Posadas De Puerto Rico Associates, Inc. v. National Labor Relations Board

United States Court of Appeals
For the First Circuit
__________________________

No. 00-1421

POSADAS DE PUERTO RICO ASSOCIATES, INC.,

Petitioner,

v.

NATIONAL LABOR RELATIONS BOARD,

Respondent.
_____________________

ON PETITION FOR REVIEW AND CROSS-APPLICATION FOR
ENFORCEMENT OF AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD

_____________________

Before

Lynch and Lipez, Circuit Judges,
Garcia-Gregory,* District Judge.

_____________________

Edwin J. Seda-Fernandez, with whom Marshal D. Morgan, and Adsuar
Muñiz Goyco & Besosa, P.S.C. were on brief, for petitioner.
Joan E. Hoyte, with whom Leonard R. Page, General Counsel, Aileen
A. Armstrong, Deputy Associate General Counsel, Frederick C. Havard,
Supervisory Attorney, and Bridget O’Connor, Attorney, National Labor
Relations Board were on brief, for respondent.

_____________________

March 23, 2001
_____________________

* Of the District of Puerto Rico, sitting by designation.
 GARCIA-GREGORY, District Judge. The General Counsel of the

National Labor Relations Board brought an unfair labor practice charge

against Posadas de Puerto Rico Associates, Inc. for having unilaterally

discontinued certain group insurance policies it had obtained for its

employees. Posadas now petitions this Court for review of a decision

and order in which the Board concluded that Posadas had committed an

unfair labor practice. The General Counsel has, in turn, cross-

petitioned to enforce the order. The Board found that Posadas engaged

in an unfair labor practice in violation of sections 8(a)(1) and (5) of

the National Labor Relations Act, 29 U.S.C. §§ 158(a)(1) and (5), when

it unilaterally discontinued a group cancer and life insurance policy

that had been in effect for 20 years without first bargaining to

impasse with the Union. Because the Board’s order is supported by

substantial evidence on the record as a whole, we deny Posadas’s

petition for review, and grant the Board’s cross-petition to enforce

its order.

I. BACKGROUND

Posadas operates the Condado Plaza Hotel and Casino, a hotel

in San Juan, Puerto Rico. Some of the casino employees are represented

by the Asociación de Empleados de Casino (the “Union”). In April 1978,

Posadas took out a cancer and life insurance policy with Maccabees

Mutual Life Insurance Company to enable its employees to obtain life

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and cancer insurance at group rates.1 For almost 20 years, Posadas made

payroll deductions from its unit employees’ paychecks to cover premium

payments, and remitted the total amount to Maccabees and to the other

insurance companies.

On April 14, 1998, Posadas notified the insurance companies

that it would no longer make payroll deductions for the life and cancer

policy premiums as of May 1, 1998, and asked the companies to “make the

necessary arrangements to invoice the employees directly.” The next

day, April 15, 1998, Posadas notified its employees of the decision.

Shortly thereafter, Union president Victor Villalba contacted Eddie

Ortiz, Posadas’s personnel director, to discuss the matter and explore

plausible alternatives. Ortiz replied that the matter was out of his

hands, and told Villalba that the decision to discontinue the group

policies had been made “higher up.”

On April 22, 1998, a week after Posadas notified its

employees about the decision, Kenneth S. Krans of Adolfo Krans

Associates, Inc., a general insurance agency representing several of

the insurance companies that extended group coverage to Posadas, wrote

a letter replying to Posadas’s April 14, 1998 letter. Krans stated

1 In addition to its policy with Maccabees, Posadas made
similar arrangements with various other insurance companies to provide
its employees additional options for obtaining life and cancer
insurance at group rates. As with the Maccabees policy, Posadas would
deduct the premium amounts from its covered employees’ paychecks and
remit the total amount to the insurance companies.

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that the then-existing group coverage was provided through a

“‘bonafide’ group contract,” and added that such a contract “was

applied for and issued under the representation that it was an

employer-paid benefit.” Krans further stated that his company had no

knowledge about any internal agreement between Posadas and its

employees regarding payment of the policy premiums.

