National Labor Relations Board v. Oregon Steel Mills, Inc., Oregon Steel Mills, Inc. v. National Labor Relations Board

Citations: 47 F.3d 1536; 95 Daily Journal DAR 2326; 95 Cal. Daily Op. Serv. 1312; 148 L.R.R.M. (BNA) 2656; 1995 U.S. App. LEXIS 3320Docket: 92-70645, 92-70658

Court: Court of Appeals for the Ninth Circuit; February 22, 1995; Federal Appellate Court

Combined Opinion SummaryCombined Opinion Original

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The National Labor Relations Board (NLRB) sought enforcement of its November 30, 1990, order which determined that Oregon Steel Mills, Inc. violated sections 8(a)(1) and (3) of the National Labor Relations Act by not reinstating former strikers and removing five from the preferential reinstatement list. The U.S. Court of Appeals for the Ninth Circuit, consisting of Judges Alarcon, Norris, and Leavy, upheld the NLRB's ruling.

Oregon Steel contested the NLRB's decision on three grounds, emphasizing that it bypassed qualified former strikers in favor of temporary workers from independent agencies. The court reaffirmed that an employer must reinstate a striker who offers to return unless there is a substantial, legitimate business reason to refuse. It clarified that economic strikers are entitled to reinstatement when positions become available.

Oregon Steel argued that the obligation to hire from the preferential list only applied when hiring new employees directly onto its payroll, asserting that it only paid employment agencies. The court rejected this reasoning, noting that Oregon Steel hired temporary workers for the same jobs previously held by strikers, which constituted an unfair labor practice. The court underscored that the right to reinstatement is not contingent on technicalities.

Lastly, Oregon Steel contended that the NLRB incorrectly placed the burden of proof on it to justify not rehiring strikers. The court ruled that this argument was inconsistent with established Supreme Court and Ninth Circuit precedents, affirming the NLRB's decision.

In NLRB v. Fleetwood Trailer Co., the Supreme Court established that the employer must demonstrate a legitimate and substantial business justification for not reinstating strikers. This principle was reiterated in subsequent cases, including NLRB v. Rockwood Co. and others. Oregon Steel contended that the Administrative Law Judge (ALJ) would prevent employers with preferential reinstatement lists from engaging outside labor, but this characterization was deemed exaggerated. The Board's ruling did not prohibit hiring temporary workers post-strike; it simply required Oregon Steel to prove that such hiring was justified by legitimate business reasons. Oregon Steel's claim of cost-effectiveness in hiring temporary labor was rejected due to insufficient evidence, including a lack of financial analysis and documentation of labor costs. The Board noted that Oregon Steel had failed to demonstrate a direct connection between its use of contract labor and its economic health, and that it sometimes paid temporary workers more than regular employees. The court must uphold the Board's factual findings if supported by substantial evidence, which in this case confirmed that Oregon Steel did not adequately justify its decision to hire temporary workers instead of rehiring former strikers.

Oregon Steel challenged the Board's determination that it violated the Act by removing five former strikers from the preferential reinstatement list. Three were removed because Oregon Steel claimed they found substantially equivalent employment elsewhere, while two were removed for refusing job offers deemed substantially equivalent. The Board's findings, supported by substantial evidence, were upheld. 

An employer can remove a former striker from the list if they find regular and substantially equivalent employment or refuse an offer of such employment. "Substantially equivalent" encompasses factors like pay, hours, working conditions, location, type of work, and seniority rights. 

Specific findings regarding the three strikers revealed that John Maxwell's new job resulted in reduced seniority and a significant wage cut, David Vasil faced continuous travel requirements that detracted from his home life, and Michael Loupe experienced poorer working conditions and reduced advancement potential. Thus, their new positions were not considered substantially equivalent.

Regarding Dan Hunker and Jeanne Wilson, Oregon Steel argued that their offered positions as stores clerks were substantially equivalent, despite both rejecting the offers. The Board found these offers were not substantially equivalent due to different working hours, as Hunker and Wilson previously worked weekday shifts only. 

The court granted enforcement of the Board's order in full.

