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Canteen Corporation v. National Labor Relations Board

January 7, 1997






Petition for Review and Cross-Application for Enforcement of an Order of the National Labor Relations Board.

No. 30-CA-11826

Before BAUER, RIPPLE and EVANS, Circuit Judges.

RIPPLE, Circuit Judge.



The issues in this appeal focus upon the status of Canteen Corporation ("Canteen") as a successor employer to Service America at the Medical College of Wisconsin. The Administrative Law Judge ("ALJ") concluded that Canteen was a successor; the National Labor Relations Board ("NLRB" or "the Board") agreed. *fn1 On the basis of the ALJ's successorship analysis, adopted by the Board, Canteen was found to have violated sections 8(a)(1), (3) and (5) of the National Labor Relations Act ("NLRA" or "Act"), 29 U.S.C. secs. 158(a)(1), (3) and (5). *fn2 Challenging its designation as a successor, Canteen now petitions this court to review the final order of the Board. The Board has filed a cross-petition seeking enforcement of its order. For the reasons set forth in the following opinion, we deny the petition for review and enforce the Board's order.


A. Facts

Prior to July 1992, the food service contract at the Medical College of Wisconsin was held by Service America. Service America's four nonsupervisory employees at the Medical College were represented by the Hotel Employees and Restaurant Employees Union Local No. 122, AFL-CIO ("the Union"). In late May 1992, Canteen, a competitor food service contractor, successfully bid on the food service operations for the Medical College. Under the terms of the takeover, it would replace Service America in that service on July 1, 1992.

Canteen first initiated contact with the Union before it bid on the Medical College's food service operations. It requested and received from the Union a copy of its collective bargaining agreement. After Canteen won the bid, Robert Kovacs, Canteen's director of labor relations, and Dennis Hillgartner, its district manager for food services, decided that there needed to be a new position at the Medical College, that of "working manager." On June 8, Kovacs telephoned Vince Gallo, the Union's business manager. He told Gallo that Canteen was "interested in working out an arrangement wherein we could have language concerning a working manager," Tr. at 27, and offered to send Gallo something in writing from other labor contracts that had authorized a supervisor to perform bargaining unit work. Gallo responded that he wanted to use the Service America contract as a guide to the overall negotiations; Kovacs in turn said that he preferred to use the contract between the Union and Miller Brewing Company. After this conversation with Kovacs, Gallo assured the Service America employees that they would be working under a union contract after the takeover.

On June 11, Hillgartner delivered to Gallo's office the written contract language concerning a "working manager." On that same day, Matthew Fitzgerald, the food service manager, posted a notice in the Medical College cafeteria announcing that Canteen was accepting applications. At about the same time, the four Service America employees were solicited personally by Canteen officials. On June 15, Kovacs sent Gallo a letter notifying him of Canteen's July 1 opening at the Medical College of Milwaukee and stating:

It is imperative to our successful operation of this facility that it be staffed by a working manager. To that end, I would propose that we either add language to any collective bargaining agreement or sign a letter of understanding that clearly spells out this position.

Therefore, I would propose the following language that is contained in other . . . contracts:

Bargaining Unit Work

[It is] agreed that supervisory employees shall be allowed to perform work normally done by bargaining unit employees as long as they do not displace said employees.

If you agree, please sign one copy of the two enclosed originals and return same to my office. A.R.II, Ex. GC-4.

The Union did not sign a copy. Around June 22, therefore, Kovacs initiated another conversation with Gallo. Kovacs testified that "we were within a couple of weeks of opening the account and we wanted to make sure that we were in agreement on it." Tr. at 32. Gallo ultimately agreed to the language proposed in Kovacs' letter. In their discussion, Kovacs also stated that he wanted the employees to serve a probationary period; Gallo replied that he did not object. Gallo testified that, during this conversation, he and Kovacs planned to meet in order to exchange proposals and to negotiate an agreement for the Medical College on June 30, the same day they were interviewing Canteen's employees at Miller Brewing.

