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National Labor Relations Board v. Sachs

decided: October 10, 1974.


On Application for Enforcement of an Order of the National Labor Relations Board.

Pell, Stevens and Sprecher, Circuit Judges. Pell, Circuit Judge, dissenting.

Author: Per Curiam

In its order of October 19, 1972, and supplemental order of March 7, 1973, the NLRB determined that Peko Ltd. (Peko), Sav-Co., Inc. d/b/a Sav-Mart (Sav-Co.) and Philip Sachs and Michael Sachs d/b/a Phil's Sav-Mart Service (Phil's) had violated §§ 8 (a) (1) & (3) of the National Labor Relations Act, 29 U.S.C. §§ 158 (a) (1) & (3). See 199 NLRB No. 96; 202 NLRB No. 48. The Board's determination was based upon its findings that respondents had coercively interrogated an employee concerning his union membership, instituted more onerous work rules in retaliation for the employees' union activities and discriminatorily laid off four employees. Pursuant to § 10 (e) of the Act, 29 U.S.C. § 160 (e), the Board has applied to this court for enforcement of its orders. We enforce as modified.


Phil's is a relatively small service station located in Collinsville, Illinois. It was the "management" of Phil's, i.e., the Sachs brothers, who actually imposed the "more arduous" working conditions and laid off the four service attendants. Peko and Sav-Co.*fn1 thus contend that the Sachs brothers were independent contractors and that they are not responsible for the brothers' labor practices. The administrative law judge agreed with this contention, but the Board reversed, concluding that the brothers were agents of Peko and Sav-Co. and not independent contractors. See App. 8 & n. 6. If the record as a whole contains substantial evidence supporting the Board's conclusion, it must, of course, be upheld.


The record demonstrates that Sav-Co. owns a building in Collinsville which is operated as a retail discount department store under the name "Sav-Mart." All of the departments within the store and the automotive store (located in a nearby building) are managed by enterprises other than Sav-Co. pursuant to lease or license agreements. Sav-Co., however, coordinates all of their advertising, furnishes building maintenance and provides utility, guard, custodial and check cashing protection services. According to the administrative law judge, the entire enterprise "gives the appearance of being a single department store." App. 12.

Located in one corner of the parking area surrounding Sav-Mart is the retail gasoline station which eventually became "Phil's." The station was constructed jointly by Sav-Co. and Mid West Petroleum Co. in 1967 and then leased to Mid West; the lease was assigned to Peko on January 2, 1968.

On the same day Peko entered into a written contract with Ben Sachs, the father of the Sachs brothers. In consideration of a $100 per week salary, Ben Sachs agreed to: 1) "supervise" the Peko stations located at the four Sav-Mart locations; 2) "advise" Peko "of the condition of the repair of its equipment and machinery and the condition of the gas service stations, the conduct and manner of operation of said service stations by the personnel operating the same and also as to the quantity, quality and types of the various products sold at said stations"; 3) "advise" Peko "as to the need for and make recommendations to [Peko] as to changing of equipment and/or products and keep [Peko] informed as to all trends and developments in the trade and business"; and 4) "make all necessary recommendations to the operators of the various stations supplied by Peko concerning their handling of credit cards and cash collection systems together with payment of accounts due from the operators to [Peko]." Ex. No. LTD-1. Although the contract referred to Ben Sachs as an "independent contractor," the Board properly concluded that he was an agent of Peko and Sav-Co.*fn2

Upon the recommendation of Ben Sachs, Peko subleased its Collinsville station to and entered into a "consignment contract" with Philip Sachs, Ben Sachs' eldest son. Pursuant to the sublease, Ex. No. GC-4, Phil Sachs was required, inter alia, to: 1) pay a rental of $500 per month or one cent per gallon of gasoline sold, whichever was greater; 2) maintain the station in good repair; 3) paint the station whenever Sav-Co. "deemed necessary"; 4) keep "the outside area of said premises in a neat condition and free of any objectionable debris, and reasonably free of snow, ice and water"; 5) refrain from erecting certain types of advertising and making certain alterations to the property without written consent; 6) indemnify Sav-Co. against certain claims; 7) give a two cent per gallon discount to "members of Sav-Mart"; 8) allow Sav-Co. to inspect all of its records upon demand; 9) "use reasonable diligence in the courteous and efficient sale and dispersing of products for sale on said premises with sufficient capable personnel"; 10) have a sufficient reserve supply of products to reasonably fill demands therefor"; 11) "have said station open for business daily from at least 6 A.M. each morning until at least 11 P.M. each night"; 12) "have sufficient number of pumps of recent design to properly service the reasonably foreseeable demand"; and 13) refrain from doing anything "which might in any way damage or injure the credit and/or business reputation of Sav-Mart." Failure to perform any of these requirements would, of course, allow Sav-Co. to terminate the lease.

Pursuant to the consignment contract, Ex. No. GC-5, Philip Sachs was required to: 1) sell only those products consigned to him by Peko; 2) deposit all receipts in a bank account insured by FDIC; 3) "render diligent and courteous service to the public"; 4) operate his station "in a sanitary, clean and presentable manner daily during reasonable hours"; 5) "furnish such personnel as are able to sufficiently render reasonably prompt and competent service to [his] customers"; 6) accept, maintain an accurate inventory of and remit daily reports on all products consigned; and 7) assume liability for losses due to the use of credit cards and bad checks. Once again, failure to satisfy these requirements could have resulted in termination of his lease.

The consignment contract further provided that Peko would: 1) "render merchandising management and administrative advice and assistance" to Phil Sachs; 2) "furnish such advertising and sales promotion from time to time as it deems proper"; 3) keep an account of all Sachs' sales; 4) pay all of the station's "rentals, utility bills, taxes, and all other occupational costs, other than labor and wages, and render a monthly account therefor"; 5) protect the consigned products "from harm resulting from fire, wind and storm, and from other hazards"; 6) have the rights to inventory all consigned products whenever it desired and to demand and receive compensation for any missing goods; and 7) have the right to change any of the trade names on the consigned products.

Peko compensated Phil Sachs at the rate of three cents per gallon of gasoline sold. However, in return for certain services, he was required to pay Peko four cents per gallon. (Presumably this one cent per gallon differential satisfied the rental requirement under the sublease.) Peko guaranteed Phil Sachs "profits" of $8,000 per annum. His only investment in the enterprise was $52 in petty cash.

Subsequent to signing the agreements with Peko, Phil Sachs entered the Navy and the management of the station was entrusted primarily to Sachs' brothers. On various occasions Ben Sachs came to the station and "directed" the employees "to do particular work assignments," such as "to make announcements" in the Sav-Mart store, "to clean the lot, how much gas to ...

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