Concurrence is expressed in Part II of the opinion, while dissent is noted in Part I. The Administrative Law Judge (ALJ) found that Oregon Steel Mills, Inc. committed an unfair labor practice by not reinstating former strikers to roles held by temporary service agency employees. Oregon Steel's Vice-President, Robert Sikora, testified that the decision to utilize temporary workers was primarily to reduce labor costs by 40% by avoiding employee benefits. The dissent argues that the ALJ incorrectly discredited Sikora’s testimony regarding Oregon Steel's legitimate business reasons, contravening the Supreme Court's ruling in *St. Mary's Honor Center v. Hicks*. Furthermore, the ALJ determined that Oregon Steel did not sufficiently establish a legitimate business justification for employing contract labor while qualified employees were available for rehire. This ruling is contested as it misapplies the Supreme Court’s findings in *NLRB v. Great Dane Trailers*, which asserts that the burden of proof does not shift to the employer until the General Counsel demonstrates that the employer's actions are inherently destructive to union activity. The dissent highlights that the ALJ did not find that Oregon Steel's use of temporary workers was inherently destructive, noting that the company reinstated 112 strikers post-strike. The majority's acceptance of the ALJ's reasoning is critiqued as flawed. Relevant facts include that Oregon Steel, a Delaware corporation, had collective bargaining agreements with local unions and faced a significant strike in September 1983 involving 418 union members. Operational changes were enacted during the strike, including workforce reduction, wage cuts, and the engagement of temporary workers, which led to increased productivity and profits.

On June 26, 1984, the union offered an unconditional end to the strike, proposing that strikers return to their previous or equivalent positions. By January 1985, the union was decertified as the collective bargaining representative for Oregon Steel's employees. After the strike, Oregon Steel placed former strikers on a preferential reinstatement list and, in early 1987, lifted its hiring freeze. In the fall of 1987, with twenty-five permanent job openings primarily in the melt shop and about one hundred strikers remaining on the list, the company held orientation sessions to inform strikers of operational changes and invited them to provide their post-strike work histories. Oregon Steel hired 112 workers from the list, allowing non-hired individuals to waive their preferential treatment for a payment of $250 per year of employment.

During this period, Oregon Steel increasingly relied on temporary service agencies for labor, which alleviated the company’s responsibility for employee benefits. By March 1989, temporary agency workers constituted about five to ten percent of the workforce, while approximately one hundred former strikers remained on the reinstatement list. On February 8, 1989, the National Labor Relations Board (NLRB) filed a complaint against Oregon Steel, alleging violations of sections 8(a)(1) and (3) of the National Labor Relations Act. An Administrative Law Judge (ALJ) found that Oregon Steel had violated these sections by employing temporary agency workers instead of qualified strikers, disqualifying some strikers based on their employment status, and removing others from the list for refusing job offers. The NLRB affirmed the ALJ's decision on November 30, 1990, leading to an application for enforcement of its order by the General Counsel.

An employer facing potential losses due to an economic strike may hire replacement workers, as established in NLRB v. Mackay Radio, Tel. Co. After the strike, the employer can retain these replacements indefinitely. Former strikers are entitled to reinstatement when job openings arise, but the employer is not required to discharge permanent replacements to accommodate them, as clarified in NLRB v. Murray Prods., Inc. However, strikers must be placed on a preferential reinstatement list, and they have the right to an offer of reinstatement for suitable positions unless the employer can demonstrate legitimate business justifications.

In the case of Oregon Steel, evidence shows that the company engaged temporary workers post-strike while the preferential reinstatement list was still valid. The Supreme Court case NLRB v. Great Dane Trailers, Inc. addressed whether an employer violates the National Labor Relations Act by denying vacation benefits to striking employees while offering them to replacements and nonstrikers. The Court ruled that such conduct is discriminatory and discourages union participation, constituting a violation. However, it emphasized that discriminatory actions alone do not prove a violation; the motivation behind the conduct must be examined. If the conduct is found to be "inherently destructive" to employee rights, no proof of antiunion motivation is necessary. Conversely, if the impact is minor, proof of antiunion bias is required unless the employer provides substantial business justifications.

In Fleetwood Trailer, 389 U.S. 375, the Supreme Court addressed whether an employer violated labor laws by hiring six new employees rather than reinstating six former strikers. The employer failed to provide any legitimate business justification for this decision. The National Labor Relations Board (NLRB) found that the employer discriminated against the strikers by not offering them reinstatement. The Supreme Court vacated a lower court's denial of enforcement of the NLRB's order, emphasizing that an employer must demonstrate a substantial business justification to avoid being found guilty of unfair labor practices.

