NLRB to Consider Ordering Shuttered Window & Door Plant Reopened
The National Labor Relations Board (NLRB) may soon confront a relatively rare labor law issue — whether to order a closed plant reopened.
The issue has come up in conjunction with unfair labor practice charges filed recently in connection with the December 2008 Republic Windows and Doors Co. plant closing
Ordering the plant to reopen is unlikely, but — perhaps surprisingly to most readers — not unheard of in such NLRB cases.
I recently did extensive research on the subject for a client, and here share the rudiments.
But first a summary of the first act of this continuing drama — in which laid-off workers at the Republic Windows and Doors Co. Chicago plant made national news last month (December 2008) for a sit-in protesting the plant’s sudden closing, and the company then promptly settled a WARN Act claim for failure to provide 60 days’ notice of the closing.
Act One, Scene One: Plant Closing
On December 4, 2008, the company announced it would shut its doors the next day, causing about 300 workers to lose their jobs. 260 of them were represented by the United Electrical, Radio and Machine Workers union.
The sudden plant closure was a direct consequence of the crises in the housing and credit markets. The company’s main lender, Bank of America, had canceled the company’s line of credit because sales for new construction had dropped from $30 million to $6 million.
Act One, Scene Two: Sit-In
The New York Times described the sit-in as follows:
Workers laid off Friday from Republic Windows and Doors … said they would not leave, even after company officials announced that the factory was closing.
Some … workers stayed all night, all weekend, in what they were calling an occupation of the factory. Their sharpest criticisms were aimed at their former bosses, who they said gave them only three days’ notice of the closing, and the company’s creditors. But their anger stretched broadly to the government’s costly corporate bailout plans, which, they argued, had forgotten about regular workers….
The workers … said they were owed vacation and severance pay and were not given the 60 days of notice generally required by federal law when companies make layoffs….
About 30 workers sat in folding chairs on the factory floor. … They tidied things. They shoveled snow. They met with visiting leaders ….
Many employees said they had worked in the factory for decades. … The workers — about 80 percent of them Hispanic, with the rest black or of other ethnic and national backgrounds — made $14 an hour on average and received health care and retirement benefits.
Act One, Scene Three: Settlement
After six days of sit-in, employees approved a $1.75 million settlement giving them eight weeks’ salary, all their accrued vacation pay, and two months’ paid health care, averaging about $7,000 per employee.
On Dec. 19, 2008, four days after Republic declared Chapter 7 bankruptcy, each union worker received a settlement check.
Interlude: Where Does a Broke Company Get $1.75 Million?
In order to pay out this settlement, Bank of America loaned $1.35 million; JPMorgan Chase added $400,000.
How can a broke company repay such a large loan? Here are some interesting clues from a company press release predating the recent unfair labor practice charges:
- As of “2006-07,” Richard Gillman, previously a minority shareholder, bought out all other partners.
- 11/2008 — after Republic had proposed to Bank of America that it would cease operations in January 2009, and BOA had rejected this plan as not soon enough — the “Gillman family form[ed] Echo Windows, LLC.”
- The Gillman family’s new company, Echo Windows, bought a windows-manufacturing plant in Red Oak, Iowa, shortly before the Chicago plant closed.
My Google research uncovered a Richard Gillman, maybe the same person, who “was for many years a senior executive of Bally Manufacturing Corporation … and of Bally’s Park Place, Inc. … , the casino operating arm of BMC.” If that’s indeed him, there’s probably plenty of Gillman family wealth protected from claims against Republic under the corporate veil.
Was the LLC formation and Iowa plant purchase part of a Gillman plan to continue in the same business in a different guise, but without the union?
If so, would these facts support unfair labor practice charges? Stay tuned…
Intermission: Happy Holidays
Act Two, Scene One: Unfair Labor Practice Charges Filed With the NLRB
After a holiday lull in the action, Act Two, Scene One, opens with the filing on January 6, 2009, of an NLRB unfair labor practice charge against Republic alleging “fail[ure] to notify or negotiate … about closing the … plant and transferring machinery and business to a new plant in Iowa” [which would be owned and operated nonunion by Gillman].
