Pacific Maritime Association v. NLRB

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 22, 2020 Decided August 4, 2020
No. 19-1101
PACIFIC MARITIME ASSOCIATION,
PETITIONER
v.
NATIONAL LABOR RELATIONS BOARD,
RESPONDENT

Consolidated with 19-1103, 19-1109, 19-1110

On Petitions for Review and Cross-Applications
for Enforcement of an Order of
the National Labor Relations Board

Michael E. Kenneally argued the cause for petitioner.
With him on the briefs were Jonathan C. Fritts, Brigham M.
Cheney, and Thomas A. Lenz.
Eric Weitz, Attorney, National Labor Relations Board,
argued the cause for respondent. With him on the brief were
Peter B. Robb, General Counsel, David Habenstreit, Acting
Deputy Associate General Counsel, and Kira Dellinger Vol,
Supervisory Attorney.
Before: SRINIVASAN, Chief Judge, and ROGERS and RAO,
Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS.
 2
Opinion concurring in part and dissenting in part by
Circuit Judge RAO.
ROGERS, Circuit Judge: The National Labor Relations
Board determined that Pacific Maritime Association
(“Pacific”) and Long Beach Container Terminal (“Long
Beach”) committed two distinct unfair labor practices in
violation of the National Labor Relations Act when they
applied disciplinary provisions of one employee’s collective
bargaining agreement for resolving discrimination complaints
to an employee represented by a different union under a
collective bargaining agreement with different procedures and
remedies. Pacific and Long Beach (hereinafter referred to
together as “The Employers”), seek to avoid their statutory
obligations by contending that they reasonably interpreted their
contractual agreement with the disciplined employee to permit
the use of procedures and imposition of penalties that were not
included in this agreement, and their disciplinary action did not
unilaterally change the terms and conditions of the disciplined
employee’s employment. In view of the plain text of the
Employers’ agreement that covered the disciplined employee
and the record before the Board, we deny their petitions for
review and grant the Board’s cross-applications for
enforcement of its Order.

I.

Pacific Maritime Association (“Pacific”) and Long Beach
Container Terminal (“Long Beach”) are involved in shipping,
longshore, and cargo-handling industries at ports on the Pacific
coast. Pacific is a mutual benefit corporation that serves as the
multi-employer bargaining representative for its employer
members, with the primary purpose of negotiating, executing,
and administering collective bargaining agreements (“CBAs”).
One of its members, Long Beach, operates a marine container
 3
terminal at the Port of Long Beach and employs both watchmen
and marine clerks. Each classification of employee is
represented by a different union, and Pacific has entered into
separate agreements with each union. We begin with a
summary of those CBAs.

A.

Watchmen at the Port of Long Beach have long been
represented by ILWU, Warehouse, Processing and Distribution
Workers Union, Local 26 (“Local 26”). Under the
Watchmen’s Agreement, Local 26 and Pacific jointly operate a
dispatch hall that refers watchmen to work for Pacific’s
members. Article 18 establishes a procedure for addressing
disciplinary issues and other disputes arising under the
Agreement. Article 16 of the Agreement broadly prohibits
discrimination against “any person” on the basis of “race,
color, national origin . . . or political beliefs . . . .” Pursuant to
Article 18(C), a Joint Labor Relations Committee of employer
and union representatives establishes the rules and penalties
governing watchmen’s conduct; employers retain an
unrestricted right of discipline for five offenses. Otherwise,
Article 18(D)(1) requires the employer to “attempt to notify
and discuss the alleged incident with the individuals involved”
and Local 26. “Following a good faith discussion with the
Union, or inability to contact the designated Union
representative within a reasonable time period,” the employer
may file a formal complaint, Article 18(D)(1), or request a
meeting with the Joint Committee, Article 18(E). “If a
satisfactory settlement cannot be reached” by the Joint
Committee, then “either party may refer the matter” to the
contractual Watchmen Arbitrator. Id. Rules control the
arbitration process, including the parties’ selection of
arbitrators, and rules also limit appeals.
 4
Article 18(H) provides that the “grievance machinery” in
the Watchmen’s Agreement “shall be the exclusive remedy
with respect to any dispute arising under [it] and no other
remedies shall be used by the Union, the Employer, or any
covered employee until the grievance procedures have been
exhausted.” Where a disciplinary action affecting a
watchman’s dispatch right is involved, Article 18(I) specifies
that an employer complaint shall only be applicable “to the
terminal where the complaint arose.” Article 21 states that no
provision of the contract “may be amended, modified, changed,
altered or waived, except by a written document executed by
the parties hereto.”