Krans told Posadas that his company could arrange for

individual coverage as of May 1, 1998, but warned that such a change

would not be as simple as Posadas might have believed, given that the

employees previously covered under the group policy would now be

subject to “individual insurability and rates.” Krans suggested that

Posadas extend the policy cancellation date to allow covered employees

sufficient time to secure individual coverage. Posadas declined to

follow Krans’s suggestion, however, and discontinued its withholding

practice -– and thereby cancelled all group cancer and life insurance

policies –- effective May 1, 1998.

The Union filed an unfair labor practice charge, and the

Board’s General Counsel filed a complaint against Posadas shortly

thereafter. On May 5, 1999, the Administrative Law Judge found that

Posadas’s actions constituted an unfair labor practice in violation of

sections 8(a)(1) and (5) of the Act, and ordered Posadas to resume,

upon written request from the Union, its past practice of making

payroll deductions for the group cancer and life insurance policies, to

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use best efforts to restore those policies, and to make Union employees

whole for any losses incurred as a result of the unilateral change.

Both the General Counsel and Posadas filed exceptions to the ALJ’s

findings and conclusions.

On February 25, 2000, the Board upheld the ALJ’s findings and

conclusion that Posadas had violated sections 8(a)(1) and (5) by

unilaterally terminating the payroll deductions for the insurance

premiums for the group life and cancer insurance policies without

bargaining with the Union over the change. The Board modified the

remedies decreed by the ALJ and ordered Posadas to restore the status

quo ante by resuming its past practice of making payroll deductions for

the group cancer and life insurance policies, restoring the policies

for previously covered unit employees, and making the employees whole

for any losses they may have suffered as a result of the unilateral

change. Additionally, the Board ordered Posadas to bargain with the

Union in the future over any changes in the group cancer and life

insurance policies that affect unit employees.

II. STANDARD OF REVIEW

We review the Board’s conclusion of law de novo, NLRB v.

Beverly Enterprise-Massachusetts, Inc., 174 F.3d 13, 21 (1st Cir.

1999), and take the Board’s findings of fact to be “conclusive if

supported by substantial evidence on the record considered as a whole.”

Id.; see also 29 U.S.C. § 160(e). Substantial evidence is “such

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relevant evidence as a reasonable mind might accept as adequate to

support a conclusion.” Beverly Entreprise-Massachusetts, 174 F.3d at

21. Moreover, “the possibility of drawing two inconsistent conclusions

from the evidence does not prevent an administrative agency’s finding

from being supported by substantial evidence.” Id. “In particular,

the credibility determinations of the Administrative Law Judge [ ] who

heard and saw the witnesses are entitled to great weight.” NLRB v.

Hospital San Pablo, Inc., 207 F.3d 67, 70 (1st Cir. 2000) (internal

quotation marks and citations omitted).

III. DISCUSSION

An employer commits an unfair labor practice “if, without

bargaining to impasse, it effects a unilateral change in an existing

term or condition of employment.” Visiting Nurse Servs. v. NLRB, 177

F.3d 52, 57 (1st Cir. 1999), cert. denied, 120 S.Ct. 787 (2000); Litton

Financial Printing Div. v. NLRB, 501 U.S. 190, 198 (1991). The Board

has “the primary responsibility of marking out the scope of the

statutory language and of the statutory duty to bargain.” Ford Motor

Co. v. NLRB, 441 U.S. 488, 496 (1979). Particularly with respect to

determinations that fall within the Board’s “special expertise,” such

as whether an issue is a mandatory subject of bargaining, the Board is

entitled to “considerable deference,” and its determination must be

upheld if reasonable and consistent with the policies of the Act. Id.

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at 497; see also Beverly Enterprises-Massachusetts, 174 F.3d at 26, 29.

We have long held that an insurance benefit is a mandatory

subject of bargaining and that unilateral actions regarding such

subjects are proscribed by the Act. Allied Chem. & Alkali Workers of

Am. v. Pittsburgh Plate Glass Co., 404 U.S. 157, 159 (1971) (citing

W.W. Cross & Co. v. NLRB, 174 F.2d 875, 878 (1st Cir. 1949)).

