On Petition to Review a Supplemental Decision and Order of the National Labor Relations Board
Cummings and Tone, Circuit Judges, and Campbell, Senior District Judge.*fn*
This case arises from a labor dispute that has been before us several times.*fn1 The contestants are Kable Printing Company and Graphic Arts International Union, AFL-CIO and its Local 91-P. All the prior cases, and this one as well, involve efforts to apply the secondary-boycott provisions of § 8(b)(4) of the National Labor Relations Act, 29 U.S.C. § 158(b)(4), against those unions and another Graphic Arts local. The issue now presented is the applicability of the "ally" doctrine to subcontractors when a primary employer responds to a strike against one department in his operation by attempting to close down that department and to contract out as much of the work of that department as possible.
Some recapitulation of facts stated in earlier published opinions is necessary to make what follows intelligible. At the time this dispute started, Kable operated a complete, integrated printing business at Mount Morris, Illinois. Local 91-P represented the nonsupervisory employees in the rotogravure-processing department, while other employee units at the plant were represented by seven other unions. Local 91-P's members performed the "front-end" preparatory film and engraving work required to produce rotogravure cylinders for Kable's presses and the handling and maintenance of those cylinders.
Efforts by Kable to persuade the various unions in the plant to accept changes in working arrangements which Kable believed necessary for economic operation were successful with all the unions except Local 91-P. During negotiations which commenced early in 1974, Local 91-P refused to accept reductions in what Kable believed to be excessive manning requirements. No agreement having been reached when the contract expired on May 10, the Local 91-P members struck. Supervisory employees in the rotogravure-processing department and the members of the other unions remained on the job.
The rotogravure-processing department consisted of two basic divisions before the strike: film processing (production of film "positives" for use in cylinder processing) and cylinder processing. Kable succeeded in completely discontinuing its film-processing division by subcontracting to outside sources who, even before the strike, had supplied approximately two-thirds of Kable's requirements. Only the cylinder-processing division is involved in the dispute before us.
Immediately after the strike began, Kable attempted to have the struck cylinder-processing work done in Chicago and Milwaukee preparatory shops, but employees in those shops, relying on struck work clauses in their collective-bargaining contracts and on the Board's ally doctrine, refused to perform the work. Kable was unable to fill its customers' orders with the in-house work done by supervisors and other non-striking employees, and struck work subcontracted to certain nonunion printers was recalled for reasons that are irrelevant here. The next step Kable took was to make arrangements whereby its customers contracted for cylinder-processing work directly with independent "front-end" shops, including S & M Rotogravure Service, Inc., one of the secondary employers involved in the case at bar. These efforts too were unsuccessful, because Graphic Arts International and its locals induced the employees in those shops to refuse to perform the struck work. Charges were filed with the NLRB against the unions, and complaints were issued by the General Counsel, who sought and eventually obtained federal court injunctions under § 10(l) of the Act, pending hearings on the complaints by the Board. See Squillacote v. Graphic Arts International Union Local 277, 513 F.2d 1017 (7th Cir. 1975); Blackhawk Engraving Co. v. NLRB, 540 F.2d 1296, 1299 (7th Cir. 1976); Kable Printing Co. v. NLRB, 540 F.2d 1304, 1307 n.3 (7th Cir. 1976). In August 1975, the Board, finding that the arrangements between Kable's customers and the secondary employers had been "orchestrated" by Kable, held that the secondary employers were Kable's allies, and therefore the unions had not violated § 8(b)(4). This court recently sustained the Board's decisions in those cases. Blackhawk Engraving Co. v. NLRB, supra, 540 F.2d at 1296, and Kable Printing Co. v. NLRB, supra, 540 F.2d at 1304.*fn2
On July 22, 1974, shortly after the customer-order litigation had commenced, Kable orally advised the union at a bargaining session that it was "phasing out" rotogravure-preparatory operations. Two days later the company advised the union in writing that it had "decided to close down its Roto Processing Department."
Prior to this announcement, Kable had discussed with S & M, which had already done work placed by Kable's customers, and the Mueller Color Plate Company, another "front-end" shop, the possibility of their taking over Kable's cylinder-processing work. The subject of Kable's termination of its rotogravure-processing department and the bearing such a termination would have on whether S & M's and Mueller's employees would work on Kable cylinders was discussed with them before and after the termination announcement. Both firms wanted the Kable cylinder work if their employees would be willing to perform it.
For several months after the termination announcement Kable had supervisory and other non-striking employees do work which the striking employees had done and which, as the Administrative Law Judge in this case found, it was "unable to place with outside suppliers because the Union had successfully invoked the struck work provision of its contract, in one way or another, in those shops." The number of cylinders produced and the volume of other work done by Kable was gradually reduced as more work was subcontracted. Nevertheless, even when 10(l) injunctions allowed Kable to subcontract freely, it retained in its plant, and plans to retain indefinitely, certain residual work formerly done by the striking employees. This work, which seems to be required by the nature of the operation and Kable's ownership of the cylinders, includes the marking-up and correction of proofs, chroming and polishing of cylinders, cylinder maintenance, stripping of copper off used cylinders, copper plating and grinding of new cylinders, and loading and shipping of cylinders. Kable still assigns five employees to these tasks.
Soon after Kable's termination announcement, it entered into subcontracts with S & M and Mueller for cylinder-preparation work. The S & M employees refused to handle Kable's work, and a similar problem with Mueller's employees appeared imminent. Following the filing of charges against the International Union and Local 277, whose membership included the S & M and Mueller employees, the proceeding now before us was initiated by the issuance of complaints charging the unions with secondary-boycott activities in violation of § 8(b)(4). An injunction under § 10(l), pending Board determination (earlier injunctions having been dissolved after the Board's decision of the customer-order cases in favor of the union), Squillacote v. Graphic Arts International Union Local 277, 388 F. Supp. 258 (E.D. Wis. 1975), was affirmed by this court, 519 F.2d 1405 (1975). In the Board proceeding, where the complaints were consolidated, a decision of the Administrative Law Judge favorable to Kable was reversed by a panel of the Board, a two-member majority holding, as we said in Squillacote v. Graphic Arts International Union, AFL-CIO, 540 F.2d 853, 856 (7th Cir. 1976), "that the General Counsel had failed to prove that Kable permanently ceased its rotogravure-processing operations and that at least in the absence of such proof, an ally relationship existed between Kable and its suppliers, S & M and Mueller." As a result of the Board's decision, the preliminary injunction was vacated. In an unpublished order on a petition to review, we remanded to the Board because its decision on its face showed a failure to apply the correct standard of proof or to follow the Board's own procedural rules with respect to the treatment of credibility findings by an Administrative Law Judge.*fn3 We directed the Board to correct these errors and also stated,
"This remand is not intended to limit the Board's discretion to take any other action it finds proper on remand."
The Board accepted the remand, and the same three-member panel issued a supplemental decision in which the same majority adhered to its earlier holding that the ally doctrine protected the unions' conduct. It is this decision which is now before us for review. For purposes of its decision, the Board "[accepted] as fact . . . that Kable decided to discontinue the work involved in this controversy, after efforts to persuade its striking employees to return to work failed, for valid economic reasons related to its competitive position in the industry and to profitability, and not as a bargaining stratagem to force capitulation by the Unions in their labor dispute with Kable." Nevertheless, the Board said, "the General Counsel has not proven by a preponderance of the testimony adduced that Kable's announced decision to discontinue its rotogravure-preparatory operations has resulted in a permanent cessation of these operations so as to overcome the ally defense interposed by the Respondent Unions." ...