National Labor Relations Board v. Pepsi-Cola Distributing Company of Knoxville, Tennessee, Inc.

Citations: 646 F.2d 1173; 107 L.R.R.M. (BNA) 2252; 1981 U.S. App. LEXIS 13692Docket: 79-1314

Court: Court of Appeals for the Sixth Circuit; May 1, 1981; Federal Appellate Court

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The National Labor Relations Board (NLRB) petitioned for enforcement of its April 13, 1979, order against Pepsi-Cola Distributing Company of Knoxville, Tennessee, for violating Section 8(a)(5) and (1) of the National Labor Relations Act by unilaterally withholding a year-end bonus for route salesmen. This bonus, previously paid by Hartman Beverage Company, was calculated at one cent per case sold and had been consistently given before and after union negotiations with Hartman. After Pepsi-Cola acquired Hartman's business on February 1, 1977, it initially communicated to the salesmen that there would be no changes to their pay structure but did not realize the bonus existed until May 1977. Upon discovering the bonus, management decided not to pay it.

The Administrative Law Judge (ALJ) determined that the bonus was integral to the route salesmen's employment and that Pepsi-Cola was required to negotiate with the union regarding any changes. However, the ALJ concluded that a waiver clause in the prior contract between the union and Hartman relieved Pepsi-Cola from the obligation to continue or negotiate the bonus. On review, the NLRB found that the union had waived its right to bargain about the bonus during the contract's duration, differing from the precedent set in Bancroft-Whitney Co., where extensive bargaining and a clear contract provision indicated the terms of wages and benefits.

The right to consultation regarding unilateral changes in employment terms is a statutory right, not one derived from a contract. To waive this right, there must be clear evidence of relinquishment, assessed based on the contract's context. In this case, the Union did not demonstrate such relinquishment concerning the year-end bonus. Consequently, the Board ordered the respondent to cease unilateral changes without consulting the Union, mandated payment of the 1977 year-end bonus, and required collective bargaining on any future changes to this practice.

The Union's statutory right to be consulted on bonus-related changes was upheld, aligning with Section 8(d) of the Act, which necessitates good faith negotiation regarding employment terms. The duty to bargain collectively, as per Section 8(a)(5), is infringed when an employer unilaterally alters working conditions under negotiation, similar to outright refusal to negotiate. Legal precedents support these findings, highlighting that direct dealings with employees or unilateral wage increases without union negotiations violate the duty to bargain. The dissent referenced a similar case where enforcement of a Board order for bonuses was denied but distinguished it based on the nature of the bonuses involved. The current case involved assurances from Pepsi-Cola regarding consistent compensation, reinforcing the obligation to consult the Union.

Year-end payments to route salesmen were determined to be a regular component of their compensation, calculated at one cent per case, rather than mere bonuses. This situation signifies a unilateral management alteration of a critical aspect of collective bargaining—wages. When a successor employer maintains previously established compensation, a general waiver clause in the collective bargaining agreement does not constitute a clear waiver of the union's collective bargaining rights regarding that compensation. The Board's petition to enforce its order is approved.

Circuit Judge Bailey Brown dissents, arguing that the Board's focus was whether Pepsi-Cola, as a successor employer, failed to bargain over the 1977 Christmas bonus, which should be examined under the existing collective bargaining contract. Brown asserts that the union's right to bargain cannot be deemed waived unless explicitly stated in the contract. The Administrative Law Judge (ALJ) found that the contract's terms clearly indicated a waiver, while the Board disagreed, stating that the contract was ambiguous. Brown contends that the collective bargaining contract contained explicit language waiving the right to bargain about bonuses, supported by surrounding circumstances.

Furthermore, Brown notes that even though the bonus was not explicitly mentioned in the contract, it had become integrated into the wage structure. He suggests that had the union pursued the bonus issue through arbitration, it might have succeeded. However, the actual question before the Board was whether the union waived its right to negotiate regarding the bonus. The contract included an arbitration provision for resolving disputes, which the Board was not tasked to adjudicate concerning Pepsi-Cola's obligation to pay the bonus. 

The relevant contract provision stated that both parties waived their right to bargain collectively on any matters not included in the agreement. In a precedent case, the Fourth Circuit identified similar language as a clear waiver of the union's negotiation rights regarding Christmas bonuses.

The clause in the Southern Materials agreement establishes that both the Company and the Union waive their rights to bargain collectively on any matters covered or not covered in the agreement itself. The waiver clause in question is equivalent to that in Southern Materials. There are no contextual factors that indicate a waiver of this provision. When Pepsi-Cola acquired the business and adopted the collective bargaining contract in February 1977, it was unaware of Hartman's practice of paying a Christmas bonus, which was not mentioned in the contract. Although Pepsi-Cola verbally assured that employee compensation would continue as under Hartman, this assurance referred only to contractual compensation. Pepsi-Cola received misleading information about the bonus from Hartman in May 1977 without consulting the Union, but this miscommunication could only potentially waive the right not to pay the bonus, not the right not to bargain about it. Even if the Board found that Pepsi-Cola committed an unfair labor practice by not bargaining on the bonus, it likely did not have the authority to compel payment of the bonus instead of ordering negotiations. Furthermore, the Board overstepped by ordering Pepsi-Cola to pay the 1977 bonus and to bargain about future bonuses despite a prior settlement on those future years. Chief Judge Frank J. Battisti expresses dissent and advocates for denial of enforcement.