are hereby affirmed. On August 31, 1938, the Board, acting pursuant to Article II, Section 37 , of National ; Labor Relations Board Rules and Regula- tions-Series 1, as amended, ordered the proceeding transferred to and continued before it for action pursuant to Article II, Section 38, of said Rules and Regulations . The Board further ordered that no Intermediate Report be issued by the Trial Examiner , and, pursuant to Article II, Section 38 (d), of said Rules and Regulations, directed that Proposed Findings of Fact, Proposed Conclusions of Law, and a Proposed Order be issued, and that the parties have the right within 10 days from the receipt of such Proposed Findings, Proposed Con- clusions of Law, and Proposed Order to file exceptions, to request permission to file a brief with the Board, and to request oral argument before the Board. On November . 18, 1,939, the Board issued its Proposed Findings of Fact, Proposed Conclusions of Law, and Pro- posed Order, copies of which were duly served upon the parties, finding that the respondent Capital had engaged in unfair labor practices affecting commerce within the meaning of Section 8 (1) and (3) and Section. 2 (6) and (7) of the Act, and ordering that the respondent Capital cease and desist from its unfair labor practices, offer stock and employment, or, in the alternative, employment without stock, with back pay, to five named persons, and take certain other affirmative action to remedy the situation brought about by its unfair labor practices . The Board further proposed to order that the complaint, in so far as it alleged that the respondent Olympia had committed unfair labor practices, be dismissed. Thereafter the respondent Capital filed exceptions to the Proposed Findings of Fact, Proposed Conclusions of Law, and Proposed Order, and submitted a brief in support of its exceptions . The Board has considered the exceptions and brief. and, save for those exceptions which are consistent with the findings, conclusions , and order set forth below, finds them to be without merit. OLYMPIA SHINGLE COMPANY 1401 Upon the *entire record in. the case, the Board makes the following: FINDINGS OF FACT I. THE BUSINESS OF'THE RESPONDENTS Olympia Shingle Company, a corporation organized under the laws of the State of Washington, was prior to December 17, 1937, engaged in the manufacture and sale of red-cedar shingles at a plant in Olympia, Washington. Capital Shingle Co. Inc., a Washington corporation, succeeded to this business and plant immediately following itss incor- poration on December 21, 1937, title to the real estate, however, remaining in Olympia. The principal raw materials used at the plant are red-cedar logs, all of which are shipped to the plant from within the State of Washington. In each of the years 1936 and 1937 , approximately $35,000 to $45,000 was spent for the purchase of these logs; from December 22, 1937, to July 31, 1938 , $34,445.33 was expended for this purpose. The total value of sales and shipments of shingles from the plant in 1936 amounted to $66,693.09 ; in 1937, the total value was $87,- 522.99; from December 22, 1937, to July 31, 1938, the total value was $63,180.18. During each of these periods , approximately 90 to 95 per cent of the total sales represented sales and shipments to places outside the State of Washington. II. THE ORGANIZATION INVOLVED Shingle Weavers Local Union 2546 is a labor organization chartered by United Brotherhood of Carpenters and Joiners of America, which is affiliated with "the American Federation of Labor. The Union is also affiliated with the Washington-Oregon Shingle Weavers District Council, chartered by United Brotherhood of Carpenters and Joiners of America. It admits to membership persons employed in the shingle industry , including those who are participants in the ownership of shingle plants, excluding managing officials., III. THE UNFAIR LABOR PRACTICES A. Background On November 3, 1916, Olympia was organized under the general corporation laws of the State of Washington and began operation as a shingle mill. Under its bylaws, a cooperative form of organization has, since that date, been provided in which, so far as possible, all stockholders are to be "workers for the company ," but in which all, 1402 DECISIONS OF NATIONAL LABOR RELATIONS BOARD employees need not be stockholders.2 All stockholders oivn an equal number of shares of stock and in the election of trustees and other officers. of the corporation each is entitled to but one vote. The affairs of the corporation are managed by a Board of Trustees, elected annually by the stockholders and of which the company's officers are ex-officio members. A stockholder may be expelled only by a two- thirds vote of the stockholders present at a meeting called for that purpose. During 1937, until the time it ceased operations on De- cember 17, 1937, Olympia had 14 stockholders, 12 of whom were active workers in the plant, and 14 employees who were not stockholders; the prevailing union scale of wages and conditions of employment applied equally to stockholders and non-stockholders. In 1937 all stockholders and non-stockholders working for Olympia were members of the Union, except L. E. Henry, president and superintendent of the plant, and L. A. Lamere, secretary-treasurer, both of whom were ineligible to membership. In- the early part of that year, a contract-covering wages, hours, and conditions of employ- ment in the shingle industry of the Northwest was signed, effective April 1, 1937, by the representatives of the Red Cedar Shingle Manu-. facturers and the Washington-Oregon' Shingle Weavers District Council, with which the Union is affiliated. In previous years Olympia had participated in the selection of, and had been represented by, the manufacturers' committee which negotiated the annual industry-wide contracts with the District Council. Olympia con- tended, however, that it was not represented in the 1937 negotiations, although aware that they were going on, and was not, therefore, a party to the 1937 contract. In any event, after a copy of this con- tract was mailed to Olympia, the Board of Trustees of Olympia voted to comply with its terms and as a result granted increased wages to certain of its employees. On November 1, 1937, the Union notified Olympia that it desired a settlement of certain matters which had been left undetermined by the contract. The resultant dispute between Olympia and the Union revolved about the questions of wage rates to be paid to those in "intermediate bracket jobs," and whether, in order that Olympia operate as a plant "fair" to organized