The Court's decisions in Fleetwood Trailer and Great Dane Trailers establish key principles: in typical cases not inherently destructive of employee rights, the General Counsel must initially present evidence of the employer's unfair labor practice, showing it was motivated by antiunion intent. If successful, the burden shifts to the employer to prove it acted for legitimate business reasons. If the employer provides such evidence, the burden shifts back to the General Counsel to counter the employer's claims. However, if the General Counsel's evidence shows inherently destructive conduct, the employer must prove, as an affirmative defense, that its actions were not motivated by antiunion animus.

In this case, no evidence indicated that Oregon Steel’s actions regarding the reinstatement of strikers were inherently destructive, particularly since the company reinstated 112 strikers after the strike ended.

Oregon Steel's use of employees from temporary service agencies to perform tasks previously held by economic strikers is claimed by the General Counsel to be inherently destructive to employee rights, violating Section 8(a)(3) and (1) of the Act. The General Counsel cites precedents to support this argument, but the referenced cases do not substantiate the claim that employing temporary agency workers constitutes inherently destructive conduct. The term "inherently destructive" is recognized as difficult to define, with rare instances of violations under this standard. Such conduct is characterized by actions that significantly impede future bargaining or discriminate based on union participation. Examples include permanent discharges due to union activity, granting superseniority to strike breakers, or failing to notify strikers of a lockout in response to their return-to-work offer.

For a finding of inherently destructive conduct related to temporary service agency agreements, there must be evidence demonstrating such an agreement undermines employee rights. Without evidence of inherent destructiveness, an employer only needs to show that the agreement serves a legitimate business purpose. The record does not indicate that Oregon Steel's agreements with temporary agencies were inherently destructive. No evidence was presented that Oregon Steel discriminated against strikers based on their union activities. In fact, Oregon Steel reinstated 112 economic strikers after the strike, contradicting any claims of inherently destructive conduct. The Administrative Law Judge (ALJ) did not find Oregon Steel's actions to be inherently destructive, and this key point was not addressed by the majority opinion.

Oregon Steel provided evidence of a legitimate business reason for utilizing temporary service agencies, claiming significant labor cost savings—approximately 40%—by avoiding the benefits paid to permanent employees. Industrial psychologist Byron Boyles supported this by stating that contract workers help maintain a stable workforce by creating a buffer against immediate demands. However, the Administrative Law Judge (ALJ) discredited Vice President Robert Sikora's testimony about these savings, arguing that it lacked supporting financial analysis. This discrediting was deemed erroneous, as the Supreme Court's ruling in St. Mary's Honor Center v. Hicks establishes that credibility assessments should not occur when determining if the employer met its burden of production. The majority opinion failed to address this misapplication of the law and improperly relied on the principle that Board findings must be accepted if supported by substantial evidence. The ALJ's ruling was further criticized for interpreting the cost savings as mere "administrative convenience" rather than a substantial justification, referencing NLRB v. Vitronic. The discussion indicates a clear legal misstep in assessing the business justification for Oregon Steel's use of temporary employees, necessitating a rejection of the ALJ's findings in light of the Supreme Court's directives.

The ALJ in Vitronic determined that the company's renewal procedure was primarily "administratively convenient" and lacked a "legitimate and substantial business justification," as no evidence was presented to support such a claim. The Eighth Circuit upheld this finding, stating that the procedure aimed to remove preferential recall rights for economic strikers, rendering it inherently discriminatory. Oregon Steel met its evidentiary burden by demonstrating that using temporary service agencies effectively lowered payroll costs and provided testimony indicating a legitimate business purpose. The absence of evidence showing that Oregon Steel's actions were inherently destructive meant that the General Counsel needed to demonstrate antiunion motives behind the company's contracts with these agencies, which was not established. Consequently, the General Counsel failed to prove, by a preponderance of the evidence, that Oregon Steel acted with antiunion animus. It was concluded to deny the Board's petition enforcing the order against Oregon Steel, particularly concerning the reinstatement of former strikers affected by temporary service agency employment. The excerpt also references Section 8 of the National Labor Relations Act, which outlines unfair labor practices related to employee rights and discrimination concerning labor organization membership.