Colo. Fire Sprinkler, Inc. v. Nat'l Labor Relations Bd.

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 7, 2017 Decided June 8, 2018

No. 16-1261

COLORADO FIRE SPRINKLER, INC.,
PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,
RESPONDENT

ROAD SPRINKLER FITTERS LOCAL UNION NO. 669, U.A.,
AFL-CIO,
INTERVENOR

Consolidated with 16-1319

On Petition for Review and Cross-Application for
Enforcement of
an Order of the National Labor Relations Board

Thomas A. Lenz argued the cause for petitioner. With him
on the briefs was L. Brent Garrett.

John N. Raudabaugh and Glenn M. Taubman were on the
brief for amicus curiae Robert Blackwell in support of
Colorado Fire Sprinkler, Inc.
 2
Jeffrey W. Burritt, Attorney, National Labor Relations
Board, argued the cause for respondent. With him on the brief
were Richard F. Griffin, Jr., General Counsel at the time the
brief was filed, Jennifer Abruzzo, Deputy General Counsel at
the time the brief was filed, John H. Ferguson, Associate
Deputy Counsel, Linda Dreeben, Deputy Associate General
Counsel, and Usha Dheenan, Supervisory Attorney.

William W. Osborne Jr. argued the cause and filed the
brief for intervenor, Road Sprinkler Fitters Local Union 669,
U.A., AFL-CIO.

Before: ROGERS and MILLETT, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by MILLETT, Circuit Judge.

MILLETT, Circuit Judge: When the Colorado Fire
Sprinkler company’s labor agreement with the Road Sprinkler
Fitters Union expired, the Company announced that it would
no longer recognize or negotiate with the Union as a
representative of the Company’s employees. The Company
asserted a right under Section 8(f) of the National Labor
Relations Act, 29 U.S.C. § 158(f) (which applies to labor
agreements in the construction and building industries), to walk
away from the union relationship. The Union begged to differ,
contending that a different provision of the National Labor
Relations Act, Section 9(a), 29 U.S.C. § 159(a), obligated the
Company to continue negotiating in good faith with the Union.
The Union filed a grievance, and the National Labor Relations
Board sided with the Union. Because the Board’s decision
rested on insubstantial evidence and failed to address important
evidence supporting the Company, we grant the Company’s
petition for review, deny the Board’s cross-application for
enforcement, vacate the Board’s decision, and remand.
 3

I

A

This is a tale of two statutory provisions, and of a Union’s
effort to move between them.

Under the more commonly employed Section 9(a) of the
National Labor Relations Act, a union that obtains the support
of “the majority of the employees in a unit” will become the
recognized representative of those employees, and the
employer will be obligated to communicate and negotiate with
it on the terms and conditions of employment. 29 U.S.C.
§ 159(a). A union recognized under Section 9(a) “enjoys
numerous benefits, including a conclusive presumption of
majority status during the term of any collective-bargaining
agreement, up to three years.” Raymond F. Kravis Center for
the Performing Arts, Inc. v. NLRB, 550 F.3d 1183, 1188 (D.C.
Cir. 2008) (citation omitted). An employer’s refusal to bargain
with a union recognized as the employees’ Section 9(a)
representative is an unfair labor practice. See 29 U.S.C.
§ 158(a)(5).

A different rule operates in the building and construction
industries. For those businesses, labor costs need to be known
in advance so that companies can bid for work. In addition,
union organization is difficult because projects can be
relatively short-lived and employees migrate between jobs.
See Nova Plumbing, Inc. v. NLRB, 330 F.3d 531, 534 (D.C. Cir.
2003) (explaining that Section 8(f) addresses “the unique
nature” of industries that “need to draw on a pool of skilled
workers and to know their labor costs up front in order to
generate accurate bids,” and in which employees often “work
for multiple companies over short, sporadic periods”).
 4

To address those challenges, Section 8(f) of the National
Labor Relations Act allows employers and unions in the
building and construction industries to enter into what is known
as a “pre-hire agreement.” Nova Plumbing, 330 F.3d at 534
(citation omitted). Under such an agreement, the business and
union agree in advance that a particular union will represent
employees, and they may even negotiate the initial terms and
conditions of employment directly between themselves. That
can all occur without any vote by the employees, or even before
a single employee is hired. See 29 U.S.C. § 158(f).