The marine clerks are represented by the International
Longshore and Warehouse Union (“the International”). The
Pacific Coast Longshore and Clerks’ Agreement (“Clerks’
Agreement”) covers approximately 25,000 longshore workers
and marine clerks at Pacific coast ports. This CBA contains its
own mechanism for the signatory unions and employers to
address disputes regarding covered longshore workers and
marine clerks. Notably for present purposes, the Clerks’
Agreement includes Section 13.2, which establishes a special
grievance procedure for resolving allegations of discrimination
or harassment. Under this streamlined procedure, an individual
employee may file a complaint, which will be assigned directly
to an arbitrator. The arbitrator must promptly schedule an
evidentiary hearing to investigate the alleged incident. Within
fourteen days after the hearing, the arbitrator shall issue a
written decision that includes, as necessary, disciplinary
penalties consistent with the guidelines in the Clerks’
Agreement. The arbitrator’s decision is final, with only limited
appeal. In addition to the broad prohibition on discrimination
in Section 13.1, side agreements set forth rules of conduct and
examples of conduct warranting discipline. In July 2014,
Pacific and the International clarified, by letter of
 5
understanding (“2014 LOU”), that Section 13.2 complaints
may be brought against “other employees of [Pacific’s]
member companies,” but those outside employees may not file
Section 13.2 complaints.

B.

The events giving rise to the Board’s determination that
the Employers had violated the Act began on March 28, 2017.
Demetrius Pleas, a watchman represented by Local 26, and a
marine clerk represented by the International had a work-
related argument during which both men allegedly engaged in
racial name-calling. At the time, Pleas was working for Long
Beach. The two employees resolved the matter informally that
day, but on March 30, 2017, the marine clerk filed a grievance
against Pleas pursuant to Section 13.2 of the Clerks’
Agreement. Long Beach informed Local 26 the next day that
it was investigating the incident and intended, if necessary, to
pursue discipline against Pleas under Article 18(C) of the
Watchmen’s Agreement. Long Beach ultimately concluded
that there was insufficient evidence Pleas engaged in
wrongdoing to warrant filing a formal Article 18 complaint, but
warned Pleas that future incidents would be dealt with through
the Watchmen Joint Committee process.

Meanwhile, the Arbitrator assigned to the Section 13.2
grievance scheduled a hearing for May 3, 2017. Counsel for
Local 26 wrote Pacific that Local 26 was not bound by Section
13.2 and neither Local 26 nor Pleas would participate in the
hearing, and requested that Pacific not take any adverse action
against Local 26 members based on these proceedings. Pacific
responded by letter that Long Beach and the other Pacific
employer members would implement whatever discipline the
Arbitrator determined would be appropriate. Neither Pleas nor
a Local 26 representative attended the arbitration hearing, but
 6
representatives from Pacific and Long Beach did attend and
actively participated. At the beginning of the hearing the
Arbitrator stated that he did not “really have authority over Mr.
Pleas” pursuant to the Clerks’ Agreement and that “it would be
up to the Employer to enforce any decision if any if action was
needed.” Arb. Hr’g Tr. 19–20 (May 3, 2017). Pacific made a
statement that the “direct employer” (referring to Long Beach)
“is prepared to implement any decision made by the
Arbitrator,” and that Pleas (the watchman) “is subject to
complaints under Section 13.2 of the [Clerks’ Agreement] as
outlined in the 2014 LOU” between Pacific and the
International. Arb. Dec. 3 (June 5, 2017).

The Arbitrator proposed that Pleas be barred from working
at Long Beach until a final decision was rendered. In his final
decision, the Arbitrator found that Pleas had violated Section
13.2 policies and should be suspended from working at all
Pacific employer member terminals for twenty eight days, and
also required to undertake an unpaid training video and to sign
a statement pledging to abide by Section 13.2 policy before
returning to work. See id. at 8. Local 26 appealed; the
Arbitrator’s Order and Decision were sustained, rejecting
Local 26’s jurisdictional argument. In July 2017, Pacific
notified its employer members of Pleas’ suspension from
working at terminals covered by the Clerks’ Agreement.

