Major, Senior Circuit Judge, and Fairchild and Kerner, Circuit Judges.
In No. 17354, Lake City Foundry Company, Inc. (the Company) petitions to set aside an order of the National Labor Relations Board (the Board), entered on December 3, 1968, in which the Board found that the Company violated numerous sections of the National Labor Relations Act and entered its order. 173 NLRB No. 159. In response, the Board requests enforcement of its order. The case had its genesis in the efforts of Local 233, International Molders and Allied Workers Union, AFL-CIO (Molders Union), to become the exclusive bargaining representative of the employees. A representation proceeding was initiated by a petition filed by the Molders Union on February 21, 1967. Subsequently, but on this same date, the Molders Union, claiming that it represented a majority of the employees in what was agreed to as an appropriate unit, made demand of the Company for recognition as the bargaining agent, which was refused by the Company, but it agreed to an election.
At the time the Molders Union commenced its organizational effort, certain of the Company's employees started organizing Lake City Foundry Employees Union (Employees Union), which intervened in the representation proceeding. The regional director ordered an election which took place on April 28, 1967, which the Employees Union won by a vote of 33 to 25. The Molders Union objected to the election result and, on September 13, 1967, filed charges against the Employees Union, alleging that it had violated the Act by entering into a bargaining contract with the Company. The Board set aside the election on the ground that the Company had committed certain unfair labor practices.
In No. 17429, the Employees Union requests that the Board's order as it pertains to it be set aside, and the Board requests that it be enforced.
Later in this opinion we shall discuss in some detail the activities of the sponsors of the respective Unions, as well as those of the Company. We think at this point it is sufficient to state that there was a vigorous campaign conducted by each of the Unions in an attempt to win a majority.
The contested issues in abbreviated form, as set forth in the Company's brief, are: (1) whether there is substantial evidence on the record as a whole to support a conclusion that the Company refused to bargain with the Molders Union on February 21, 1967, the date on which it made demand for recognition, in violation of Sec. 8(a)(5) of the Act; (2) whether, notwithstanding the employees' rejection of the Molders Union and selection of the Employees Union in a Board-conducted secret ballot election, the issuance of its order requiring the Company to bargain with the Molders Union is an appropriate remedy for enforcing the policies of the Act; (3) whether there is substantial evidence on the record to support a conclusion that the Company violated Sec. 8(a)(3) of the Act; (4) whether there is substantial evidence to support a conclusion that the Company violated Sec. 8(a)(2) of the Act, and (5) whether there is substantial evidence to support a conclusion that the Company violated Sec. 8(a)(1) of the Act.
The Employees Union raises the additional issue as to whether there is substantial evidence on the record to support the Board's finding that the Employees Union violated Secs. 8(b)(2) and 8(b)(1)(A) of the Act.
The issue as to whether the Company violated Sec. 8(a)(5) of the Act depends upon whether the Molders Union represented a majority of the appropriate unit at the time it requested recognition. We shall first consider that issue.
Earl, Karl and Carl Lundquist
It was stipulated that these persons were employees of the Company on February 21, 1967, and worked in the classifications covered by the bargaining unit. It is not disputed but that they worked the same hours, received the same wages and were subject to the same working conditions as other unit employees; voted, without challenge, pursuant to a Board-approved agreement between the Molders Union and all other parties, in the subsequent Board election, and enjoyed no special status as the result of their being the sons of the stockholders of a closely held corporation.
As to these employees, the examiner in his decision stated:
"According to Arnold Lundquist, they voted, notwithstanding an agreement between the Union and Respondent-Employer that they were ineligible to vote. It is true that to include them in the unit, at that time, would not have been inconsistent with Board precedent, notwithstanding the fact that Karl and Earl Lundquist are the sons of Elmer Lundquist and Carl Lundquist is the son of Arnold Lundquist and the further fact that Elmer and Arnold Lundquist are the principal stockholders of Respondent-Employer. However, since the election herein, the Board has modified existing policy 'so as to exclude from bargaining units the children of individuals who have substantial stock interests in closely held corporations' and has overruled prior cases to the extent inconsistent therewith. In these circumstances, and notwithstanding the fact that the three individuals voted without challenge in the election, I deem myself bound to apply this modified policy and to hold, consistently therewith, that these three individuals should be excluded from the unit."
The Board on brief states:
"The Board, in excluding these three persons, relied upon its decision in Foam Rubber City No. 2 of Florida d/b/a Scandia, 167 NLRB No. 81, 66 LRRM 1096 (September 18, 1967), where it had modified prior holdings 'so as to exclude from bargaining units the children of individuals who have substantial stock interests in closely held corporations.'"
