Petitions for review and cross-application for enforcement of order of the National Labor Relations Board, based on a finding that petitioning companies unilaterally changed working conditions in violation of a collective bargaining agreement and sections 8(a)(1) and 8(a)(5) of the National Labor Relations Act. Petitions granted and enforcement denied on the ground that the Board abused its discretion in declining to defer to an arbitrator's award.
Before Feinberg, Chief Judge, and Waterman and Van Graafeiland, Circuit Judges.
This case, incredibly, arises out of an alleged unilateral change of work rules in 1975 by six liquor wholesalers ("the companies") in breach of their respective collective bargaining agreements with the union representing their salesmen-employees. The dispute was submitted to an arbitrator, who found that the agreements had not been violated. Dissatisfied with this conclusion, the union succeeded in bringing the case before the National Labor Relations Board, which declined to defer to the arbitrator's award under the policy of deference first announced in Spielberg Manufacturing Co., 112 N.L.R.B. 1080 (1955). Instead, the Board found that the companies had committed an unfair labor practice and issued a remedial order. Under the circumstances presented here, we conclude that the Board abused its discretion in not deferring to the arbitrator's award, and we deny enforcement of the Board's order.
The companies are engaged in the wholesale distribution of alcoholic beverages to restaurants, bars, liquor stores, and the like in the New York City metropolitan area. Their salesmen, who work on a commission basis, are represented by petitioner-intervenor Liquor Salesmen's Union Local 2 of the State of New York, Distillery, Rectifying, Wine & Allied Workers' International Union, AFL-CIO.*fn1 The companies' drivers are represented by Local 816 of the International Brotherhood of Teamsters, which is not a party to this litigation.
Collective bargaining agreements between the companies and the two unions were due to expire on October 31, 1975; as that date approached, negotiations of new agreements occurred simultaneously, but independently of each other. Under the expiring agreement between the companies and the drivers' union, the drivers bore responsibility for the collection of payment from all C.O.D. customers at the time of delivery. In the closing hours of negotiations over the new agreement, the companies agreed to free the drivers of this task. They did not inform Local 2 of this change, however, and negotiations between the companies and that union did not address the subject of collections before tentative accord on a three-year contract was reached on November 2, subject to ratification by the Local's members.
On November 3, officials of one of the companies, Peerless Importers, Inc., distributed to its salesmen a handwritten directive on the handling of C.O.D. accounts, stating that customers could mail checks or that salesmen could pick the checks up from the customers and bring them to the office, after which the order would be shipped. Caught short by these new procedures, several C.O.D. customers complained to the salesmen when they did not receive their deliveries. The salesmen, in turn, complained to their union about the added burden being placed on them.
By the time of the Local 2 ratification meeting on November 7, the union was aware of the change in collection procedures. At the meeting, the president of Local 2 spoke to the salesmen about the change:
Without prior discussion with the union, some employees circulated photocopies of a handwritten instruction that salesmen are to pick up C.O.D. payments in the form of checks or otherwise in order to have the orders filled. This is a violation of our contract, and I direct you that this change in our work rules shall not be honored by you until further notice. I instruct you to disregard it, and I will so advise your employer.
With this instruction given, the salesmen proceeded to ratify the new agreement without further consideration of the collection issue.
Shortly thereafter, each of the companies circulated announcements to its salesmen outlining and clarifying the new procedures. With variations from company to company, the new procedures generally encompassed three options. First, customers could mail in checks, with delivery taking place upon receipt; this procedure involved a delay of three days or so. Second, customers could leave signed blank checks with the companies, lessening the delay in delivery though obviously creating other problems of security. Third, customers could give checks directly to the salesmen, who could either bring the checks in immediately or call in the check number and amount, turning in the actual check the next day.
The companies generally took pains to stress the freedom of the salesmen to choose any procedure they wished, asserting that it was the individual salesman's "prerogative" to pick up payment rather than adopt an alternative that involved less of a burden. There was, on the other hand, some evidence of pressure on the salesmen to collect the checks themselves. The salesmen, moreover, argue that economic realities made it essential that they handle the collections personally. Since the business is highly competitive, they point out, an unwillingness by one salesman to pick up payment and thus to permit same-day delivery will simply lead his customer to turn elsewhere. As the arbitrator observed, "(t)he sad fact from the salesman's point of view is that, except for a small number with exclusive rights to a few brands, each salesman generally competes with the salesmen representing other wholesalers, all selling the same brands at the same prices."
On November 12, 1975, Local 2 president Joseph Matranga sent a letter to the companies asserting that the companies had "unilaterally and without notice changed a very serious working condition that has existed for many years in the industry and which is raising havoc with the rights of our members in the pursuit of their occupation." The letter claimed that "some or all of the employers have instructed the employees to pick up payment in advance from all customers who are on a Cash or COD basis." Citing the dangers and burden thus imposed, and charging that the employers were violating both the National Labor Relations Act and their contracts, Matranga said he would "be available immediately at my office for an open and frank discussion of this matter in order to avoid a confrontation on this issue." On the same day, however, Matranga wrote the companies' counsel, enclosing a final draft of the new contract and asking him for his approval of the draft so that copies could be prepared for formal signature.
Replying to the former letter the next day, counsel for the companies suggested that Matranga was "attempting to renegotiate the Teamsters', Local 816 contract," and denied that the employers had changed a working condition unilaterally and without notice. The union's response was prompt: the following day, Matranga filed unfair labor practice charges against one of the companies with the NLRB, alleging that the change in "work rules" constituted an unfair labor practice under sections 8(a)(1) and 8(a)(5) of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(1), (a)(5). Soon thereafter, however, the union withdrew the charges and in February 1976 served on the companies a notice of intention to arbitrate, in accordance with the arbitration provision of the collective bargaining agreements. When the companies resisted arbitration, the union reinstated charges against all of them in March 1976, adding a charge of refusal to submit to arbitration. The Board's Regional Director, however, deferred action on the charges pending resolution of the requested arbitration proceedings. The companies' effort to avoid arbitration finally failed on June 1976, when Judge Charles S. Haight, Jr., of the United States District Court for the Southern District of New York denied their motion for a stay of arbitration and granted the union's cross-motion to compel the arbitration. Charmers Industries, Inc. v. Liquor Salesmen's Union Local No. 2, 415 F. Supp. 781, 787 (S.D.N.Y.1976).
The arbitration then took place under the auspices of the New York State Mediation Board, culminating in an award by arbitrator Arthur T. Jacobs dated April 7, 1977. In a careful opinion, the arbitrator concluded that "(t)he Employers did not violate their contract with Local 2 when they adopted their present C.O.D. procedures." He noted, first, that the bargaining agreements contained no provisions governing C.O.D. procedures, so that there had been no violation of the agreements' "direct wording." He also found no violation of "any meaningful concept of past practice," observing:
In the absence of a past practice clause, arbitrators including this one, and the courts have nevertheless frequently found that past practice was significantly implied in the contractual relations involved ...