Tough Remedy Sought
The Chicago Tribune reported:
Representatives and an attorney for the union representing Republic employees said that they hope the NLRB will order Gillman to return the machinery to the Chicago plant, facilitating the potential reopening of the factory under a new owner.
Members of Gillman’s family formed a new company, Echo Windows, which bought a windows-manufacturing plant in Red Oak, Iowa, shortly before the Chicago plant closed.
“The union is asking the Board to demand, among other things, the return of the machinery, the clients and the jobs to Chicago,” said Laurie Burgess, the attorney filing the charges.
Can the NLRB Order a Closed Plant Reopened?
In a word — YES!
It has done so before, with support from the federal courts in some cases.
In Coronet Foods, Inc. v. NLRB, 158 F.3d 782, 788 (4th Cir. 1998), the Fourth Circuit Court of Appeals, though denying enforcement to such an order on the particular facts before it, strongly affirmed the NLRB’s authority to issue one:
The Board is expressly authorized by statute to order the reinstatement of improperly discharged workers and to award back pay. 29 U.S.C. § 160(c). In addition, the Supreme Court has held that the Board may, in an appropriate case, order an employer to restore a department closed as the result of anti-union animus. See Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 215-17, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964).
When an employer closes a department in retaliation for its employees’ union activities, an order mandating restoration of the department is presumptively appropriate and should be overturned only if the employer shows that restoration would either impose “an undue or unfair burden on it,” Fibreboard, 379 U.S. at 216, 85 S.Ct. 398, or threaten its viability as a company. … While restoration is presumptively appropriate, however, the question of remedy is “closely tied to the facts of each case” and “[n]o per se rule can be stated.”
What Could Be an Unfair Labor Practice in this Situation? Can’t a Union Employer Just Shut Down, Outsource Work, or Move an Entire Operation?
In the two words lawyers love to utter when confronted with tough legal questions: It depends. (But the answer may well be NO.)
Entire books and long, hairy law journal articles can be written on these questions (and have been written). But here’s the short version — just a few key, necessarily overgeneralized principles in a very difficult area of labor law in which the rulings can be hard to fully reconcile:
- It is not an unfair labor practice for an employer to go out of business entirely, even if the decision is due to anti-union animus.
- But closing part of a business is an unfair labor practice if the purpose is to discourage unionism in any of the employer’s remaining plants and if the employer may reasonably have foreseen such effect.
- Even if an entire business is closed, if the people who controlled it closed it in order to maintain the nonunion status of other businesses they own — by causing employees to fear plant closings if they engage in union activities — the closing is an unfair labor practice.
- A union employer that decides to close part of a business, outsource work, or relocate all or part of the business because of labor costs — or other factors that could be mitigated by union agreement to change contract terms — may be required to bargain with the union over this decision.
- Regardless of whether labor costs motivate a union employer’s decision to partially close, outsource, or relocate, the employer must bargain with the union upon request regarding the effects of the decision, such as transfer rights, severance pay, etc.
So, bottom line, if Republic simply went out of business entirely and liquidated, and Gillman retired to Florida, it looks like no unfair labor practice.
But with Gillman apparently remaining in the window business, albeit with a new company in a different location, there would likely be an unfair labor practice — if it could be shown that his motives were to go non-union and remain that way by setting a precedent in the eyes of new employees that he will close a plant and move it to avoid a union.
It is also possible that the duty to bargain over the relocation and its effects will be found to have been violated — if the closing is viewed as a sham and the new company viewed as Republic’s “alter ego.”
A remedy requiring reopening the Chicago plant will involve jumping some additional legal hurdles, but they are not insurmountable. Such a remedy is unlikely if the only violations found are failure to bargain. But if an anti-union motive for the relocation is established, the only remaining hurdle is whether a return to Chicago would impose “an undue or unfair burden.”
No doubt Gillman would claim the lack of profitability and desperate financial situation that led to closure establishes it would be such a burden.