The reasoning of the trial examiner by which these three employees were excluded from the unit, approved by the Board on brief, must be rejected. In the first place, the statement attributed to Arnold Lundquist that "they voted, notwithstanding an agreement between the Union and Respondent-Employer that they were ineligible to vote," appears to be a distortion of the record; in fact, the record demonstrates to the contrary.*fn1
That they voted without challenge in a closely supervised election in itself strongly negates the finding that there was an agreement that "they were ineligible to vote." The Board on brief does not even mention, much less explain or retract, this erroneous statement by its trial examiner. Neither does either mention Sec. 2(3) of the Act which defines the term "employee" and designates the persons and classes which are excluded therefrom. The sole exclusion on the basis of family relationship is "any individual employed by his parent or spouse."
In National Labor Relations Board v. Sexton, 32 L.R.R.M. 2105, 23 LC 67,570) 203 F.2d 940 (CA-6), the court in deciding the precise issue contrary to the Board's contention stated:
"Section 2(3) of the National Labor Relations Act, as amended, 29 U.S.C.A. Sec. 152(3), sets forth what the term 'employee' shall include, and specifically excludes a spouse or child of an individual employer as such an employee, but provides for no other exclusion on the basis of family relationship. The Act, therefore, having expressly set forth the individuals who are excluded from the term 'employee' on the basis of family relationship, we find no justification for the exercise of discretion on the part of the Board, by virtue of Section 9 of the Act, to exclude from the appropriate bargaining unit and from participation in the election for the selection of a bargaining agent any persons on the basis of family relationship other than those specifically excluded under Section 2(3)."
The same court in Cherrin Corp. v. National Labor Relations Board, 349 F.2d 1001, (6th Cir.) reaffirmed its holding in Sexton, and stated (page 1006):
"When the Union challenged Miss Cherrin's ballot, it was challenged on the ground that she was a daughter of the owner. This would have been sufficient to exclude the ballot under the rule followed by the Board before the decision of this court in NLRB v. Sexton, 203 F.2d 940, but it is not sufficient ground for exclusion since that decision. It was not until the investigation conducted by the Acting Regional Director, after the election for a bargaining agent, that the reasons for sustaining the challenge were based, not upon the fact that Miss Cherrin was a daughter of the owner, but, also, probably as an afterthought, on the ground that, as a result of such relationship, she occupied a special status."
The examiner concedes that it "would not have been inconsistent with Board precedent" to hold that they were eligible to vote. He might further have stated that it would have been in compliance with Sec. 2(3) of the Act and in conformity with the court decisions above noted. However, without mentioning the statutory provision, the Board on brief, in excluding the three persons under discussion, relies on its Foam Rubber decision, supra, rendered almost five months after the April 28, 1967 election.
In that case it held that it would "exclude from bargaining units the children of individuals who have substantial stock interests in closely held corporations." In reality, the Board amended Sec. 2(3) so as to exclude not only "a spouse or child of an individual employer as such an employee" as Congress had done, but also "the children of individuals who have substantial stock interests in closely held corporations." The Board cites in support of its Foam Rubber decision National Labor Relations Board v. Wyman-Gordon Co., 394 U.S. 759, 22 L. Ed. 2d 709, 89 S. Ct. 1426. We think there is nothing in that opinion pertinent to the point. True, the court recognized, as we assume all courts do, that "Congress granted the Board a wide discretion to ensure the fair and free choice of bargaining representatives" (page 767). The court did not authorize the Board to make rules in conflict with a statutory provision; in fact, it noted (page 764):
"There is no warrant in law for the Board to replace the statutory scheme with a rule -making procedure of its own invention. Apart from the fact that the device fashioned by the Board does not comply with statutory command, it obviously falls short of the substance of the requirements of the Administrative Procedure Act."
Assuming arguendo that the Board had the authority, contrary to what we think, to proclaim the rule relied upon, it was a gross abuse of discretion to give it retroactive application.
In Laidlaw Corporation v. National Labor Relations Board, 414 F.2d 99, (7th Cir.) this court held that the Board properly gave retroactive effect to its decision under the facts of that case. In response to the authorities cited by the company, we stated (page 107):
"These cases stand for the proposition that in certain situations the Board's adoption of a new rule or policy may not be applied retroactively where its practical effect is to create a hardship on the employer disproportionate to the public ends to be accomplished."
To give retroactive effect to the Board's Foam Rubber decision would create a hardship not only upon the Company which was confronted with the problem of determining whether the Molders Union represented a majority in the unit so as to require recognition but also upon the Employees Union which was competing for recognition in a contest that was extremely close, as evidenced by the results of the election. We hold that the three employees under discussion should have been included in the unit.
Leroy Kent and Leo Foster
The treatment accorded by the Board as to the status of Kent and Foster is an indication of the length it was required to go in order to maintain that the Molders Union represented a majority of the employees at the time demand was made for recognition. Kent was found to have been an employee at the time of such demand and, therefore, entitled to be included in the unit, while the Company contends that he had been discharged. On the other hand, Foster was found not to be an employee and excluded from the unit on the ground that he had been discharged, while the Company contends that he was on the payroll and was merely on a leave of absence.
