Kbi Security Service, Inc., Petitioner-Cross-Respondent v. National Labor Relations Board, Respondent-Cross-Petitioner
Docket: 1771
Court: Court of Appeals for the Second Circuit; July 1, 1996; Federal Appellate Court
KBI Security Service, Inc. challenged a decision by the National Labor Relations Board (NLRB) that found KBI in violation of the National Labor Relations Act. The NLRB affirmed an administrative law judge's findings that KBI supervisors made coercive comments while questioning employees about union activities and that KBI retaliated against two employees for their union involvement, violating sections 8(a)(1), (3), and (4) of the Act. KBI did not contest the findings regarding the interrogation of employees, which limited the court's jurisdiction to review that aspect. Furthermore, KBI's failure to respond to the complaint about the retaliatory discharge led to the affirmation of those allegations as true. However, the court expressed concerns regarding the potential misconduct of the discharged employees, indicating that the NLRB's remedy—reinstatement and back pay—was not adequately tailored to address the unfair labor practice. The court declined to enforce the reinstatement order and remanded the case to the NLRB for a reassessment of the appropriate remedy. The backdrop includes KBI's operations in security services and the initiation of union organizing activities by employees in late 1993, leading to the filing of unfair labor practice complaints against KBI.
On September 28, 1994, KBI was issued a second complaint, alleging coercive interrogation of employees about union activities and retaliation against employees Hector Rosenthal and Orlando Febus for their organizing efforts and participation in an ongoing investigation. KBI was required to respond within 14 days, but failed to do so, leading to a default where all allegations would be deemed admitted. Despite a phone reminder about the requirement, KBI's branch manager, Netto, refused to file an answer, claiming prior correspondence sufficed.
Administrative Law Judge (ALJ) Stephen J. Gross conducted a hearing on November 9 and 10, 1994, where the General Counsel moved to have the September complaint allegations deemed admitted due to KBI's failure to respond. KBI attempted to argue that Netto's earlier letter constituted an adequate answer. The ALJ listened to evidence from both complaints, including allegations that Rosenthal and Febus were involved in thefts at a Saturn dealership, which KBI claimed led to their termination of security services.
On November 28, 1994, the ALJ ruled the September complaint allegations admitted due to KBI's default. On April 20, 1995, the ALJ found KBI guilty of unfair labor practices related to both complaints, specifically violating section 8(a)(1) by interrogating employees and section 8(a)(1), (3), and (4) for coercive actions and illegal termination of Rosenthal and Febus. The ALJ ordered their reinstatement. KBI filed objections to the ALJ's decision on May 16, 1995, which were treated as formal exceptions. On August 9, 1995, the National Labor Relations Board adopted the ALJ's order in full. KBI did not file exceptions regarding the interrogation finding, leading the Board to argue a lack of jurisdiction to review that aspect, which was affirmed.
Section 10(e) of the Act provides the Court with jurisdiction over petitions from the Board and aggrieved parties, stipulating that any objections not raised before the Board will not be considered by the appellate court unless extraordinary circumstances are shown. Under the Board's regulations, issues not included in exceptions cannot be raised in further proceedings. A failure to address an issue before the Board precludes judicial consideration of that issue. In this case, the Union and General Counsel did not file any exceptions to the Administrative Law Judge's (ALJ) ruling, thus barring them from appealing the ruling's validity. KBI's letter outlining exceptions did not address the finding of illegal employee interrogation, leading the Board to conclude that no exceptions were filed regarding that issue. KBI also failed to present any extraordinary circumstances to excuse its oversight, resulting in a lack of jurisdiction to review the Board's finding on the interrogation claim.
Regarding the allegations of wrongful termination in the September complaint, KBI argued that the ALJ incorrectly accepted the allegations as true. However, the Board has statutory authority to establish rules for enforcing the Act and has broad discretion in applying these rules. A court will only overturn the Board's interpretations if they are deemed arbitrary. KBI did not file an answer to the complaint within the required 14 days, which led to the allegations being automatically accepted as true unless good cause was shown. Other circuits have upheld similar Board decisions regarding deemed admissions due to failure to respond.
On September 30, 1994, KBI received a complaint and notice of hearing but did not file a response, despite being informed by the Board's regional office about the requirement for a responsive pleading. KBI argued that an August 30, 1994, letter from Netto, which claimed the allegations by two individuals were false, served as an adequate response. However, this letter addressed an earlier communication regarding a different matter and was not relevant to the September complaint. Consequently, the Administrative Law Judge (ALJ) deemed the allegations in the complaint true and found KBI liable for the illegal discharge of employees Febus and Rosenthal.
The Board's remedial order mandates reinstatement of these employees, which KBI opposes, citing a lack of available work and asserting that they would have terminated the employees due to unrelated thefts. The jurisdiction allows for modification of the Board's order to align with the policies of the National Labor Relations Act. The ALJ's November 28, 1994, reinstatement order reflected concerns about potential wrongdoing by Febus or Rosenthal, expressing discomfort with reinstating an employee who may have compromised trust at KBI's customer location. The ALJ noted that accepting the General Counsel's motion to admit the complaint's allegations precluded further exploration of whether the employees had engaged in misconduct, potentially allowing a wrongdoer to receive backpay and reinstatement.
If Febus or Rosenthal committed theft while employed by KBI, reinstating them is not an automatic or appropriate remedy. A default judgment does not exempt the Board from evaluating the suitability of reinstatement. Such a remedy could be detrimental to KBI and its employees, potentially harming the company's reputation. The ALJ incorrectly believed he lacked authority to consider theft evidence when determining the remedy, leading to a misjudgment of his responsibilities. The Board found nothing exceptional about the remedial order; however, it was unclear whether Febus or Rosenthal were individually responsible for the thefts, as the ALJ's findings were ambiguous. Consequently, the Board's order is modified to remove the reinstatement and backpay provisions for Febus and Rosenthal. The Board's order is enforced as modified, and the case is remanded for further evaluation on the appropriateness of reinstatement. The Board is tasked with considering all evidence presented at the hearing and may return to the ALJ for additional record development. The conclusion asserts that the Board's finding of KBI's liability for unlawful employee interrogation is not subject to review, while affirming KBI's violation regarding the failure to recall Febus and Rosenthal. KBI does not contest the ALJ's ruling that Rivera was acting as a supervisor during the interrogations.