Local 26 filed unfair labor practice charges against the
Employers in May 2017, alleging that they had violated the Act
by committing two theoretically distinct unfair labor practices
in disciplining watchman Pleas under the Section 13.2
procedure in the Clerks’ Agreement: (1) impermissibly
modifying the Watchmen’s Agreement and (2) unilaterally
imposing a new term and condition of employment without
bargaining. The Board affirmed the decision of an
administrative law judge (“ALJ”) that the Employers had
 7
violated Sections 8(a)(5) and (1) of the Act under either of the
General Counsel’s alternative theories: when they applied
Section 13.2 of the Clerks’ Agreement, to Pleas, an employee
of the watchmen’s unit represented by Local 26 and covered by
that unit’s Watchmen’s Agreement, and when they disciplined
him pursuant to the Section 13.2 process. Pac. Mar. Ass’n, 367
NLRB No. 121, 2019 WL 1977314, at *1, 4–6 (May 2, 2019).
The Employers were ordered to cease and desist, to rescind the
suspension and make Pleas financially whole, and, among
other things, to delete from their records any reference to his
suspension. One Member dissented, arguing the Employers
did not apply the Section 13.2 procedure since they did not file
the complaint, they reasonably believed the Watchmen’s
Agreement did not preclude imposing Section 13.2 discipline,
and they did not unilaterally change the terms and conditions
of Pleas’ employment because there was no consistent
disciplinary practice. Pacific and Long Beach both petitioned
for review of the Board’s Decision and Order. The Board filed
cross-applications for enforcement of its Order.

II.

The Board determined that the Employers committed two
distinct unfair labor practices: contract modification and
unilateral change. These alternative grounds for the Board’s
Decision involve distinct violations of the Act with different
governing standards, defenses, and remedies. Bath Iron Works
Corp., 345 NLRB 499, 501–03 (2005), enforced sub nom. Bath
Marine Draftsmen’s Ass’n v. NLRB, 475 F.3d 14 (1st Cir.
2007). The Board has concluded that it may find an unlawful
unilateral change, in addition or in the alternative, where it has
also found an unlawful contract modification. See, e.g.,
Comau, Inc., 364 NLRB No. 48, 2016 WL 3853834, at *4–6
(July 14, 2016). Its counsel explains that “an employer’s
actions may modify a provision ‘contained in’ a [CBA] while
 8
also imposing a change to a mandatory bargaining subject
where nothing in the contract ‘covers’ the employer’s right to
act unilaterally.” Resp’ts’ Br. 22 (citations omitted).

The Supreme Court has recognized that “the authority of
the Board and the law of contract are overlapping, concurrent
regimes,” and that “the Board may proscribe conduct which is
an unfair labor practice even though it is also a breach of
contract remediable as such by arbitration and in the courts.”
NLRB v. Strong, 393 U.S. 357, 360–61 (1969). But neither the
Supreme Court nor this court has spoken directly to the
question whether the Board has the authority to proceed on
different theories of violation based on the same set of facts.
Nor need we do so today. The Employers challenge the
Board’s findings of both statutory violations but they present
no challenge to the application of both theories to the same set
of facts. Therefore, the court has no occasion to decide whether
both unfair labor practices can be properly found in cases of
this sort and proceeds on the assumption the Board may do so.

Turning to the Employers’ challenges, the scope of the
court’s review of the Board’s decision is limited. As the
Supreme Court has long acknowledged, Congress has
determined that the Board has “the primary responsibility of
marking out the scope . . . of the statutory duty to bargain,”
Ford Motor Co. v. NLRB, 441 U.S. 488, 496 (1979), and “great
deference” is due to the Board because determining whether a
party has violated this statutory duty is “particularly within” the
Board’s expertise, see Crowley Marine Servs., Inc. v. NLRB,
234 F.3d 1295, 1297 (D.C. Cir. 2000) (quoting Local 13,
Detroit Newspaper Printing & Graphic Commc’ns Union v.
NLRB, 598 F.2d 267, 272 (D.C. Cir. 1979)); see also Ford
Motor, 441 U.S. at 495. Consequently, this court “must sustain
the Board’s decision ‘unless, reviewing the record as a whole,
it appears that the Board’s factual findings are not supported by
 9
substantial evidence, or that the Board acted arbitrarily or
otherwise erred in applying established law to the facts at
issue.’” S. Nuclear Operating Co. v. NLRB, 524 F.3d 1350,
1355 (D.C. Cir. 2008) (quoting Int’l All. of Theatrical & Stage
Emps. v. NLRB, 334 F.3d 27, 31 (D.C. Cir. 2003)); Universal
Camera Corp. v. NLRB, 340 U.S. 474, 477, 488 (1951); 29
U.S.C. § 160(e). Reviewing courts may not “displace the
Board’s choice between two fairly conflicting views,” even if
the court “would justifiably have made a different choice” in
the first instance. Universal Camera, 340 U.S. at 488.