The job interviews were held during the week of June 23. Steve Srok, Canteen's on-site manager, interviewed each of the three who applied (Kelly Piquette, Susan Anderson and Irene Cook). *fn3 He offered each one a job at a salary rate of $5.70 an hour. Srok testified that he became aware, during the interviews, of the drastic reductions in earnings they would sustain if they accepted employment with Canteen: The three were making $6.79 or $7.49 as Service America employees. Even though the rate was raised to $5.72 an hour, eventually each one refused to accept employment because of the low wage offer. As a result, Canteen was forced to hire quickly from other sources.

Once Service America's employees rejected the job offers, Canteen's corporate vice president in charge of labor relations "instructed Kovacs to refuse to negotiate" with the Union because it no longer represented employees working at the Medical College. Tr. at 38, 48-49. On June 30, Kovacs and Hillgartner met with Vince Gallo; once they completed their discussion on the Miller Brewing contract, however, Kovacs refused to talk to Gallo about the Medical College contract. Kovacs admittedly told Gallo: "I have been advised by my boss that I will not recognize Local 122 since we feel that they legally do not represent the employees at the Medical College." Tr. at 38. Gallo, who did not know that the Service America employees had turned down the job offers, left in anger. When he telephoned the Service America employees, they told him they had "no choice" but to reject the offers because of the substantial cuts in pay. At Gallo's recommendation the employees wrote a letter stating that they would work for Canteen at the Medical College if current conditions were met. Gallo then returned to the meeting and declared to Kovacs that Canteen had "stabbed me in the back, that we had an agreement that we were going to negotiate a contract, and they orchestrated the discharge of those employees by offering reduced wages and no benefits." Tr. at 162. Canteen representatives left the meeting. The company did not respond to the letter signed by the Service America employees.

The Union then filed this unfair labor practice charge on July 21, 1992. The complaint alleges that Canteen violated sections 8(a)(1), (3) and (5) of the NLRA by (a) bargaining with, and then withdrawing recognition from, the Union as the exclusive bargaining representative of a unit of employees in its newly acquired business, and (b) constructively denying employment to the employees of Service America by offering predictably unacceptable terms, thereby causing them to reject job offers.

B. Decision of the Administrative Law Judge

The ALJ found, from the evidence and testimony presented by Canteen officials, that as of June 22, Canteen "held the intention, albeit unannounced, to retain the Service America employees at the Medical College." Canteen Corp., 317 NLRB 1052, 1063 (1995). The ALJ noted Canteen's several contacts with the Union, its invitation posted in the Medical College cafeteria to submit applications, and its managers' personal solicitation of the four Service America workers to apply and to schedule an interview. He then found that Canteen "was on a course pointing to recognition of the Union and retention of the Service America employees." Id. at 1064.

The ALJ concluded that Canteen was a "successor" to Service America at the Medical College under the successorship doctrine of federal labor law. The ALJ found that there was a substantial continuity in the operations of Canteen and Service America; Canteen continued to provide the same services and to serve the identical market under the same conditions with no break in time for provision of those services. Id. at 1065-66. The ALJ acknowledged that Canteen did not employ a single Service America employee, and therefore did not establish the second "successorship prong"--that a majority of the new employer's employees were the predecessor's employees. Nevertheless, the ALJ determined that Canteen's failure to retain a majority of Service America's employees was based on illegal discrimination: Canteen's low wage offers were "predictably unacceptable" and were made when it was required to consult the Union. Id. at 1066.

The ALJ found that it was "perfectly clear" that the new employer planned to hire all of the Service America employees and therefore that Canteen was required to accept the collective bargaining relationship of the predecessor employer and to consult with the Union before it fixed its terms. The ALJ stated that Canteen, by its "overall pattern of conduct[,] left the Union every reason to assume that, until alternative terms were established through negotiations, then scheduled for June 30, [Canteen] would maintain all employment conditions" for those four employees. Id. at 1067. Thus, the ALJ concluded that Canteen violated subsections 8(a)(5) and (1) by stating unilaterally, at the job interviews, that the job offers were contingent on acceptance of the low hourly wage. It also violated those sections by refusing to recognize and to bargain with the Union. Canteen violated sections 8(a)(3) and ...

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