N. Peter Lareau uses O.G.S.
Technologies, Inc., as a vehicle for examining Board and judicial precedent
about an employer's obligation to bargain over a decision to subcontract work
currently performed by employees represented by a labor organization. He
concludes that the Board majority erred in rejecting the OGS's defense that
bargaining would have been futile.
Confronted with the opportunity
to reduce the time required to produce new dies by 90 percent, an employer
decided to seize it and subcontracted the work to a vendor that possessed
advanced technology not available to the employer. Two jobs were eliminated in
the process and an employee was laid off. In O.G.S. Technologies, Inc., the
National Labor Relations Board, split 2-1, concluded that the employer was
required to bargain with the Union representing the employees formerly employed
as die cutters before subcontracting their work. Accordingly, it ordered the
employer to restore the status quo ante, provide the Union with notice
and an opportunity to bargain regarding any future proposed changes and their
effects, reinstate the laid off employee and pay him backpay for any wages lost
since his layoff over ten years ago.
* * *
When the Union challenged OGS'
actions by filing charges with the National Labor Relations Board
("Board"), the two primary questions were whether OGS violated the
National Labor Relations Act ("Act") by: (1) excluding the newly
created die engineers classification from the existing collective-bargaining
unit; and (2) unilaterally subcontracting to other firms the work of cutting
dies performed by its die engineers, eliminating the die engineer
classification, and laying off one of the two employees holding that position
while changing the duties of the other. The Board, split 2-1, held that the
answer to both questions was "yes."
Exclusion of Die Engineer Classification from the Bargaining Unit
With respect to OGS removal of the die engineer position from the bargaining
unit, the Board recognized that a "successor employer . . . ordinarily is
free to establish employees' initial terms and conditions of employment
unilaterally." However, citing, inter alia, SFX Target Center
Arena Management, LLC, the Board in O.G.S. Technologies held that an
employer "may not remove job classifications from an existing bargaining
unit absent reaching agreement with the unit employees' collective-bargaining
representative or satisfying the conditions set by the Board."
"Satisfying the conditions set by the Board," requires that the
employer establish either:
in a unit clarification proceeding or in its defense to an 8(a)(5) allegation,
that the employees in the position no longer share a community of interest with
the employees comprising the rest of the unit. In sum, to justify the
unilateral removal of a position from a bargaining unit, the employer bears the
heavy burden of demonstrating that the failure to remove the classification
would have rendered the unit inappropriate.
Applying that standard, the Board in O.G.S. Technologies concluded "that
the changes in the die engineers' duties did not sever their community of
interest with the unit[.]" Accordingly, it held that OGS violated the Act
by removing the die engineers from the bargaining unit.
Subcontracting of the Die-Cutting Work and the Elimination of the Die
The Board also held that OGS violated the Act by unilaterally subcontracting
its remaining die-cutting work and by making the other unilateral changes that
followed from that action. It started its analysis of this issue by noting
that, although the Supreme Court, in Fibreboard Corp. v. N.L.R.B., held
that the subcontracting of unit work is a mandatory subject of bargaining,
Justice Stewart had expressed reservations about the scope of that obligation.
In a concurring opinion, justice Stewart observed that management decisions
"concerning the commitment of investment capital and the basic scope of
the enterprise" that "lie at the core of entrepreneurial
control" are not subject to collective bargaining. Subsequent to the
decision in Fibreboard, the Board held, in Torrington Industries,
a decision to subcontract the work of employees unaccompanied by any
substantial commitment of capital or change in the scope of the business was
not the type of decision that Justice Stewart had identified as being at the
core of entrepreneurial control, and was, therefore, subject to bargaining.
OGS argued that in First National Maintenance Corp. v. N.L.R.B. [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law], the
Supreme Court had identified three types of managerial decisions, one of which
- a decision that has '"a direct impact on employment,' because it leads
to job loss, but has 'as its focus only the economic profitability' of the
enterprise" - may or may not require bargaining. In First National
Maintenance, the employer, a provider of cleaning and maintenance services,
decided to terminate a contract with a nursing home (and to layoff all
employees working under that contract) when the nursing home refused to accede
to a price increase proposed by the employer. The First National Maintenance
Court held that the decision to terminate the contract was not a mandatory
subject of bargaining because, according to the Board in O.G.S. Technologies,
it involved "a change in the scope and direction of the
enterprise[.]" and therefore that the employer had no duty to bargain over
it. [footnotes omitted]
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