labor, stockholders had to 2 Article V, Section 8 of the current bylaws provides in part : "all stockholders of this company must be workers for the company, unless excused from such service for good and sufficient reasons , or unless they come within the provisions of [subsequent sections]." Section 10, provides in part : "Owing to the co- operative nature of the business transacted by this corporation and its stockholders, it is desirable that the stock owned and held or to be owned and held, should be owned and held by active workers in the business of this corporation , giving their personal time and attention to the development of its business ; however, by reason of the uncertainties of life and on account of sickness, death , suspension or other unforeseen cause it may become essential that the stock of such individual or individuals should be or must be transferred, it is hereby declared permissible and lawful (but not desirable) that stock in this company may be owned and held by stockholders , their heirs and estates other than active employees of the Company ." Section 9 provides the procedure for expulsion of a stockholder. OLYMPIA SHINGLE COMPANY 1403 belong to the Union. During this dispute, the plant was declared "unfair" and was shut down for a period of about 3 weeks, Olympia secured a temporary restraining order against the Union, and the committee for Olympia, consisting of four trustees, conferred with the union committee on about eight occasions. Members of the Olympia committee, particularly Lamere and. A. P. Bissell, as well as Henry, Olympia's president and superintendent, contended that stockholders, being in the position of employers with respect to nonstockholder employees of Olympia, should not belong to the Union. At about this time, Lamere told Fred Vaughn, one of the Olympia stockholders, that "he was going to bust the union wide open," and A. P. Bissell, speaking to Vaughn, criticized the Union and stated that it was "riding the company too hard." Finally, on December 5, 1937, the men returned to work and an agreement was reached under which Olympia agreed to accept the industry- wide agreement as of April 1, 1937, and to pay an increased wage to those in the "intermediate bracket jobs," retroactive to April 1, 1937. In regard to the increased wage, Lamere testified that "we were not going to jump at the crack of the whip. Every penny they got they fought for it; I don't mean maybe." Within 10 days of the agree- ment, however, the back pay, amounting to about $350, was paid by Olympia and this aspect of the dispute was definitely closed. The agreement on December 5 also provided for a tentative settle- ment of the question of membership of stockholders in the Union, namely, Olympia stockholders were to pay delinquent dues to the Union but were to withdraw from the Union, withdrawal cards being placed in escrow, unless three named Washington shingle mills were unionized before the February convention of the Washington- Oregon Shingle Weavers District Council, which was to rule upon the question of membership of stockholders in the Union. From December 5 until the sale of its business to Capital on December 17, 1937, Olympia operated, without labor disputes, as a "fair" plant. B. Sale of the business to Capital. The idea of organizing a new corporation, operating under a co- operative arrangement, to conduct Olympia's shingle business appears to have been first considered in July 1937. At that time Henry Bettch.er, a trustee of Olympia, told one of its employees that "they were figuring on starting up some kind of a cooperative concern." During the negotiations between the Olympia and union committees in November 1937, in response to the inquiry of a union representative who feared that this plan might be instituted to defeat the purpose of the Union, Lamere denied that Olympia was considering such an arrangement. 1404 DECISIONS OF NATIONAL LABOR RELATIONS BOARD On December 15, 1937, at a regular stockholders' meeting of Olym- pia, a majority of the stockholders, including Fred Vaughn and War- ren Ward,' voted to sell Olympia's shingle plant and to lease its real estate for 10 years to another company for the sum of $30,000, pay- ment to be made at the rate of 10. cents per square mill cut subject to a minimum monthly payment of $200 and a maximum monthly pay- ment of $400. It was further agreed by these same stockholders that A. P. Bissell be given authority to secure members or subscribers for the purchase of stock in the new company who would agree to the terms of the proposed sale.' This corporate action was taken after the presentation of a plan at the meeting by A. P. Bissell, who had been a stockholder of Olympia since 1916, the first year of its existence, and a trustee for 8 or 10 years. Bissell's plan envisaged the creation of a new 100% cooper- ative'corporation, that is, a corporation in which all employees were equal stockholders and all stockholders were employees. The sale was voted by Olympia prior to the formation of the new corporation and before it was known who its members would be. On December 17, 1937, a meeting was held by all working stock- holders of Olympia, except Fred Vaughn and Warren Ward, and other shingle weavers for the purpose of organizing the new 100 per cent cooperative corporation. At this meeting, 25 persons agreed to pur- chase the shingle plant and secure a 1.0-year lease of its land from Olympia on the terms set by Olympia stockholders at their December 15th meeting; to subscribe equally to -stock in a new corporation to be known. as "Capital Shingle Company," which was to use as its working rules the bylaws of Olympia; that monthly losses sustained in operations of Capital should be deducted from amounts payable to each stockholder; and that disagreements or issues among members of Capital would "be brought togthe Board of Trustees 5 for proper handling." Lamere, one of the incorporators and secretary-treasurer of Capital, testified that this last article of agreement was drafted by all 25 prospective stockholders of Capital, and was not intended to prevent a union committee from negotiating hours, wages, and work- ing conditions for the men. Olympia ceased operations on December 17th; since that time it has had no employees except Lamere who has been acting as liquidator of the corporation. 