A pre-hire agreement in the construction and building
industries is presumed to be governed by Section 8(f) rather
than Section 9(a). Allied Mechanical Services, Inc. v. NLRB,
668 F.3d 758, 766 (D.C. Cir. 2012). A Section 8(f) relationship
can convert into a Section 9(a) relationship only if the union
“either petition[s] for a representation election or demand[s]
recognition from the employer by providing proof of majority
support.” M & M Backhoe Service, Inc. v. NLRB, 469 F.3d
1047, 1050 (D.C. Cir. 2006).

Under the more commonplace Section 9(a) union
representation, when a collective bargaining agreement
expires, the employer generally must continue to negotiate with
the union in good faith and preserve the status quo in
employment terms and conditions. See, e.g., NLRB v. Katz,
369 U.S. 736, 743 (1962) (holding that “an employer’s
unilateral change in conditions of employment under
negotiation” is a violation of the National Labor Relations Act
because “it is a circumvention of the duty to negotiate”); Nova
Plumbing, 330 F.3d at 534 (noting that, under Section 9(a),
when a collective bargaining agreement expires, an employer
must “continue bargaining * * * unless the company can
demonstrate either that the union has in fact lost majority
 5
support or that the employer has a good faith uncertainty as to
the union’s status”).

Not so for Section 8(f) agreements. For them, the
employer (or the union) “may repudiate the terms of a pre-hire
agreement when it expires,” and the employer has “no
obligation to bargain with the union” upon expiration. M & M
Backhoe, 469 F.3d at 1048.

That is all a long way of saying that, when a labor
agreement expires, an employer’s rights and obligations under
Section 8(f) and Section 9(a) of the National Labor Relations
Act are substantially different. And therein lies the rub in this
case.

B

Colorado Fire Sprinkler, Inc., installs, services, and
inspects fire sprinkler systems across commercial properties in
Southern Colorado. Ken Stringer founded the Company in
1991 and still serves as its sole owner. At the time of the
Company’s founding, Stringer entered into a Section 8(f) pre-
hire agreement with the Road Sprinkler Fitters Local Union
No. 669, a national union. In that Agreement, the Company
agreed to recognize the Union as the representative of its
employees, to comply with the terms and conditions for
employees’ work set by the Union, and to make monthly
payments to the Union’s national Health and Welfare,
Education, and Pension Funds to cover its future employees’
health insurance, retirement, and ongoing training
requirements.

The Section 8(f) pre-hire agreement was actually a form
agreement the terms of which were predetermined by the
National Fire Sprinkler Association (an outside association of
 6
sprinkler installation companies of which the Company was
not a member) and the national Union. The Company did not
negotiate or have any input concerning the terms of the
agreement. Illustrating the cookie-cutter nature of the terms,
the first agreement that Stringer signed was in 1991, three
years before the Company hired a single sprinkler fitter. Yet
that 1991 Agreement included a provision labeled
“Acknowledgement of the Representative Status of Road
Sprinkler Fitters Local Union No. 669,” purportedly certifying
that “on the basis of objective and reliable information,” the
Company had “confirmed that a clear majority of the sprinkler
fitters in its employ”—of which it had none—“have
designated, are members of, and are represented by [the
Union] for purposes of collective bargaining.” J.A. 93. The
1991 Agreement went on to have the Company
“unconditionally acknowledge[] and confirm[]” that the
national Union “is the exclusive bargaining representative of
its sprinkler fitter employees pursuant to Section 9(a) of the
National Labor Relations Act.” J.A. 93.