Insurance benefits have been typically regarded as mandatory subjects

of bargaining because they provide “direct and immediate economic

benefits from the employment relationship,” and because they “provide

a financial cushion in the event of illness or injury ... at less cost

than such a cushion could be obtained through contracts or insurance

negotiated individually.” W.W. Cross & Co., 174 F.2d at 878.

Posadas’s principal argument is that the withholding practice

was neither a benefit nor a term or condition of employment, but rather

a mere internal mechanism that it was free to eliminate unilaterally

when it so chose. Posadas contends that it was not required to bargain

to impasse before making the unilateral change because it did not

contribute to the premium payments, but merely collected the premiums

and remitted them to the insurance companies. Posadas concedes, as it

must, that an insurance benefit is “vital” to employees and is a

mandatory subject of bargaining, but argues that the impact of its

decision on the group insurance policies was merely incidental.

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 Posadas’s attempt to frame its actions as having to do only

with an internal company mechanism is disingenuous. The record plainly

shows that the withholding practice and the group insurance policy were

inextricably intertwined. The April 1998 exchange of letters between

Posadas and Krans reveals that the unilateral decision that Posadas was

contemplating would have had the effect of eliminating the group

insurance policy altogether. A corollary of that decision, therefore,

would be that previously covered employees would be forced to secure

individual coverage at individual policy rates. Thus, by eliminating

the withholding practice, Posadas did much more than eliminate an

“internal mechanism”; it unilaterally removed a group insurance policy

that Posadas’s unit employees had been able to avail themselves of for

almost twenty years. Given that the decision had the effect of

unilaterally changing a long term benefit, Posadas was required to

bargain with the Union to impasse. We doubt that Posadas could hide

behind an ignorance defense, but, even if it could, such a defense is

not supported by the record.

Moreover, the Board found, based on the uncontested testimony

offered by Elsie Santana, a Krans employee, that group policies were

considerably less expensive than individual policies. Accordingly,

Posadas’s longstanding practice of withholding and remitting premiums

allowed covered employees to obtain group coverage at rates

significantly below what they could have obtained individually. Such

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a benefit existed regardless of whether Posadas itself contributed to

the premium payments.

Posadas’s reliance on Seattle First National Bank v. NLRB,

444 F.2d 30 (9th Cir. 1971), McCall Corp. v. NLRB, 432 F.2d 187 (4th

Cir. 1970), and Westinghouse Elec. Corp. v. NLRB, 387 F.2d 542 (4th

Cir. 1967) for the proposition that its unilateral action did not

impinge on an issue traditionally considered “vital” to employees is

unavailing. None of these cases even remotely suggests that an

employer can unilaterally eliminate a benefit (insurance-related or

otherwise) without bargaining with the Union, by claiming that it

actually intended to undertake an unrelated, internal administrative

action that happened to cause an adverse effect on the benefit at

issue. In Seattle First National Bank, for example, the Ninth Circuit

specifically noted (pointing to our opinion in W.W. Cross Co., supra)

that group insurance plans involve issues traditionally considered

“vital” to employees, as opposed to bank services, the putative benefit

at issue in that case. Seattle First National Bank, 444 F.2d at 35

n.8.

Similarly, McCall and Westinghouse involved minor food price

increases -- issues quite different from those presented here. In both

cases, the employees had alternative places to eat, or they could bring

their own lunches; in neither instance were the cafeteria plants so

isolated that employees were dependent on the food that caused the

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controversies. Although the Fourth Circuit held that such issues were

not required subjects for bargaining, none of the actions complained of

in either case impinged (directly or indirectly) on a traditionally

“vital” issue, such as insurance benefits. Westinghouse, 387 F.2d at

550; McCall, 432 F.2d at 188.