Where a challenge is made to the Board’s interpretation of
a contract, however, the court need give “no special deference”
to “ultimate legal conclusions that rest on” the Board’s contract
interpretations and interprets such contracts de novo. Local
Union No. 47, Int’l Bhd. of Elec. Workers v. NLRB, 927 F.2d
635, 640–41 (D.C. Cir. 1991). The court applies “ordinary
principles of contract law.” M&G Polymers USA, LLC v.
Tackett, 574 U.S. 427, 435 (2015). Still, the court’s deference
to the Board’s fact-finding extends to findings necessary to
interpret the meaning of the contract, “including evidence of
intent from bargaining history, and other factual findings on
matters bearing on the intent of the parties,” as long as those
findings are supported by substantial evidence in the record
considered as a whole. StaffCo of Brooklyn, LLC v. NLRB, 888
F.3d 1297, 1302 (D.C. Cir. 2018) (citations and internal
quotations marks omitted).

A.

An employer violates Sections 8(a)(5) and (1) of the Act
by modifying terms and conditions of employment established
in a CBA. 29 U.S.C. §§ 158(a)(1), (5), 158(d). Because the
unfair labor practice question derives from an employer’s
statutory duty to bargain, a midterm modification is unlawful
 10
only if it involves a mandatory subject of bargaining for which
the employer was required to bargain in the first place. Allied
Chem. & Alkali Workers of Am., Local Union No. 1 v.
Pittsburgh Plate Glass Co., 404 U.S. 157, 185–88 (1971).
Disciplinary procedures are a mandatory subject of bargaining.
See, e.g., El Paso Elec. Co., 355 NLRB 428, 453 (2010),
enforced, 681 F.3d 651, 662–64 (5th Cir. 2012).

The Board has recognized that an employer has not
violated Section 8(a)(5) by modifying terms and conditions of
employment under a CBA where the employer has a “sound
arguable basis” for its interpretation of a contract and it is not
motivated by animus or bad faith. Bath Iron Works, 345 NLRB
at 502. This exception has limits: no “sound arguable basis”
in support of an employer’s purported interpretation of the
contract can exist where, that interpretation runs “counter to the
clear intention of the parties,” id., or the contract “cannot be
colorably interpreted to permit” the employer’s interpretation,
MV Transp., Inc., 368 NLRB No. 66, 2019 WL 4316958, at
*30 (Sept. 10, 2019).

The Employers contend that they reasonably believed
enforcing Section 13.2 of the Clerks’ Agreement against
watchman Pleas was consistent with the Watchmen’s
Agreement under which Pleas was covered. In their view, they
did not modify the Article 18 procedures because no employer
had filed the complaint as is contemplated by the Watchmen’s
Agreement; rather a marine clerk covered by the Clerk’s
Agreement filed the complaint. So, in their view, it was
reasonable to interpret Article 18(D) regarding exhaustion
requirements to apply only in cases in which an employer files
a complaint. For the same reasons, they contend that there was
no modification of Article 18(H), which provides that Article
18’s grievance procedures are the exclusive remedy with
respect to any dispute arising under the Watchmen’s
 11
Agreement, because the dispute was initiated by the marine
clerk and arose under the Clerks’ Agreement.

But as the Board concluded, Article 18 of the Watchmen’s
Agreement cannot be colorably interpreted to permit the
Employers to unilaterally impose an alternative disciplinary
procedure contrary to the exclusive procedure in that CBA, or
to affirmatively grant the Employers the right to impose
alternative disciplinary procedures unilaterally. First, the
Employers’ view that Article 18 of the Watchmen’s Agreement
did not limit their ability as employers to discipline Pleas for
racial harassment is implausible on the face of the plain terms
of the CBA. Article 18(H) expressly limits the Employers’
ability to discipline employees “with respect to any dispute
arising under the [Agreement]” unless the “grievance
procedures have been exhausted.” Pleas’ alleged misconduct
arose under the Agreement — specifically, Article 16’s anti-
discrimination provision, which broadly prohibits
discrimination against “any person” on the basis of “race,
color, national origin, religious or political beliefs, sex, age,
Veteran’s status, or disability.” Given the plain express terms
of the Watchmen’s Agreement, an employer who seeks to
discipline a covered employee for conduct prohibited by
Article 16, must exhaust the grievance procedures in Article 18
before pursuing other disciplinary remedies. See Pac. Mar.
Ass’n, 367 NLRB No. 121, 2019 WL 1977314, at *5 & n.18,
20. Such procedures include filing a complaint after attempting
to informally resolve the dispute with Local 26, Article
18(D)(1), or meeting with the Joint Committee and if a
satisfactory settlement cannot be reached, referring the matter
to the Watchmen Arbitrator, Article 18(E). The Employers did
neither, and Long Beach expressly acknowledged the
applicability of Article 18 procedures in declining to file a
complaint against Pleas. The employers, therefore, could not
reasonably conclude that, without first exhausting these
 12
procedures, enforcing Section 13.2 of the Clerks’ Agreement
against watchman Pleas was consistent with the Watchmen’s
Agreement under which he was covered.