In 1994, the Company hired its first employees. Over the
next two decades, the Company continued to hire employees
primarily through the Union’s apprenticeship program, and
entered into successive multi-year representation Agreements
with the Union. The next three Agreements—in 1994, 1997,
and 2000—likewise said that the Company acknowledged “the
Union’s status as the exclusive bargaining representative of its
employees pursuant to Section 9(a) of the National Labor
Relations Act.” J.A. 85; 87; 89.

In 2005, the Company signed its fifth Agreement with the
Union, which again was a nationwide form contract. The 2005
Agreement included a similar acknowledgement of
representative status, and then added the additional statement
“that the Union has offered to provide the Employer with
 7
confirmation of its support by a majority of such employees.”
J.A. 83. The subsequent two Agreements retained that same
language.

In 2010, Stringer told the Union that the Company was in
serious financial straits, and that he was concerned that he
would be unable to continue meeting the same contractual
obligations, especially the payments into the Union’s Health
and Welfare, Education, and Pension Funds. After some
convincing, Stringer chose to renew the Agreement. Stringer’s
predictions came true, however, and the Company became
delinquent on fund payments three months before the
contract’s expiration in March 2013. Stringer met with the
Union several times over the next few months, and eventually
reached a settlement agreement under which, in June 2013, the
Company paid back the three missed contributions.

At that same time, Stringer and the Union were also
attempting to hammer out a new collective bargaining
agreement. Stringer told the Union’s business agent that he
wanted to remain a Union contractor, but could not afford fund
payments because of increased competition from non-union
sprinkler installation companies. The Union responded that the
Company was obligated to honor the existing terms and to
negotiate a new contract. After several efforts to reach an
agreement failed, Stringer informed the Union in October 2013
that he had gone ahead and offered his employees a non-union
health insurance plan. The Union claimed that was a violation
of their Agreement because it was the employees’ exclusive
bargaining representative.

The Union then filed two unfair labor practice charges
with the National Labor Relations Board against the Company.
The charges alleged that the Company had violated the
National Labor Relations Act by (i) “discontinuing
 8
contributions to the [Union’s] benefit funds,” J.A. 55, and (ii)
unilaterally implementing a change in the employees’ terms of
employment in breach of its obligation to negotiate with the
Union in good faith and to preserve the existing employment
terms in the interim, all in violation of 29 U.S.C. § 158(a)(1)
and (a)(5). The Company in turn contended that the Union’s
charges were time-barred and that, in any event, it had lawfully
implemented its own healthcare plan because its contractual
relationship with the Union was governed by Section 8(f),
which imposed no duty to continue bargaining once the
contract expired.

An administrative law judge concluded that the Company
was at fault, reasoning that the 2005 Agreement had converted
the Section 8(f) Agreement into one governed by Section 9(a)
and its general prohibition against unilaterally altering
employment terms during collective bargaining negotiations.
The administrative law judge also concluded that the unfair
labor practice charges related to the cessation of payments to
the Union’s benefit funds were time-barred.

The National Labor Relations Board affirmed in part and
reversed in part. Pointing to the added language in the 2005
and subsequent Agreements about the Union’s offer of proof
of its representative status, the Board agreed that the
Company’s and Union’s relationship had become one
governed by Section 9(a) because “clear and unequivocal
contract language can establish a 9(a) relationship in the
construction industry.” Colorado Fire Sprinkler Inc. and Road
Sprinkler Fitters Local Union No. 669, U.A., AFL-CIO, 364
N.L.R.B. No. 55, at 1 (2016) (citing Staunton Fuel, 335
N.L.R.B. 717 (2001)). The Board then disagreed with the
administrative law judge’s timeliness finding, and ordered the
Company to bargain with the Union, to make up any
outstanding contributions to the benefit funds, and to reimburse
 9
its employees for any expenses they incurred as a result of the
missed contributions.

The Company filed a timely petition for review of the
Board’s decision, and the Board filed a cross-petition for
enforcement.