3 Vaughn and ward are two of the five persons alleged to have been discriminated against. See infra, III C. Two sets of minutes for the December 15th stockholders' meeting, both of which appear in Olympia's minute book and both of which were prepared by Lamere, secretary-treasurer of Olympia , were introduced in evidence . Lamere explained that the second set was prepared at the request of several .Olympia stock- holders in order to clarify the original set. Subsequently , Lamere testified that the second set was drawn up to serve as an exhibit in a suit brought against Olympia in the Superior Court of the State of Washing- ton. In all events , the two sets are not, so far as here concerned , materially different in content. ' Lamere testified that by "Board of Trustees" was meant the Board of Directors of Capital , rather than the Board of Trustees of Olympia. OLYMPIA SHINGLE COMPANY 1405 Capital was incorporated under the general corporation laws of the State of Washington on December 21, 1937, and at its first regular meeting, held the next day, adopted bylaws equivalent in effect to those of Olympia hitherto described, except that its affairs are man- aged by a "Board of Directors" in place of a "Board of Trustees." As under the Olympia bylaws there is no provision that all employees must be stockholders; there is only provision that all stockholders are, so far as possible, to be active workers for the corporation. How- ever, as organized, Capital has 25 regular employees, all of-whoni are stockholders in the corporation. Of its elected seven-man Board of Directors, three, including Lamere and Henry, are also trustees of Olympia; four of its seven temporary 60-day directors, named in Capital's articles of incorporation, including Lamere, Henry, and A. P. Bissell, were also Olympia trustees. The 25 stockholders of Capital were selected by A. P. Bissell and consisted chiefly of Olympia stock- holders and employees; of these, ten are also stockholders of Olympia. Claiming that the sale of the plant to Capital was being effected in order to avoid. operation under the union contract and in order discriminatorily to discharge two stockholders and three other workers of Olympia, who were not taken in as. stockholders and employees of Capital,' the Union sought unsuccessfully to have Olympia rescind its action and reemploy the five men. After the incorporation of Capital, a union committee conferred with a committee repre- senting Capital, and was again unsuccessful in securing a return to the previous status of the business and the reemployment of the five men. On December 23, the Union began to picket the plant, and placed it on the "unfair list." In support of the Union's contention that the sale to and organ- ization of Capital was motivated by the desire of Olympia discrim- inatorily to discharge and to refuse reemployment to the five men named in the complaint, the record shows the following facts: The antagonistic attitude and statements of Lamere, Bissell, and Henry against the Union and against membership of stockholders therein; some testimony that at about the time of the sale of the plant A. P. Bissell told Henry that "he had the idea that would answer the whole thing," told M. J. Eitreiln, an employee of Olympia who was later elected president and superintendent of Capital, that "if he could put it over in the next 24 hours he could get away with it," and also told another employee that "he thought they would eliminate Fred Vaughn, Warren Ward, and Oliver Beatty," three of the five men alleged to have been discriminatorily discharged; the partial over lapping of stockholders and directors or trustees of Olympia and Capital; and evidence that A. P. Bissell refused to permit the five 6 These men are discussed more fully in Section III C, infra. 1406 DECISIONS OF NATIONAL LABOR RELATIONS BOARD men to become stockholders and thus employees of Capital because of their union activities.' On the other hand, it is undisputed that for 8 years prior to the sale Olympia had been losing money almost steadily; during this period a profit was earned in only 1 year, and then only because Olympia signed a union agreement and operated while other shingle mills were still closed. The accumulated profits of $48,000 possessed by Olympia in January 1930 had been dissipated and replaced with a deficit of over $20,800 by December 1937; almost $69,000 was thus lost during this period. An application by Olympia for further credit had been rejected by its bank. A plan of taking new stockholders into Olympia and making it a 100 per cent cooperative had been discussed for 2 years prior to the sale but could not be fulfilled because prospective stockholders would not participate on the basis of assum- ing a proportion of the value of the real estate owned by Olympia. Consequently, Olympia had taken steps to sell its plant and its real estate. On October 20, 1937, the stockholders agreed to such a sale and appointed a committee to handle prospective purchasers; a real estate broker was thereafter authorized to effect the sale. These efforts, however, proved unsuccessful until the proposed stockholders of Capital agreed to purchase the plant and rent the real estate for 10 years for the sum of $30,000, payable in monthly installments. Lamere testified that at this price it was "a bargain." Under their 100 per cent cooperative organization, the working stockholders, of Capital agreed to keep the plant solvent by absorbing -losses out of wages. Likewise, Capital stockholders agreed to deduct further sums from their wages in order to create a log fund, which would make bank loans unnecessary. The minute book of Capital shows that 20 to 30 per cent was deducted from wages on December 31, 1937, on January 12, February 17, March 17, 31, May 11, and May-26, 1938, the amounts deducted to apply on the purchase of stock. On January 19, 1938, the Capital stockholders agreed to a subordination of wages of stockholders in favor of the Seattle-First National Bank. The net effect is that Capital has been operating with less labor costs than those previously paid by Olympia. Olympia has paid and continues to pay about $1,400 annually for its real estate taxes, whereas Capital, owning no land, pays no tax. Under its different form of organization, Capital has been "operating profit- ably" where Olympia had suffered only losses. In the light of the foregoing facts, we cannot conclude that the sale off the business to Capital was not grounded in business reasons or 7 These activities as well as the reasons advanced by Capital for the exclusion of these men are discussed in Section III C, infra. OLYMPIA SHINGLE COMPANY 1407 reasons of economy of operation, distinct and apart from any anti- union motive.s Nor can we conclude that Capital is an instrumentality of or is controlled and dominated by Olympia or by persons