The Employers press on, contending that Article 18(C)
affirmatively grants employers the right to unilaterally
discipline Pleas for racial harassment. This too is facially
implausible. The plain text of Article 18(C) limits the
employers’ unrestricted right of discipline to the specific
offenses involving “intoxication, pilferage, assault,
incompetency, or failure to perform work as directed.” Pleas’
misconduct did not fall within these five offenses. Reading
Article 18(C) to provide the employers an open-ended right to
unilaterally discipline, as the Employers do, would effectively
render the enumeration of offenses superfluous and Article
18’s established disciplinary procedures largely meaningless.

With Article 18(H) so understood, the Employers lacked a
sound arguable basis for interpreting the CBA to permit their
disciplinary action. Stark differences between the exclusive
Article 18 grievance procedures and the Section 13.2 procedure
applied by the Employers compel this conclusion. In a contract
modification case, the dispositive issue is whether the
Employers “had a ‘sound arguable basis’ for [their] actions,”
Bath Iron Works, 345 NLRB at 503. Here, the Employers
interpreted their CBA with Local 26 to permit a marine clerk,
covered by a different CBA, to refer his dispute with Pleas to
arbitrators identified under the special Section 13.2 Grievance
process and to permit the Employers to impose the Arbitrator’s
discipline that exceeded the discipline allowed under the CBA
that covered Pleas, and to do so without first exhausting the
Article 18 procedures. The Employers’ conduct in imposing
discipline was inconsistent with the exclusive provisions of
Article 18, such as Article 18(E), which provides that the
Employers may refer grievances to the “Watchmen Arbitrator,”
 13
who is jointly selected and appointed by the Employers and
Local 26, if a satisfactory settlement cannot be reached with the
Joint Committee. Even if the marine clerk could properly file
a complaint against watchman Pleas under Section 13.2, that
did not mean the Employers could ignore their CBA with Local
26 that covered Pleas. Therefore, they fail to show that the
Board erred in rejecting their attempt to come within the scope
of the sound arguable basis exception for contract
interpretation.

Second, the Employers maintain that the basic premise of
the Board’s Decision, that they applied Section 13.2 against
Pleas, is belied by the record. It is true that the Section 13.2
procedures were initially invoked and pursued by the marine
clerk, and not initiated by an employer. But the Board’s
finding that the Employers actively participated before, during,
and after the Section 13.2 arbitration hearing is supported by
substantial evidence in the record considered as a whole. That
evidence effectively rendered the marine clerk’s complaint the
Employers’ complaint. Long Beach suggests it merely
observed the arbitration proceeding and did not enforce the
Arbitrator’s order. But at the hearing, Pacific represented to
the Arbitrator, without objection, that Long Beach was Pleas’
direct employer and stood ready to carry out any discipline
recommended by the Arbitrator, and that Pleas was subject to
the Section 13.2 procedures under the 2014 LOU between
Pacific and the International. Participating in this Section 13.2
arbitration proceeding was inconsistent with the terms of Pleas’
Watchmen’s Agreement for addressing discrimination
complaints. Furthermore, the Employers “implemented the
resulting discipline,” Pet’rs’ Br. 47, by notifying all member
terminals of Pleas’ suspension. That action, among others,
resulted in penalties beyond those authorized under the
Watchmen’s Agreement. For example, when Pleas was
dispatched in July 2017 for a job at Hanjin Terminal, a covered
 14
terminal under the Watchmen’s Agreement, he was ordered to
leave.