II

A

Recognizing the Board’s substantial expertise in
evaluating unfair labor practices, we will affirm the Board’s
order as long as its factual findings are supported by substantial
evidence. Nova Plumbing, 330 F.3d at 536. The Board’s
analysis, however, must be grounded in the complete record
and must grapple with evidence that “fairly detracts from the
weight of the evidence supporting [its] conclusion.” Reno
Hilton Resorts v. NLRB, 196 F.3d 1275, 1282 (D.C. Cir. 1999)
(citation omitted); see also Fred Meyer Stores, Inc. v. NLRB,
865 F.3d 630, 638 (D.C. Cir. 2017). We will also reverse a
Board decision if the Board “acted arbitrarily or otherwise
erred in applying established law to the facts.” Nova Plumbing,
330 F.3d at 536. Specifically, in reviewing the Board’s
determination whether a Section 8(f) or 9(a) relationship
existed between the parties, “our inquiry is whether the Board’s
conclusion was reasonable” under existing law. Allied
Mechanical Services, 668 F.3d at 772 (citation omitted).

All that means that, in reviewing the Board’s decision, we
will defer to the reasonable, but will not green light the
unreasoned.
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B

1

In deciding whether the relationship between the Union
and the Company was governed by Section 8(f), 29 U.S.C.
§ 158(f), or Section 9(a), 29 U.S.C. § 159(a), at the time their
agreement expired in 2010, we are guided by settled precedent
and labor-law principles.

To start, “a construction-industry contract will be
presumed to be governed by section 8(f) unless the employer
and union clearly intended to create a section 9(a) agreement.”
Nova Plumbing, 330 F.3d at 537 (citing J&R Tile, Inc., 291
N.L.R.B. 1034, 1037 (1988)) (emphasis added). That
presumption attached here. When the Union’s and Company’s
relationship first started, it was governed by Section 8(f), and
the 1991 Agreement was a pre-hire contract. It could not be
otherwise because, at the time the 1991 Agreement was
adopted, the Company had no employees at all—there was no
one to vote the Union in as labor’s representative under Section
9(a).

Given that Section 8(f) starting point, the General Counsel
bore the burden of proof to overcome the presumption of
continued Section 8(f) status with “clear[]” evidence that both
the Union and the Company intended to transition to a Section
9(a) relationship. Nova Plumbing, 330 F.3d at 537.

Those burdens of proof matter. The raison d’être of the
National Labor Relations Act’s protections for union
representation is to vindicate the employees’ right to engage in
collective activity and to empower employees to freely choose
their own labor representatives. See International Ladies’
Garment Workers’ Union v. NLRB, 366 U.S. 731, 738–739
 11
(1961) (“[T]he premise of the [National Labor Relations] Act
* * * [is] to assure freedom of choice and majority rule in
employee selection of representatives.”); see also Skyline
Distributors v. NLRB, 99 F.3d 403, 411 (D.C. Cir. 1996) (“One
of the principal protections of the [National Labor Relations
Act] is the right of employees to bargain collectively through
representatives of their own choosing or to refrain from such
activity.”). So under Section 9(a), the rule is that the employees
pick the union; the union does not pick the employees.

The unusual Section 8(f) exception is meant not to cede all
employee choice to the employer or union, but to provide
employees in the inconstant and fluid construction and building
industries some opportunity for collective representation. See
Raymond Interior Systems, Inc. v. NLRB, 812 F.3d 168, 176–
177 (D.C. Cir. 2016). A pre-hire arrangement still is ultimately
meant to benefit the employees and to promote harmonious
labor relations in those industries; it is not meant to force the
employees’ choices any further than the statutory scheme
allows. See NLRB v. Local Union No. 103, 434 U.S. 335, 346
(1978) (stating that the “major purpose” of Section 8(f), in
conjunction with other statutory provisions, is “to implement
one of the [National Labor Relations] Act’s principal goals—
to ensure the employees were free to make an uncoerced choice
of bargaining agent”); see also Jim McNeff, Inc. v. Todd, 461
U.S. 260, 268–270 (1983).