in control of Olympia. As stated above, only 10 of the 25 stockholders of Capital are also stockholders of Olympia, and only 3 of the elected board of 7 directors of Capital are, or were during 1937, trustees of Olympia. Moreover, the two companies do their banking business with different banks, pay their own individual expenses, and otherwise operate as distinct entities. Aside from their common stockholders, the only relations between them have been those involved in the contract of sale, a loan of $500 by Olympia which was repaid in 4 days by Capital, and the fact that the attorney retained by Capital, along with others, also did legal work on occasion for Olympia. C. Discriminatory refusals to hire Conceding that Olympia's sale of the plant to Capital did not con- stitute an unfair labor practice, the question next arises whether in refusing stock to Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz, and William J. Eickhoff,' Capital, by discrimination in regard to hire, discouraged membership in the Union in violation of the act. As stated above, Capital was organized as a corporation to operate under a 100-per cent cooperative arrangement in which all regular workers for the company were to be equal stockholders therein. All of the 25 Capital stockholder-workers were selected. by A. P. Bissell, who acted on behalf, of and whose selections were ratified and confirmed by, Capital. Most of these stockholders were selected from among the 26 stockholder and non-stockholder-workers of Olympia, all of whom, except Henry and Lamere, were members of the Union. In addition, Bissell offered stock in the new corporation to three or four other men who were not members of the Union after hehadexpressly questioned them and learned of their non-membership in the Union. However, Bissell offered no stock to Ward or Vaughn, the only stock- holder-workers of Olympia not included in the new company, or to Beatty or Kautz, or, tmtil several weeks after the organization of Capital, to Eickhoff, non-stockholder-workers of Olympia. Bissell admitted his offer of stock to three or four non-union men whom he had first questioned concerning union affiliation, and also admitted that during the November 1937 dispute he had expressed 8It is significant to note that, as stated above, both Vaughn and Ward, the two Olympia stockholders alleged to have been discriminated against voted at the December 15, 1937, meeting of Olympia stock- holders in favor of the proposed sale. Although taken at a time when it was not known who the stock- holders of the purchasing company were to be, this action tends to support the existence of legitimate busi- ness reasons for the sale. 0 Also sometimes designated in the record as William I . Eichoff, 1408 DECISIONS OF NATIONAL LABOR RELATIONS BOARD opinions against stockholders of a partial cooperative, like Olympia, belonging to the Union, and that as a co-member of Olympia's Board of Trustees he had discussed problems with, and became aware of the views of, Lamere and Henry concerning the Union. and their opinion of various stockholders and other workers. It is likewise undisputed that, as stated above, Lamere and Henry had also, during the No- vember dispute, opposed union membership for Olympia stockholders, and Lamere had stated to Vaughn that"he was going to bust the union wide open." I Bissell denied, however, that their membership or activities in the Union had played any part in his failure to invite Beatty, Ward, Vaughn, Kautz, and Eickhoff to buy Capital stock, and testified that he had told stock-subscribers "that I expected all the boys to belong to the Union." Bissell also testified that he made no offer of stock to Beatty, Ward, Vaughn, and Kautz because of various deficiencies in the character or ability of each which would prevent them from being good "partners" or workers, and that Eickhoff had refused an offer of stock in January 1938. The facts with reference- to each of these men is as follows: Oliver Beatty had been a stockholder and shingle sawyer for Olympia continuously from the time of its organization in 1916 until 1936. In 1936 he lost his stock at a mortgage-foreclosure sale but continued to work for Olympia whenever it operated at full capacity. He had joined the predecessor of the Union in 1933 or 1934, and continued on as a member of the present Union when it was formed in 1935. For over 2 years, Beatty was president of the Union and vice president of the Washington-Oregon Shingle Weavers District Council, being a member of the negotiating committee for the District Council in 1935. He also served continuously as steward for the Union in the Olympia plant. In November 1937, after Beatty had ceased being a stock- holder and was seeking to discover when he could return to work for Olympia, Henry Bettcher, one of Olympia's trustees, told Beatty's wife, "In order to work for the Olympia Shingle Company, he has got to cease all activities with the Union." Beatty, however, was called back to work a short time thereafter. During the November 1937 dispute between Olympia and the Union, Lamere stated to a union representative that Beatty "was at the bottom of this" and that Beatty "is hard to get along with in the mill. He is a discordant element." At about this time A. P. Bissell told an Olympia employee, after Beatty had acted as chairman of a committee which conferred with the management concerning wages, that "he was glad that Beatty came out in the open, that he was not a man for the committee; that he was a troublemaker." It is undisputed that Beatty was a good worker. No complaints were ever made concerning his work; in fact, Bissell admitted that OLYMPIA SHINGLE COMPANY 1409 Beatty "was considered a very fine workman," and Lamere used to bring visitors around to see Beatty saw shingles and used to say that Beatty was considered one of the best sawyers in the industry. Bissell testified, however, that he had not invited Beatty to become a stockholder of Capital because Beatty was "rather hard to get along with, always in financial difficulty, and I didn't believe he would vote for the best interests of the organization in case of financial difficulty," that, therefore "I didn't think he would be a desirable partner." Other witnesses for the respondents, all of whom are stockholders in Capital and were stockholders or employees of Olym- pia, testified variously concerning Beatty's characteristics . Lamere stated that Beatty was not a "satisfactory member" of Olympia because "he was a man that they could not get along with-selfish." Henry was of the opinion that "he was very lax in paying