Third, the parties’ bargaining history and past practice
further support the Board’s conclusion that the plain language
of the Watchmen’s Agreement does not permit or authorize the
Employers to discipline a Local 26 watchman using the special
Section 13.2 procedure. In evaluating an employer’s sound
arguable basis, the Board may examine “both the contract
language itself and relevant extrinsic evidence,” such as
bargaining history or past practice to determine the parties’
intent, Knollwood Country Club, 365 NLRB No. 22, 2017 WL
1088796, at *1 (Mar. 8, 2017), and the Board has repeatedly
relied on extrinsic evidence to support its sound arguable basis
analysis, see, e.g., id. at *1 & n.8; see also ADT, LLC, 369
NLRB No. 31, 2020 WL 996271, at *5 & n.10 (Feb. 27, 2020);
see also Comau, 364 NLRB No. 48, 2016 WL 3853834, at *5
& n.16. The Board’s analysis here is in line with its precedent.
The Board first determined that the “clear language” of Article
18 prohibited the Employers’ disciplinary action and then
explained how the parties’ past practice and bargaining history
supported this finding. Pac. Mar. Ass’n, 367 NLRB No. 121,
2019 WL 1977314, at *5.

There is substantial evidence to support the Board’s
finding that Local 26 consistently rejected the Employers’
proposals to incorporate procedures similar to a Section 13.2
procedure into the Watchmen’s Agreement. During
negotiations in 2008 and 2014, the Employers proposed that a
Section 13.2 procedure be added to the Watchmen’s
Agreement and Local 26 repeatedly rejected these proposals.
The Employers suggest that the Board has mischaracterized the
record evidence because the parties never bargained over
whether a non-watchman could use Section 13.2 to accuse a
watchman of workplace harassment. Yet evidence credited by
 15
the ALJ indicated that in October 2014 Pacific proposed to
amend Article 16 to allow “any employee” to file a Section
13.2 type grievance, General Counsel Ex. 5 (Employer
Proposals: Article 16 (Oct. 8, 2014)) (emphasis added), and
Local 26 rejected this proposal.

There also is substantial evidence to support the Board’s
finding that the parties have historically used Article 18
procedures to resolve complaints of worker-versus-worker
harassment. Sometimes this has been done informally with
Local 26; other times it has been done through the formal
complaint process. In the instant case, Long Beach notified
Local 26 of its investigation into the discrimination allegations,
and later issued Pleas an informal warning that future such
occurrences would be resolved through the Article 18
disciplinary process. Long Beach’s general manager testified
that he had had informally resolved at least two dozen similar
harassment complaints by issuing warning letters. In 2016,
when Long Beach filed a formal Article 18 complaint against
a watchman accused of harassing another watchman in
violation of Article 16, the matter was resolved by the Joint
Committee.

Still, the Employers maintain that the evidence fails to
support the Board’s position that Article 18 is the exclusive
means for addressing these types of complaints. Putting aside
the fact that Article 18(H) clearly states as much, the
Employers point to no record evidence that the parties intended
for the Employers to have a unilateral right to enforce Section
13.2 against covered watchmen accused of discrimination. It
is undisputed that the parties have not previously resolved
worker-versus-worker harassment allegations in this way. The
Board could properly conclude, therefore, that the Employers
had no sound arguable basis to believe that their Section 13.2
 16
disciplinary action was consistent with the Watchmen’s
Agreement.

Fourth, the Employers maintain that Local 26 is not
entitled to override the Employers’ agreements with other
unions and other workers’ rights under these agreements. They
misconstrue federal labor law and principles of contract law.
The Act establishes a system of exclusive collective-bargaining
representation in which employers are statutorily obligated to
bargain with their employees’ chosen representative over
subjects such as employee disciplinary procedures. See 29
U.S.C. §§ 158(a)(5), 159(a); see generally First Nat. Maint.
Corp. v. NLRB, 452 U.S 666, 674–79 (1981). The Employers
speculate that if they had refused to enforce Section 13.2, then
the Board would have entertained contract modification
charges from the marine clerk’s union. Even if that were true,
which we need not decide, it does not change the Employers’
statutory and contractual obligations to Local 26.

“[A] contract cannot bind a nonparty.” EEOC v. Waffle
House, Inc., 534 U.S. 279, 294 (2002). Local 26, the watchmen
employees’ union, was not a party to the Clerks’ Agreement.
Neither was there evidence that Local 26 had acted in a manner
as would give the Employers reason to conclude that Local 26
had agreed, albeit informally and not in writing as Article 21
contemplated, to the use of Section 13.2 procedures where a
non-watchman files a complaint against a covered watchman,
nor any other evidence that the Agreement permitted this
departure from Article 18 procedures. Local 26 is apparently
the last holdout among unions with which Pacific contracts to
use Section 13.2 procedures, most recently in negotiations for
the 2014-2019 Watchmen’s Agreement. The Employers point
to no conduct by Local 26 that provided a basis for them to
conclude that the Agreement would permit using Section 13.2
procedures against watchman Pleas.
 17
In sum, this contractual defense, much like the Employers’
others, ignores the plain text of the Watchmen’s Agreement,
the parties’ bargaining history, and their negotiations for the
2014-2019 contract where Local 26 again rejected the
Employers’ proposal to import the special Section 13.2
disciplinary procedure in the Clerks’ Agreement into the
Watchmen’s Agreement. The remainder of the Employers’
challenges to the contract-modification violation fail because
the Board’s findings are supported by substantial evidence in
the record considered as a whole.