Because the statutory objective is to ensure that only
unions chosen by a majority of employees enjoy Section 9(a)’s
enhanced protections, the Board must faithfully police the
presumption of Section 8(f) status and the strict burden of proof
to overcome it. Specifically, the Board must demand clear
evidence that the employees—not the union and not the
employer—have independently chosen to transition away from
 12
a Section 8(f) pre-hire arrangement by affirmatively choosing
a union as their Section 9(a) representative.

2

This court’s decisions in Nova Plumbing and Allied
Mechanical provide two goalposts guiding the analysis of what
evidence is required for a union to score a Section 9(a)
relationship.

In Nova Plumbing, a construction contractor and union
entered into a labor agreement. The contract included a
“recognition clause” stating that “independently verified”
evidence had been presented to the company “demonstrat[ing]
that the Union represents an uncoerced majority of the
employees * * *.” 330 F.3d at 535. Despite that language, the
record was devoid of any actual evidence of employee support
submitted by the union to Nova Plumbing or to anyone else.
Even more damning, “uncontradicted testimony” in the record
indicated that senior employees actually opposed union
representation. Id. at 537.

We held that “contract language” and the “intent” of the
union and company alone generally cannot overcome the
Section 8(f) presumption, and certainly not when “the record
contains strong indications that the parties had only a section
8(f) relationship.” Nova Plumbing, 330 F.3d at 537. While
such language could be a relevant factor, the “proposition that
contract language alone can establish the existence of a section
9(a) relationship runs roughshod over the principles” of
employee choice “established in” Supreme Court precedent.
Nova Plumbing, 330 F.3d at 536–537 (citing Garment
Workers’ Union, 366 U.S. at 738–739). In particular, language
crafted solely by the union and employer “completely fails to
account for employee rights,” and creates a risk of the union
 13
and employer “colluding at the expense of employees and rival
unions.” Nova Plumbing, 330 F.3d at 537. For those reasons,
an “agreement between an employer and union is void and
unenforceable * * * if it purports to recognize a union that
actually lacks majority support as the employees’ exclusive
representative.” Id.

Conversely, Allied Mechanical established that, when
there is strong evidence of employee majority support in the
record, such as authorization cards signed by employees, then
a union’s offer to provide concrete evidence of its majority
status can convert a Section 8(f) relationship into a Section 9(a)
one. 668 F.3d at 768. Whether the employer viewed that
evidence is beside the point; what matters is that the affirmative
evidence of majority support exists in the record. Id.; see M&M
Backhoe Service, 469 F.3d at 1050–1051 (union had collected
authorization cards).

This case falls in the middle. The record is bereft of
evidence either confirming or controverting majority support.
In the Company’s twenty-year history, there were no petitions,
authorization cards, or votes confirming or denying the
Union’s majority status. No anecdotal evidence was offered
either. The only evidence the Union points to is the rote
language repeated in a series of contracts purporting to
acknowledge the Union’s status as “the exclusive bargaining
representative of its employees pursuant to Section 9(a) of the
National Labor Relations Act.” J.A. 89; 87; 85; 83; see also
J.A. 93.

The Board concluded that contract language was enough,
invoking past Board precedent holding that a written agreement
can “establish a 9(a) relationship if its language unequivocally
indicates that the union requested recognition as majority
representative, the employer recognized the union as majority
 14
representative, and the employer’s recognition was based on
the union’s having shown, or having offered to show, an
evidentiary basis of its majority support.” Staunton Fuel, 335
N.L.R.B. at 717; see Colorado Fire Sprinkler Inc., 364
N.L.R.B. at 1 n.3 (“Here, it is undisputed that the Staunton Fuel
requirements are met.”).

That approach by the Board will not do. The first two
prongs of the Staunton test do nothing more than document the
union’s and employer’s views on Section 9(a) status. They say
nothing about the pivotal question of employee support for the
union. It is the “employees[’] freedom of choice and majority
rule” that Section 9(a) “guarantees.” Garment Workers’
Union, 366 U.S. at 737. That choice cannot be arrogated by a
union or an employer.