Posadas further contends (again focusing solely on the

withholding practice) that its unilateral action was not one

traditionally considered “vital” because unit employees “could have

maintained the life and cancer insurance policies by simply making the

premium payments themselves . . . .” Posadas Brief at 11. The record

provides no support for that proposition. To the contrary, Krans’s

April 22, 1998 letter, stating that the cancellation of the policy

would subject covered employees to “individual insurability and rates”

(emphasis supplied), suggests precisely the opposite. Indeed, the

record shows that the employees could not have maintained the same

coverage at the same cost – even assuming they were individually

insurable – by making the premium payments themselves.

None of Posadas’s remaining arguments calls for a contrary

conclusion. Posadas contends, for example, that its employees could

have maintained their coverage by making premium payments directly to

the insurance companies. The record shows, however, that Posadas’s

employees could not have maintained the same level of coverage by

paying the premiums themselves; any coverage after May 1, 1998, would

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have been subject to individual rates, and would therefore have been

more expensive.2 Posadas also contends that its withholding practice

was not a term and condition of employment because it was not embodied

in the collective bargaining agreement with the Union. The argument is

meritless. An item that is not addressed in a collective bargaining

agreement can become a term and condition of employment, and hence a

mandatory subject of bargaining, if it has been “satisfactorily

established” by past practice or custom. See, e.g., Exxon Shipping Co.,

291 NLRB 489, 493 (1988). Here, we have a practice that was carried

out for almost twenty years, resulting in substantial reliance by

Posadas’s unit employees. As the Board noted, it is that longstanding

history -- coupled with the nature of the benefit at issue -- that

transformed this practice into a term or condition of employment. As

such, Posadas was required to bargain to impasse.

We need go no further. The record amply supports the Board’s

conclusion that Posadas provided its unit employees with an insurance

benefit, and that, as a result, it was not free to eliminate that

benefit unilaterally without offering the Union the opportunity to

bargain concerning that change. Posadas’s unilateral actions

2There is a dispute regarding whether unit employees could have
continued to receive group rates had they transferred over within a
specific grace period provided by the insurance companies. Even
assuming arguendo that this alternative solution was available,
Posadas’s argument ignores the fact that its own actions created the
problem of which it now complains.

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effectively eliminated the group policy and left previously-covered

employees without a critically important benefit. Posadas’s past

practice of withholding premium payments was a term and condition of

employment that triggered the duty to bargain. Its failure to do so

constituted an unfair labor practice.

Lastly, Posadas argues that the remedy imposed by the Board

constituted an abuse of discretion. It is well-settled that the Board

has “the primary responsibility and broad discretion to devise remedies

that effectuate the policies of the Act,” and that discretion is

“subject only to limited judicial review.” Pegasus Broadcasting of San

Juan v. NLRB, 82 F.3d 511, 513 (1st Cir. 1996). Pursuant to its

authority under 29 U.S.C. § 160(c), the Board ordered a remedy

directing Posadas to, inter alia, (1) resume its practice of making

payroll deductions for group cancer and life insurance policies, (2)

restore the policies for previously covered unit employees, and (3)

make the employees whole for any losses they may have suffered as a

result of the unilateral change. We have consistently maintained that

a Board-ordered remedy “should stand unless it can be shown that [it]

is a patent attempt to achieve ends other than those which can fairly

be said to effectuate the policies of the Act.” Id. (quoting Virginia

Elec. & Power Co. v. NLRB, 319 U.S. 533, 540 (1943)).

The Board acted within its sound discretion in ordering the

restoration of the status quo. Had it not been for Posadas’s

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unilateral alteration of the terms and condition of employment, the

covered employees would have continued to enjoy the benefit of life and

cancer insurance at group rates. Posadas’s proposed remedy –- to

bargain over the resumption of payroll deductions, which Posadas had no

right to eliminate unilaterally -– would effectively place the unit

employees “behind the line of scrimmage.” Id. at 514. There is no

reason to disturb the remedy ordered by the Board.

IV. CONCLUSION

For the foregoing reasons, we deny Posadas’s petition for

review and grant the Board’s cross-petition to enforce its order.

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