Our dissenting colleague changes the question before the
court. To avoid the plain text of the Watchmen’s Agreement
covering Pleas, the dissent defines the relevant question as
whether the Employers had “a sound arguable basis for
concluding that employee discipline may occur before or apart
from filing an employer grievance under the Watchmen’s
Agreement.” Dis. Op. 13; see also id. 2, 16. The answer
provided distorts the standard adopted by the Board for the
sound arguable basis exception, and it does not meaningfully
engage with the Employers’ disciplinary action against Pleas
nor with Article 18(H)’s exclusivity and exhaustion
requirements, much less Article 18’s provisions on individual
cases of employee discipline. Not only does Article 18(H)
provide that the Article 18 procedures are the “exclusive
remedy with respect to any dispute arising under the
[Watchmen’s Agreement],” id. (emphasis added), but Article
18(D) regarding employer complaints of employee discipline,
provides that Employers “may implement the established
procedures as outlined in Articles 18 and 19 of Agreement,”
Article 18(D)(1). Article 18(D)(1) requires the Employers to
participate in a good faith discussion with Local 26 prior to
implementing the Article 18 procedures, namely referring a
matter to the Joint Committee, Article 18(E), or filing a formal
complaint, Article 18(D); there is no exception to Article
 18
18(H)’s exclusivity and exhaustion requirements. To the
extent our colleague interprets Article 18(H) to mean that the
Pleas disciplinary incident did not “aris[e] under” the
Watchmen’s Agreement, this interpretation also flounders on
the plain text. And in responding to the dissent by pointing to
the plain text’s statement of what Article 18(H)’s exclusivity
entails, the court does not create a rationale for denying the
petitions other than the Board’s reliance on
Article 18.

Authority involving a different context and different
contract terms does not advance the dissent’s position. See Dis.
Op. 10–11. For example, in Nolde Bros., Inc. v. Local No. 358,
430 U.S. 243 (1977), the Supreme Court considered whether
an arbitration clause in a CBA that required the parties to
arbitrate “any grievance” arising between the parties applied to
a contractual dispute over severance pay that arose after the
contract’s termination. Id. at 244–45, 248–49. Moreover, even
applying the reasoning in Nolde Brothers to Article 18(H), the
Court’s interpretation of “arising under” supports the Board’s
conclusion that the Employers lacked a sound arguable basis
for their disciplinary action, which was precluded by the plain
text of the Watchmen’s Agreement.

Nor does resolution of whether Pleas’ conduct violated the
no-discrimination provision of Article 16 “hinge[] on the
interpretation ultimately given” by the Arbitrator to the Section
13.2 policy of the Clerks’ Agreement, Nolde Bros., 430 U.S. at
249, because the present dispute does not cease to arise under
the Watchmen’s Agreement simply because the Employers
chose not to determine whether Pleas violated Article 16 of that
Agreement using Article 18 procedures and instead chose to
apply the different procedures and penalties in the Clerks’
Agreement, enforcing Section 13.2 remedies in the Arbitrator’s
order. The Employers did not challenge the Board’s internal
 19
operating procedures using three-member panels, see Dis. Op.
19, and consequently that issue is not properly before the court,
see 29 U.S.C. § 160(e).

B.

An employer violates Sections 8(a)(5) and (1) “by
unilaterally changing an existing term or condition of
employment without first bargaining to impasse.” Regal
Cinemas, Inc. v. NLRB, 317 F.3d 300, 309 & n.5 (D.C. Cir.
2003). The General Counsel must show that “there is an
employment practice concerning a mandatory bargaining
subject, and that the employer has made a significant change
thereto without bargaining.” Bath Iron Works, 345 NLRB at
501 (emphasis in original). Disciplinary procedures are a
mandatory subject of bargaining. See, e.g., El Paso Elec., 355
NLRB at 453.