But he apparently sees a future in the window business. So do I. It’s a “green business” that, one way or another, will likely benefit greatly from government policy encouraging the installation of energy-efficient replacement windows.
So by the time the case gets to final decision several years from now, the window business will be booming, Gillman will be making money from the Iowa plant hand over fist, and it will be obvious that the Chicago plant’s problem was a temporary function of the credit crunch and near-cessation of new construction — not some inherent unprofitability that would make it an undue burden to reopen.
Thus, the NLRB just might end up ordering this seemingly unthinkable unfair labor practice remedy — reopening of a plant years after it closed!
Sources
- Chicago Tribune: Republic Windows Closing Doors
- Dec 08, 2008 Statement from Republic Windows & Doors (chronology of company’s discussions with Bank of America; majority company history events)
- New York Times: In Factory Sit-In, an Anger Spread Wide
- USA Today: Workers in sit-in win $1.75M deal
- Chicago Tribune: Republic Windows and Doors Workers File Labor Board Charges
Photo credit: Just Taken Pic via flickr
Payroll Solutions says at http://www.payrollsolutions.info/blog/?p=344?
“Employee lawyer George Lenard has put together an incredible post outlining his theory on how federal employer regulators might go about ordering a money-losing window factory in Illinois to reopen and continue losing money. With the federal government poised to outlaw unionization elections, many much smaller employers in America are likely to find themselves becoming union shops.”
My response to Payroll Solutions:
I appreciate the link. I’d like to add a few corrections and comments.
(1) I am NOT an employee lawyer, but an employer lawyer. I DO try to write objectively, which means not always blaming unions first.
(2) The federal government is NOT posed to outlaw unionization elections, though the bill to which you refer would make them less frequent where union support is strong (over 50% willing to publicly state support). I strongly oppose several parts of this bill, including this one that requires recognition of a union based on card-check.
However, under it NLRB election procedures would be unchanged if a union only obtained public employee support between 30% and 50%. The NLRB would hold a secret-ballot election. Employees favoring the union (or not), but wishing their co-workers to have a fair, private vote, could simply say as much to the union and not sign cards — and the NLRB would conduct a secret-ballot election.
(3) I hope it came across that I view successful action by the NLRB to order the Republic plant reopened as unlikely, but conceivable as a matter of law.
I found it extremely important — and very fishy — that the guy looked like he would go his merry way making the same products, probably for the same customers, in a neighboring state, escaping the union.
There was no indication the union contract caused the company’s financial distress. It borrowed a lot to finance plant growth that looked like a very reasonable business plan a year ago, perhaps even six months ago, when business was booming, along with the housing bubble. Expectation of substantially more business, which could be handled in Chicago, may be reasonable again within six months, if federal stimulus weatherization spending causes a massive uptick in replacement window and door sales, entirely independent of a continuing new-home and home-remodeling slump.
(4) It is incorrect to think of and refer to the NLRB as “employer regulators” in the same sense as most federal regulatory agencies that dictate detailed requirements to businesses.
The NLRB regulates general rights and a process, collective bargaining, not an outcome or specific terms of employment.
It is beyond the bounds of that process to take business action that is discriminatorily designed to discourage (or encourage) union membership. That’s the law.
Likewise, the NLRB enforces the duty to bargain in good faith with properly designated union representatives, which specifically does not require agreement on any specific terms. If union costs are killing a business and it wants to move elsewhere and avoid the union, bargaining allows the union a final opportunity to correct the situation and save the jobs.
(5) Please don’t see me as an apologist for the NLRB or unions in general. But I am familiar with the agency and the law it enforces. For decades, this law was indeed the core of American labor policy. This may have had negative effects, but it also had some positive ones.
For one, most employees with union contracts were not terminable at will; today most employees are. This may seem like a fine thing for employers, but in my view is responsible for a good many frivolous discrimination charges and lawsuits, as equal employment opportunity law is misused as a substitute for the just-cause requirement found in most union agreements. And this is a more costly way to go for employers, I think.