what he owed" and was not "on the square all the time." H . Bettcher, a trustee of Olympia, testified that Beatty always wanted to make better wages and was "too selfish for himself," and M.. Eitreim, a former employee of Olympia and president of Capital stated that Beatty was "extravagant." J. V. Romaine, it former employee of Olympia and a director of Capital, testified that Beatty "wanted to be the head show all the time." Yet among these same witnesses, Bett- cher also testified that Beatty was never the source of any disputes or controversies among the stockholders; Eitreim stated "I got along fine with Oliver Beatty as long as I was there," namely, for almost 14 years; and Henry admitted that although he thought Beatty was not a "satisfactory member" and not "on the square" most of the 20 years that Beatty was a stockholder, he had never attempted to utilize provisions in the bylaws providing for the suspension or expulsion of a stockholder. In the light of all the evidence, particularly the vague, indefinite and inconsistent character of the accusations against Beatty, and the statements of Bissell and of his f ellow trustees of Olympia concerning Beatty's union activities , we find that Beatty was not permitted to become a stockholder and worker for Capital because of his union activities . At the time of the hearing Beatty was not em- ployed. Fred Vaughn became a stockholder and worker of Olympia in 1917 and worked continusouly until December 17, 1937, when Olympia ceased operations . Most of the time he worked as a "kneebolter," but in the year and a half before the cessation of operations he had occupied the position of a boom man , a position which required skill and the ability to walk upon and manipulate floating logs. He joined the Union when it was organized and was as active as some stockhold- erworkers therein but not as active as others . During the November 1937 negotiations , Lamere accused him of being "a go-between be- tween the union and the mill." 1410 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Bissell testified that he did not ask Vaughn to become a Capital stockholder because he did not think Vaughn "physically able to hold down his job if he had one," and because of Vaughn's age and the bad physical condition of his legs. He also testified that complaints about Vaughn's ability had frequently been made by Ward, another worker-stockholder. Similarly, Henry testified that Vaughn "could not possibly have lasted much longer," and Bettcher stated that although he "didn't pay so much attention to it" yet he "didn't think he [Vaughn] was capable of doing his work any more towards the last." On the other hand, Vaughn testified that despite the fact that he was 63 years of age and limped due to a leg injury in 1930, he was just as good as the average boom man. Ward testified that the complaint he had made concerning Vaughn related to Vaughn's refusal to perform extra work and did not relate to Vaughn's ability as a boom man. Moreover, he knew of no serious complaint about Vaughn's work. Similarly, another Olympia worker who had been in a position to observe Vaughn's work testified. that his work was satisfactory and that Vaughn could have continued to perform it. Even Lamere, testifying as a witness for the respondents, stated that Vaughn's work had been satisfactory, that he had never received any complaints about Vauglm's boom work, and that Vaughn, despite his age and physical condition, might still be competent to handle that work. When Vaughn first told Lamere about being left out of the new company, Lamere had said "he didn't see bow they were going to get along without [Vaughn] working around there." Under all the circumstances, we find that Bissell failed to offer stock to Vaughn because of his membership and activity in the Union. Vaughn was not employed at the time of the hearing. Warren Ward was one of the original stockholders of Olympia and continued to be a stockholder at the time of the hearing. He worked continuously at the mill from 1916 to December 17, 1937, chiefly at a "cut-off" job, involving skilled work for which he had had 10 years' previous experience elsewhere. Ward has been a "union man" practically all his life and joined the Union "quite a while" ago.. During November 1937, Henry, Lamere, and A. P. Bissell, trustees of Olympia, had told him that the stockholders should not belong to the Union. At that time, Ward bad, in several discussions with Henry, argued in favor of union membership and of increased wages; and Lamere had referred to Ward as a "discordant element" in the company. Bissell, while admitting that "Ward is a fine workman, no question about it," and that differences of opinion frequently existed con- cerning company affairs, contended that he had not asked Ward to join Capital as a stockholder because of his quarrelsome and disagree- OLYMPIA SHINGLE COMPANY 1411 able disposition, because Ward had had several fights with Olympia workers and was twice convicted of assault. Other witnesses for the respondents contended in general terms that Ward often used vile language and caused trouble all the time. Ward admitted that he had been twice convicted of assault on fellow stockholders. However, the first conviction occurred 8 or 9 years prior to the hearing and the second, involving a Mr. Arkin, occurred in January 1938, after Bissell had already organized Capital; neither of Ward's adversaries became stockholders of Capital. Moreover, although it was alleged that Ward's vile language had persisted for the last 10 years, no at- tempt was made to suspend or expel him from Olympia. J. Lathrop, a prospective stockholder of Capital had objected to Ward's exclusion from the new company, and Walter Carpenter, who had worked with Ward for a year and a half, testified that Ward was a peaceable workman, that so far as he knew only Arkin had had trouble with Ward, and that no one had ever had any trouble involving work with Ward during working hours. Under the circumstances, we find that Bissell's failure to offer stock to Ward was due to Ward's membership and activity in the Union. At the time of the hearing Ward was not regularly employed. Fred Kautz was first employed by Olympia in 1930. He was never an Olympia stockholder. For 4 years prior to December 17, 1937, he was a carloader, and at the date Olympia ceased operations, was the head carloader. He received an increase in wages under the contract of April 1, 1937. Since 1934 he has been a member of the Union and its predecessor. In October 1937, he had a dispute with Bissell concerning wages during which