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Shares, Inc. v. National Labor Relations Board

January 9, 2006


Petition for Review and Cross-Application for Enforcement of an Order of the National Labor Relations Board. No. 25-CA-28771

The opinion of the court was delivered by: Cudahy, Circuit Judge.


Before CUDAHY, POSNER, and EASTERBROOK, Circuit Judges.

Shares, Inc. (Shares) is a nonprofit corporation that trains and employs disabled individuals who perform primarily industrial tasks for customers. Wellman Automotive Parts (Wellman) retained Shares' services to package the glow plugs*fn1 that it manufactured for diesel engines. When Wellman entered bankruptcy in 2003, Shares decided to move to the manufacturing side of the glow plug business. Toward that end, Shares formed a new company (WAP, LLC), purchased Wellman's machinery and hired many of Wellman's former employees. These employees belonged to the International Union, United Automobile, Aerospace & Agricultural Implement Workers of America (UAW). When Shares refused to bargain with the UAW, the union filed a complaint with the National Labor Relations Board (NLRB). The NLRB concluded that Shares is Wellman's successor and is therefore obligated to bargain with the UAW under 29 U.S.C. § 158(a)(5) and (1). Shares petitions this Court for review, and the NLRB cross-applies for enforcement of its bargaining order against Shares. We deny Shares's petition and grant the NLRB's cross-application.

I. Background

Shares is an Indiana corporation that employs approximately 300 individuals in its Industrial Services Group, about 250 of whom are disabled. These 300 employees are divided into six subsets, each of which specializes in work on different products, including die-cast aluminum parts, DNA child-identification kits and glow plugs. Disabled employees (referred to as "consumers") and nondisabled employees ("staff") work under various conditions and terms of employment, especially with respect to compensation. Staff receive a standard hourly wage while consumers receive an individual hourly wage based on their productivity. In some circumstances, consumers perform well enough to be hired as staff.

Wellman bought a manufacturing facility in Shelbyville, Indiana, in 1988. The UAW had represented employees at that facility since 1972 through a number of changes in ownership. Wellman used the facility to manufacture glow plugs and contracted the task of packaging the glow plugs with Shares. In February 2003, however, Wellman filed for bankruptcy. The bankruptcy court appointed Shares to oversee the glow plug operation, which it did for about seven weeks.

During those seven weeks, Shares decided to move into glow plug manufacturing for profit in order to supplement its income and thereby better support its nonprofit activities. Accordingly, on April 28, 2003, Shares purchased Wellman's assets that were used to produce glow plugs out of bankruptcy. In order to maintain its not-for-profit status, Shares created WAP, LLP, a wholly owned for-profit subsidiary to own and manage the glow plug operation.

Pursuant to the purchase agreement, Wellman discharged its glow plug employees on Friday, April 25, 2003. Shares resumed glow plug production the following Monday and hired eleven employees to work on the glow plug production line. Seven of those employees were Wellman employees discharged on April 25. Three others were Wellman employees who had been laid off but who held recall rights under the expiring collective bargaining agreement. The ten former Wellman employees continued working on the same orders they had been working on the previous workday.

On May 9, 2003, a representative of the UAW sent a letter to Shares's general manager asserting that Shares was a successor to Wellman and demanding that Shares recognize and bargain with the union. Shares disputed these claims and refused to bargain. The UAW then filed a complaint with the NLRB. An administrative law judge recommended that Shares recognize and bargain with the UAW. A panel of the NLRB agreed and entered such an order. Specifically, the NLRB found that Shares violated 29 U.S.C. § 158(a)(5) and (1) by refusing to recognize and bargain with the UAW as the exclusive representative of the glow plug manufacturing employees. Shares petitions this Court for review, and the NLRB cross-applies to enforce its order.

II. Discussion

We review a disposition of the NLRB with substantial deference. Under this standard of review, we ask only whether the record contains substantial evidence to support the NLRB's factual findings and whether its application of the law to the facts is reasonable. E.g., L.S.F. Transp., Inc. v. NLRB, 282 F.3d 972, 980 (7th Cir. 2002); Canteen Corp. v. NLRB, 103 F.3d 1355, 1360-61 (7th Cir. 1997). The question before the NLRB and before us on review is whether Shares is a successor employer to Wellman and therefore obligated to bargain with the UAW.

Under the National Labor Relations Act, a new employer, succeeding to the business of another, is obligated to bargain with the union representing the predecessor's employees. Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 41 (1987); NLRB v. Joe B. Foods, Inc., 953 F.2d 287, 292 (7th Cir. 1992). The obligation to bargain is triggered when:

(1) there is "substantial continuity" between the enterprises of the predecessor and the new employer; (2) the unit of employees comprising the new operation remains the appropriate unit for collective bargaining; and (3) the new employer's workforce contains a majority of the predecessor's former employees at a time when the new workforce has reached a "substantial and representative complement." Fall River Dyeing & Finishing Corp., 482 U.S. at 43, 46-47; Joe B. Foods, Inc., 953 F.2d at 292-93. It is well established that a new employer has a duty to bargain when it makes a conscious decision to maintain generally the same business and to hire a majority of its employees from its predecessor. It is equally well established that in conducting the successorship analysis, it is appropriate to "keep[ ] in mind the question whether 'those ...

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