UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT
decided: September 21, 1972.
R & M KAUFMANN, A DIVISION OF RUSS TOGS, INC., PETITIONER,
NATIONAL LABOR RELATIONS BOARD, RESPONDENT *FN*
13-CA-10451; 192 NLRB No.14
Pell and Stevens, Circuit Judges, and Laramore, Senior Judge.*fn**
Author: Per Curiam
The National Labor Relations Board seeks enforcement of a bargaining order based on its findings that the employer (Kaufmann)*fn1 violated §§ 8(a)(1) and 8(a)(5) of the National Labor Relations Act*fn2 by refusing to bargain with the union (District 65).*fn3 The question presented is whether District 65 merits certification as the collective bargaining representative of Kaufmann's employees despite its close relationship and affiliation with the National Association of Women's and Children's Apparel Salesmen, Inc. (NAWCAS), an organization previously denied certification by the Board on conflict of interest grounds. We do hold that the Board's reasons for disqualifying NAWCAS also disqualify District 65; it is not sufficiently independent of NAWCAS to insure good faith representation of the employees in the bargaining unit.
District 65 is a long established labor union presently representing almost 30,000 members under more than 2,000 individual collective bargaining agreements. Prior to its affiliation with NAWCAS, however, it had never represented traveling apparel salesmen who participate in trade shows organized and conducted by NAWCAS and its affiliate members. The majority of NAWCAS' members are independent contractors and are not entitled to union representation under § 2(3) of the Act. The rest are protected by the Act as employee traveling salesmen for individual apparel manufacturers.
Starting in 1965, NAWCAS sought to achieve union status with the help of District 65. The two organizations originally operated under an informal working arrangement; a formal affiliation agreement was signed on July 20, 1967. Under the agreement, District 65 carries on essentially all the "union" functions of NAWCAS. NAWCAS, on its part, collects dues for District 65 from its members, continues to carry on its trade association activities, and retains the right "to make all decisions affecting the interests of its members in accordance with its constitution and by-laws."*fn4
The first attempts by the NAWCAS-District 65 combination to organize employee traveling salesmen were frustrated by the Board's decision in Bambury Fashions, Inc., 179 NLRB 447, 72 LRRM 1350 (1969). There, a joint NAWCAS-District 65 certification petition was denied on the ground that NAWCAS was disqualified by its conflict of interest. The Board properly recognized that NAWCAS might subordinate the interests of the employee traveling salesmen (who composed the units in question) to those of the independent contractors. Similarly, NAWCAS, whose primary activity is the operation of trade shows, might oppose joint manufacturer-employee salesmen interests in manufacturer operated trade shows. Disqualification because of such conflicting interests is a necessary measure to assure good faith representation in collective bargaining.*fn5 Neither this principle nor the holding of Bambury is questioned in this proceeding.
NAWCAS and District 65 jointly conducted the Kaufmann organizing campaign during the pendency of Bambury in 1969. Kaufmann's employee-salesmen were asked to sign two different representation cards -- one designating "NAWCAS-District 65" as the bargaining agent (apparently following the Bambury pattern) and the other designating only "District 65." The stated reason for the use of two cards was to avoid "entanglements" at the Labor Board. J. A. 57.
On March 26, 1969, NAWCAS-District 65 jointly requested a meeting with management. On April 18, Kaufmann responded that in view of the Bambury proceeding, it doubted whether NAWCAS-District 65 could represent the unit. The joint campaign continued until May 22, when NAWCAS-District 65 withdrew its request for recognition. At the same time, District 65 individually sought recognition, relying on the alternate representation cards. This change in form was not accompanied by any change in substance. NAWCAS and District 65 remained affiliated, and NAWCAS officers still were capable of influencing if not controlling District 65.
In the subsequent certification proceeding, Kaufmann argued that the union's close ties with NAWCAS barred certification. The Board rejected the defense and ordered an election which District 65 won. Following Kaufmann's renewed refusal to bargain, the Board again rejected Kaufmann's arguments and ordered it to bargain with District 65. Kaufmann then petitioned for review in this court, and the Board cross petitioned for enforcement of its bargaining order.
The Board argues that District 65's established history as an independent labor union and its expressed intent to act independently in representing the bargaining unit are controlling in a certification proceeding. If these arguments were sufficient, potential conflicts of interest would seldom, if ever, be disqualifying.*fn6 The Board suggests, however, that ample protection is afforded by the availability of decertification. If District 65 "refuses to maintain an independent course in representing unit employees, or if in bargaining the Employer has grounds for believing that District 65 is acting as an agent for another organization, the Board, pursuant to its authority to police its certifications, may examine Petitioner's conduct when the Board's established procedures are appropriately invoked for such purpose." 187 NLRB. No. 20 (J. A. 24).
Under the Board's suggested procedure, the employer would have to challenge the union in a decertification context with proof of actual misconduct by the bargaining representative. Postponing any protection against the risk that conflicting interests may infect the bargaining process until actual damage has been done is inconsistent with the Board's proper evaluation of the potential for harm evidenced by its decision in Bambury. Disqualification of a bargaining representative whose independence and loyalty are properly drawn into question should not await proof of actual misconduct. Rather, the Board must focus on the potential for such misconduct before the union is certified.
We agree with Judge Coffin's criticism of the test applied by the Board:
"The principles attaching to the concept of conflicts of interest in the fiduciary field generally, and also in the field of collective bargaining, look to the prevention and forestalling of conditions which are likely to divide loyalties. Were proof of union 'betrayal' required to trigger the application of sanctions, this constructive operation of the law would be largely nullified. We therefore take issue, not with the interpretation of the testimony, nor, of course, with the facts as revealed by the documentary evidence, but rather with the test or standard applied and the application of the undisputed facts to such standard." NLRB v. David Buttrick Co., 361 F.2d 300, 304-305 (1st Cir. 1966).
As the Board recognized in Bambury, "what disqualifies a union from acting . . . is the latent danger that it may bargain, not for the benefit of unit employees, but for the protection and enhancement of [other interests]." 179 NLRB at 451, 72 LRRM at 1354.
The record is replete with proof of the close relationship between NAWCAS and District 65. Mere assertions that they have acted or will act independently are not material even if believable; their continued close relationship in and of itself creates the danger that District 65 "may bargain, not for the benefit of unit employees, but for the protection and enhancement of" NAWCAS. Ibid. We conclude that the same conflict of interest which disqualified NAWCAS in Bambury also disqualifies District 65, which owes loyalties both to NAWCAS and to the employees in the bargaining unit.
Employer's petition for review is granted; the Board's cross petition for enforcement is denied.