Bissell told him that if he did not like it, he could quit. Kautz then spoke to other Olympia workers who, he thought, were entitled 'to increased wages, and they all consulted Beatty and O. P. Allison, business agent of the Union. As a result, the Union began to negotiate in November 1937 for increased wages, the negotia- tions culminating in the agreement of December 5, 1937. Bissell testified that he did not ask Kautz to become a stockholder in Capital because some of the men who had already signed up told him that Kautz would not be a good " partner" and Bissell had known that Kautz had disobeyed orders not to smoke and was "kind of slow- ing up on his work." Others of the respondent's witnesses testified that Kautz had "an attitude of defiance and insubordination"; that several complaints were made about him in 1937; that an insurance agent had said that he had seen the carloader smoking and that if it were not stopped an additional insurance premium would have to be paid by Olympia, but that Kautz had continued to smoke during the last 2 years after being told not to smoke on the premises; that Kautz "was laying down on the job, as well as smoking." Kautz, 1412 DECISIONS OF NATIONAL LABOR RELATIONS BOARD on the other hand, testified that orders were given not to smoke in certain areas, that he. never smoked in those areas, that he did not smoke more in the last 2 years than in the previous 5 years that he worked for Olympia, that all others at the Olympia mill also smoked, that no complaints were made to him individually, that the insurance company's complaint was not due to his smoking, that despite the "No Smoking" signs at the Olympia plant, it was understood that men could smoke at certain places. Lamere, who was Kautz's supervisor, admitted that no effort was made to discharge Kautz despite the fact that his work had allegedly not been satisfactory and he had allegedly been smoking incessantly in violation of orders for the last 2 years. In. addition, the contract effective April 1, 1937, with which Olympia complied, provides that it is an offense punishable by immediate dis- charge or suspension to be "smoking while on duty in prohibited areas." 10 Under all the circumstances, we are of the opinion that Kautz's testimony is the more credible and that he was not offered stock by Bissell because of his union membership and activities. At the time of the hearing Kautz was employed on W. P. A. William J. Eickhoff began to work for Olympia on July 11, 1937. He was not a stockholder. He had been a member of the Union and attended union meetings regularly for about 4 months when he ceased work on December 17, 1937. No complaints were ever made about his work and Lamere admitted that he was a satisfactory employee. He was not asked by Bissell to become a stockholder before the in- corporation of Capital. In January 1938 Bissell told Eickhoff that his work for Olympia had been "absolutely satisfactory." Eickhoff testified that Bissell then asked him if he would have gone through the picket line if he had been working for Capital, and when Eickhoff responded in the negative, Bissell said, "Well, I had you figured out right, then. That is one reason why I didn't ask you to join." Bissell did not expressly deny having made this statement but testified that he had, in January 1938, asked Eickhoff to buy stock in Capital, that he had not previously offered him stock because he had not known Eickhoff very well and did not suppose Eickhoff wanted stock, that Eickhoff had refused the offer in January stating be would come in after the union trouble had cleared up, and that thereupon Bissell stated it would be too late at that time. In the light of all the evidence, we find that Eickhoff's version of the event is the more accurate one, and that Eickhoff was not offered Capital stock by Bissell in December 1937 because of his membership in the Union. After leaving the employ of Olympia, Eickhoff had no regular em- ployment until April 16, 1938, when he began to work for a timber 10 Underscoring supplied. OLYMPIA SHINGLE COMPANY 1413 company in the construction of railroads. He prefers to work. in a shingle mill. Beatty, Vaughn, Ward, and Kautz, and Eickhoff did not, prior to the incorporation of Capital, ask Bissell to be included as stockholder- workers in the new corporation. However, Bissell had, on behalf of Capital, undertaken actively to solicit or select future stockholder- workers from among a group of workers of an existing enterprise whose operation was to be.continued by Capital. Having undertaken this course of active solicitation, Bissell diverged therefrom in failing to solicit or select the above-named members of that group. This di- vergence was due to their membership or activities in the Union; but for their union membership or activity they would have been offered stock and employment by Bissell. We therefore find that by his failure to offer stock and employment to the above-named persons, Bissell discriminated against them in his choice of stockholder-workers because of their union membership or activities. Moreover, it seems plain that a request by these men for stock and employment would, under the circumstances, have been, and was known by them to have been, idle and futile. Accordingly, we find that it was un- necessary for them to make such request. We are, furthermore, of the opinion that in selecting stockholder- workers for Capital, Bissell, and through him, Capital, were selecting "employees" for Capital, within the meaning of Section 2 (3) of the Act, and that these ."employees" or prospective "employees" are con- sequently entitled to the protection afforded by the Act. We have said, in discussing the scope of the term "employee" as used in the Act, that "the term embraces `any employee',11 that is, all employees in the conventional as well as legal sense except those by express provision excluded. The primary consideration is whether effectuation of the declared policy and purposes of the Act compre- hends securing to the individual the rights guaranteed and protection afforded by the Act . . . Public interest in the administration of the Act permits an inquiry into the material facts and substance of the relationship." 12 It is true that, operating under a 100-percent cooperative organiza- tion, each of the 25 stockholders of Capital owns an equal number of shares of stock, is entitled to one vote in the annual election of a Board of Directors which manages the affairs of the corporation, and that each shares in profits and losses. Nevertheless, it is also true that each stockholder is, to at least an equal extent, in the position of an ordinary employee. Each is an active worker for the corporation, 11 Section 2 (3) of the Act provides in part: "when used in this Act ... (3) the term `employee' shall include any employee .. . 