The examiner found that the bargaining demand was made at "about" 2 p. m. on February 21. Kent testified that he was discharged at 2:45 p. m., and at that time was given his check.*fn2 When minutes are involved, we do not think it can be held that the general counsel carried his burden of showing that Kent was an employee without more definite proof as to the time the demand was made. It is not sufficient to say, as the examiner found, that it was "about" 2 p.m. The examiner found:
"Kent was employed on February 6, and his last day of employment was February 21. At about 2 p.m. on the latter date, the Union made its oral demand upon Respondent-Employer for recognition. There is testimony by Supervisors Long, Paldorf and Elmer Lundquist that the decision to discharge Kent was made during the morning of that day and that, before the demand for recognition was made on that day, the decision had been implemented by informing Kent of his discharge and by preparing a special paycheck in full payment of wages due as of his normal quitting time of 3 p.m. on that day; and that at the time Kent was discharged it was not known that he was going to work as late as he did that day, namely beyond 2 p.m.; but, that the check covered that full day in keeping with Respondent's practice of giving at least 2 or 3 hours' notice and paying the employee for the full day or full week, as the case may be."
Carl Paldorf, a Company foreman, testified that on the morning of February 21, it was agreed that Kent should be discharged, that his pay check was prepared in the office, and at about 1:30 p.m. he found Kent in the washroom, notified him that he was discharged and gave him his check.
In his decision, the examiner seeks to justify his finding with the statement:
"For as the General Counsel points out, even assuming that Kent was informed of his discharge at 1:30 p.m. that day and given his check, the fact remains that he was still an employee at about 2 p.m. when the Union requested recognition, it being undisputed that he was working until at least 2:30 p.m."
In our judgment, when Kent was discharged and given his check his employment was terminated, even though he may or may not have of his own volition worked a few minutes thereafter. After he was discharged he could not have had any reasonable expectation of future employment. In Whiting Corp. v. National Labor Relations Board, 200 F.2d 43, 45, (7th Cir.) this court cited many cases, including those of the Board, for the statement:
"* * * that whether one is an employee is a question to be determined by his reasonable expectation of employment within a reasonable time in the future. We find no escape from the clearly established fact that Norgard had no such expectation."
In our judgment, the Board's finding that Kent was an employee at the time the demand was made for recognition is without substantial support and he was improperly included in the unit.
We also conclude that the exclusion of Leo Foster from the unit was erroneous both as a matter of fact and of law. The Board on brief states:
"The Board's exclusion of Leo Foster from the unit was also proper because he was not an employee when the Union requested recognition on February 21. Foster commenced working for the employer on February 6 and worked only five days. His final timecard for the week ending February 14 bears the notation 'let go -- did not show up for work'. While Elmer Lundquist testified that this notation was made during the week ending February 21, he admitted that he deducted the full amount of a loan from Foster's pay on February 14, because Foster ' might not come back '. In these circumstances, the Board and the Examiner reasonably concluded that the Company had terminated Foster's employment status before February 21. Cf., Whiting Corp. v. NLRB, 200 F.2d 43, 45."
We have cited Whiting in support of our conclusion that Kent was not an employee at the time demand was made for recognition, but it furnishes no support for the Board's finding that Foster was properly excluded. Elmer Lundquist, the only witness on this point, testified in relevant part:
"Q. Now, the next employee I would like to ask you about is Mr. Leo Foster. Can you tell me how much he owed you on that week -- the week ending February 14?
A. On the week ending the 14th, he owed me $25.
Q. How much was taken out?
Q. Can you tell us why the full amount was taken out?
A. Yes. Leo Foster was with us about a week and a half or so, and the second day he was working, he asked for an advance, and I did give it to him, and this previous Friday, this being the week ending the 14th, the Friday previous to this * * *. Now, on Monday, he didn't come in, and he called me up and said his wife was in an accident or had fallen and was in the County Hospital, and he was taking care of her. And he said he didn't know when he would be in, but he would be in as soon as he could. I told him that when he comes in, I would like some kind of proof to show his wife was in the County Hospital, so I would know he wouldn't be telling me a fib on this in not reporting it. And he never did come in after that. Now, when I got to the 14th or 15th, rather, I knew he hadn't been in, and I went out and looked out, and we had new cards in the rack. I went out to see if he was working on Wednesday, and he wasn't either, so I decided I had better take it all. He might not come back. Therefore, I took his whole $25 right there. And I didn't see him again.
Q. I'm going to show you what has been marked as Respondent's Exhibit 23 and ask if these are the two time cards you just mentioned.
Q. Now, there is a notation on this one, being the one on the left, 'Let go. Did not show for work.' You ...