As for the third prong, the Board’s reliance in this case on
a mere offer of evidence in a form contract—the language of
which has been proven demonstrably false in at least one prior
iteration—would reduce the requirement of affirmative
employee support to a word game controlled entirely by the
union and employer. Which is precisely what the law forbids.
For what Garment Workers’ Union, Nova Plumbing, and Allied
Mechanical collectively teach is that, while an employer and a
union can get together to create a Section 8(f) pre-hire
agreement, only the employees, through majority choice, can
confer Section 9(a) status on a union. So to rebut the
presumption of Section 8(f) status, actual evidence that a
majority of employees have thrown their support to the union
must exist and, in Board proceedings, that evidence must be
reflected in the administrative record.

The Board could point to no such evidence here. None of
the usual indicia of majority support—authorization cards or
votes—was introduced; it apparently does not exist. And the
 15
contract language on which the Board hung its hat defied
reality. The very first 1991 Agreement between the Union and
the Company recited that the Company had “confirmed that a
clear majority of the sprinkler fitters in its employ have
designated * * * [the Union] for purposes of collective
bargaining,” and that the Union was the “exclusive bargaining
representative * * * pursuant to Section 9(a) of the National
Labor Relations Act.” J.A. 93. That contract language was
objectively false. There is no dispute that the Company had
zero employees at the time it signed onto that contract
language.

Nor is there any dispute that every Agreement signed by
the Company was a carbon-copy contract proffered by the
Union without any input from the Company or its employees.
The 1991 Agreement, for example, was sent to Stringer, and
“all [he] had to do was sign the agreement.” J.A. 26:13. He
did not discuss with the Union what the Agreement contained,
and there was no negotiation over its terms. Instead, the union-
recognition clauses in the Agreements Stringer signed simply
bound him to the terms and conditions of the general agreement
between the National Fire Sprinkler Association and the
national Union. None of its terms were specific to the
Company or its employees.

That same pattern continued for each successive
Agreement. They were all just mailed to Stringer, who signed
them without any “back and forth on the contents.” J.A. 27:10–
11. The resulting union-recognition clauses were boilerplate.
Apparently, they were never fact-checked either.

The Board points to the addition of language in the 2005
Agreement stating that the Union “offered to provide the
Employer with confirmation of its support.” J.A. 83. But
nothing in the record provided the Board any reasonable basis
 16
for finding this cut-and-paste language from the national
contract any more accurate than the previous empty
representations. Tellingly, at no point in the administrative
record did the Union even explain, let alone proffer, what
evidence it claimed to have collected. Given the central
importance of honoring employees’ organizational rights and
the risks of employer-union collusion, the Board must identify
something more than truth-challenged form language before it
can confer exclusive bargaining rights on a union under Section
9(a).

*****

By blinking away record evidence undermining the
credibility or meaningfulness of the recognition clauses, the
Board “entirely failed to consider an important aspect of the
problem.” Motor Vehicle Mfrs. Ass’n of U.S. v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Although actual
employee support for the Union was the dispositive issue in the
case, the record lacks any affirmative evidence—let alone
substantial evidence—of the employees’ views.

The Board’s decision was also arbitrary and capricious.
By making demonstrably untrustworthy contractual language
the be-all and end-all of Section 9(a) status, the Board adopted
a rule of law that would leave in potentially “careless employer
and union hands the power to completely frustrate employee
realization of * * * freedom of choice and majority rule in
employee selection of representatives.” Garment Workers’
Union, 366 U.S. at 738–739. *

* Because the record does not support the Board’s conclusion that
the Union was the employees’ Section 9(a) representative, we have
no need to address the Company’s remaining challenges to the
 17

Accordingly, we grant the Company’s petition for review,
deny the Board’s cross-application for enforcement, vacate the
Board’s decision, and remand.

So ordered.

timeliness of the Union’s unfair labor practice charges or to the
remedy imposed by the Board.