17 Matter of Seattle Post-Intetligencer Department of Hearst Publications , Inc. and Seattle Newspaper Guild, Local No. 82, 9 N. L. R. B. 1262, 1274-5. 323429-42-90 1414 DECISIONS OF NATIONAL LABOR RELATIONS BOARD subject in his work to the control of managing officials, and receiving compensation in the form of wages. In addition, the record shows that Washington-Oregon Shingle Weavers District Council, with which the Union is directly affiliated, expressly provides for admission to mem- bership as "employees" of "all men working at jobs which ordinarily come under the jurisdiction of this Union, regardless of whether or not they are participants in the ownership of the plant or the business agreement under which it is operated"; that in the partially coopera- tive Olympia, all eligible stockholder-workers were members of the Union; that Olympia stockholder-workers actively participated on behalf of the Union in its negotiations with Olympia; and that Olympia entered into collective bargaining contracts with the Union which covered the wages, hours, and other working conditions of these Olympia stockholder-workers. Because a majority of the stockholder-workers may have ultimate control of the policies of Capital, appears to be no reason for not se- curing to a minority of them the safeguards afforded by the Act. That an employee may also have the rights and privileges of a stockholder does riot, of itself, seem sufficient to debar him from availing himself, in his capacity as employee, of the rights and privileges of an employee to engage in concerted activities, for the purpose of collective bargain- ing or other mutual aid or protection, We have, thus, recently held that a number of-producer-members who had the right to participate in the election of a Board of Directors of a producers' cooperative association, consisting of about 6,000 members and who were also employed by the association, were nonetheless "employees" who could be included within an appropriate bargaining unit.' Nor can we con- clude in this case, particularly in view of the history of bargaining relations of Olympia stockholders, that the interests of the stock- holder-workers of Capital as stockholders outweigh or overshadow their interests as workers. In the light of all the facts presented by the record, we find that it would effectuate the policy and purposes of the 13 Matter of Utah Poultry Producers Cooperative Association and Independent Union of Poultry Employees, etc., 15 N. L. R. B. 534. The Administrator of the Wage and Hour Division, Department of Labor, has similarly noted in a statement regarding the application of the Fair Labor Standards Act of 1938: "Although it is possible that there may be `workers' cooperatives in which the interests of the members as workers are in all respects the same as their interests as proprietors and in which the usual characteristics of the em- ployer-employee relationship do not exist, and hence in which the worker-members would not be employees within the meaning of the Act, it is to be noted that cooperatives are commonly separate entities in which the usual characteristics of the employer-employee relationship exist as between them and worker -members. "Cooperatives are generally in the corporate form with interests distinct from those of their members. Though their workers may be stockholders , as workers they are subject to the usual control and discipline of the corporate employer; they work at the discretion of the cooperative's board of directors or other mana- gerial body. Their concern, as workers , with wages , hours of work and other working conditions , is quite distinct from and may be much greater than their interest, as stockholders, in profits or dividends. "The Fair Labor Standards Act provides no express exemption in favor of cooperatives as do some other statutes and the provisions in the Act defining the employer-employee relationship cover the relation of the ordinary cooperative to its workers regardless of whether or not they are stockhoders or members." 2 Wage and Hour Reporter (Jan. 16, 1939) 26. OLYMPIA SHINGLE COMPANY 1415 Act to secure to stockholder-workers or prospective stockholder- 'workers of Capital the rights guaranteed and protection afforded employees and prospective employees by the Act. Accordingly, we find that the respondent Capital, by discrimination in regard to the hire of Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz, and William J. Eickhoff, has discouraged membership in the Union, and has thereby engaged in unfair labor practices, within the meaning of Section 8 (3) of the Act. We further find that by refusing to hire Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz, and William J. Eickhoff, the respondent Capital has inter- fered with, restrained, and coerced its employees in the exercise of the rights guaranteed in Section 7 of the Act.14 IV. THE EFFECT OF THE. UNFAIR LABOR PRACTICES UPON COMMERCE The activities of the respondent Capital set forth in Section III above, occurring in connection with the operations of the respondent Capital described in Section I above, have a close, intimate, and sub- stantial relation to trade, traffic, and commerce among the several States and tend to lead and have led to labor disputes burdening and obstructing commerce and the free flow of commerce. V. THE REMEDY Having found that the respondent Capital has engaged in unfair labor practices, we will order that it cease and desist therefrom and, in aid of such order, that it take certain affirmative action which the Board finds will effectuate the policies of the Act. We have found that the respondent Capital has discriminated in regard to the hire of Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz, and William J. Eickhoff, thereby discouraging membership in the Union. This discrimination took the form of a refusal to hire by imposing stock ownership in Capital as a condition of employment and by refusing to permit the above-named persons to purchase stock. Clearly the appropriate remedy to effectuate the policies of the Act is to order that the respondent Capital offer stock and employment, at the same or substantially equivalent positions at which they would have been employed had they not been discriminated against, to the above- named persons. However, since nothing in. the certificate of incorpo- ration or bylaws of Capital prevents it from hiring regular employees U See National Labor Relations Board v. Waumbec Mills, Inc., 114 F. (2d) 226 (C. C. A. 1), enforcing as modified in a particular not here relevant, Matter of Waumbec Mills, Inc. and United Textile Workers of America, 15N. L. R. B.37; Matter of Milan Shirt Manufacturing Company and Milan Improvement Company and Amalgamated Clothing Workers of America, 22 N. L. R. B. 1143. Cf., however, Phelps Dodge Corporation v. National Labor Relations Board, 113 F. (2d) 202 (C. C. A. 2), enforcing as modified, Matter of Phelps Dcdge Corporation and International Union of Mine, Mill, and Smelter Workers, Local No. 30, 19 N. L. R. B. 547; National Labor Relations Board v. National Casket Co., Inc., 107 F. (2d) 992 (C. C. A. 2). 1416 DECISIONS OF NATIONAL LABOR RELATIONS BOARD who are not stockholders, Capital will be permitted, in lieu of an offer of stock and employment, to offer regular employment without stock to the persons discriminated against. As stated above, the Union, on December 23, 1937, placed Capital on its "unfair list" and began to picket, the plant, after having in a conference with a committee representing Capital, attempted unsuc- cessfully to secure dissolution of the newly formed corporation, a return to the previous form of business, and the reemployment of the five men. It seems clear from the record that none of the men dis- criminatorily refused employment by Capital, if asked to work for Capital, would have done so after Capital was placed upon the "unfair list." 15 Under the circumstances of this case we do not believe it would effectuate the policies of the Act to award back pay to these five men. We will, therefore, order the respondent Capital to offer stock, on the same terms and conditions as it was offered to present stock- holder-workers, and immediate employment, at the same or sub- stantially equivalent positions at which they would have been em- ployed if they had not been discriminated against, to Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz, and William J. Eickhoff, or, in the alternative, to offer'such employment, without stock, to Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz, and William J. Eickhoff. Upon the basis of the foregoing findings of fact and upon the entire record in the proceeding, the Board makes the following: . CONCLUSIONS OF LAW 1. The operations of the respondent, Olympia Shingle Company, until December 17, 1937, occurred in commerce, within the meaning of Section. 2 (6) of the Act. 2. Shingle Weavers Local Union 2546 is a labor organization within the meaning of Section.2 (5) of the Act. 3. The stockholder-workers of the respondent Capital Shingle Co. Inc. are employees, within the meaning of Section 2 (3) of the Act. 4. By discriminating in regard to the hire of Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz and William J. Eickhoff, and thereby discouraging membership in Shingle Weavers Local Union 2546, the respondent Capital Shingle Co. Inc. has engaged in and is engaging in unfair labor practices within the meaning of Section 8 (3) of the Act. 15 Beatty and ward testified directly to this effect, and Eickhoff admitted that he had in fact refused an offer of stock and employment in January 1938 because Capital was on the "unfair list ." Although they were not questioned on this matter , we infer that Vaughn and Kautz, who continued as union members, had the same attitude. OLYMPIA SHINGLE COMPANY 1417 5. By interfering with, restraining, and coercing its employees in the exercise of the rights guaranteed in Section 7 of the act, the respondent Capital Shingle Co. Inc. has engaged in and is engaging in unfair labor practices within the meaning of Section 8 (1) of the Act. 6. The aforesaid unfair labor practices are unfair labor practices affecting commerce within the meaning of Section 2 (6) and (7) of the Act. , ORDER Upon the basis of the above findings of fact and conclusions of law and pursuant to Section 10 (c) of the National Labor Relations Act, the National Labor Relations Board hereby orders that the respondent Capital Shingle Co. Inc., Olympia, Washington, and its officers, agents; successors, and assigns shall: 1. Cease and desist from: (a) Discouraging membership in Shingle Weavers Local Union 2546, or any other labor organization of its employees, by discriminat- ing in regard to the hiring of applicants for stock and employment or in any manner discriminating in regard to hire or tenure of employ- ment or any term or condition of employment; (b) In any other manner interfering with, restraining, or coercing its employees in their rights to self-organization, to form, join, or assist labor organizations, to bargain collectively through repre- sentatives of their own choosing, and to engage in concerted activities for the purposes of collective bargaining and 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 Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz, and William J. Eickhoff stock, on the same terms and con- ditions as it was offered to present stockholder-workers, and immediate employment at the same or substantially equivalent positions at which they would have been employed on December 17, 1937, or thereafter, had the respondent Capital Shingle Co. Inc. not dis- criminatorily refused to hire them; or, in the alternative, offer them such employment without stock; (b) Immediately post notices in conspicuous places in its plant, buildings, and other places of employment, and maintain them for a period of at least sixty (60) consecutive days, stating (1) that it will not engage in the conduct from which it is ordered to cease and desist in paragraphs 1 (a) and (b) of this Order; (2) that it will take the affirmative action set forth in paragraph 2 (a) of this Order; and (3) that its employees are free to become or remain members of Shingle 1418 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Weavers Local Union 2546, and that it will not discriminate against any employee because of membership or activity in that organization; (c) Notify'the Regional Director for the Nineteenth Region in writing within ten (10) days from the date of this Order what steps the respondent has taken to comply herewith. AND IT IS FURTHER ORDERED that the complaint, in so far as it alleges that the respondent Olympia Shingle Company has dis- criminated in regard to the hire and tenure of employment of Oliver Beatty, Warren Ward, Fred Vaughn, Fred Kautz, and William J. Eickhoff, be, and it hereby is, dismissed. MR. WILLIAM M. LEISERSON took no part in the consideration of the above Decision and Order.