The Employers contend that the Board’s finding that there
was a significant change to an established employment practice
is not supported by substantial evidence. They assert that
allegations of worker-versus-worker discrimination were not
previously addressed in any consistent way and were often
handled outside of Article 18’s process. But the record before
the Board shows that the parties had consistently utilized the
established Article 18 disciplinary procedure in the
Watchmen’s Agreement to discipline bargaining unit
employees and that this included the informal resolution of
disputes prior to the issuance of formal employer complaints.
See, e.g., Bill Carson testimony, ALJ Hr’g Tr. 465–66 (Apr.
17, 2018); Letter of March 31, 2017, from Long Beach General
Manager Bill Carson to Luisa Gratz, Local 26 President; Letter
of April 27, 2017, from Long Beach to Pleas. Indeed, as noted,
even in the present case Long Beach acknowledged that if Pleas
were to be formally disciplined, it would be pursuant to the
 20
Watchmen’s Agreement. Although there is no evidence of an
established practice for handling inter-union employee
complaints, the Employers acknowledge that a non-Local 26
employee had never filed a harassment complaint against a
watchman. Pet’rs’ Br. 53. Absent established disciplinary
practices to resolve this type of dispute, the Employers’
decision to enforce Section 13.2 against a covered watchman
was a change in practice and itself a deviation from the status
quo that supports the Board’s determination that there was a
unilateral change without bargaining. See NLRB. v. Katz, 369
U.S. 736, 744–47 (1962); Wilkes-Barre Hosp. Co. v. NLRB,
857 F.3d 364, 375–76 (D.C. Cir. 2017). Cf. E.I. Du Pont De
Nemours & Co. v. NLRB, 682 F.3d 65, 67–68 (D.C. Cir. 2012).

The Employers’ invocation of the contract coverage
doctrine fares no better. The court has interpreted the “contract
coverage” standard in unilateral-change cases to present the
question whether a union has already “exercise[d] its right to
bargain” by memorializing in a contract the employer’s right to
act unilaterally, thereby removing the covered action from the
range of further mandatory bargaining. NLRB v. U.S. Postal
Serv., 8 F.3d 832, 836 (D.C. Cir. 1993) (quoting Local Union
No. 47, 927 F.2d at 640). The evidence does not show that
Local 26 ever “surrendered the[] right to bargain over the . . .
change[] through either waiver or contract.” Wilkes-Barre
Hosp., 857 F.3d at 376 (quoting S. Nuclear Operating, 524
F.3d at 1357).

The Employers maintain that the Board’s ruling must be
vacated because the Board applied a “clear and unmistakable
waiver” standard and the Board recently ruled that the
“contract coverage” doctrine is the appropriate mode of
analysis, MV Transp., 368 NLRB No. 66, 2019 WL 4316958,
at *1. The Board noted that application of the “contract
coverage” standard would not require a different result. Pac.
 21
Mar. Ass’n, 367 NLRB No. 121, 2019 WL 1977314, at *6 n.21.
Even so, the Employers maintain that the Board failed to
explain, under the contract coverage doctrine, why procedures
related to employee discipline in the Watchmen’s Agreement
did not encompass the Employers’ decision to apply Section
13.2 to Pleas. Yet after reviewing the text of the Watchmen’s
Agreement, the parties’ bargaining history, and the parties’ past
practice, and concluding that the Employers had no sound
arguable basis for their interpretation of the Agreement, the
Board also concluded that the Agreement did not cover the
Employers’ disciplinary action. Id. at *5–6 & n.21. Given the
overlap between the sound arguable basis and contract
coverage analysis, (as conceded by the Employers, see Oral
Arg. Tape 6:55–8:17 (Jan. 22, 2020)), the Employers fail to
demonstrate that the Board’s explanation was deficient.

To conclude that a CBA covers the challenged unilateral
conduct, the conduct must fall “within the compass or scope of
contract language granting the employer the right to act
unilaterally.” MV Transp., 368 NLRB No. 66, 2019 WL
4316958, at *17; see also Wilkes-Barre Hosp., 857 F.3d at 377.
In the Employers’ view, their conduct falls “within the
compass” of the Watchmen’s Agreement even if the
Agreement does not specifically authorize discipline pursuant
to Section 13.2 because the Agreement grants an “unrestricted
unilateral right to impose discipline for a number of broadly
stated reasons” and “any dispute over the propriety of Pleas’s
discipline falls ‘within the compass’ of the Watchmen’s
Agreement.” Pet’rs’ Br. 59–60. As noted, Pleas was not
disciplined for any of the exempted offenses in Article 18(C),
and disciplinary disputes falling within the terms of Article 16
of the Watchmen’s Agreement are governed by Article 18’s
procedure, which is exclusive and does not encompass Section
13.2. Given the text of the Watchmen’s Agreement and the
Employers’ bargaining history with Local 26, their attempt to
 22
stretch the Agreement to cover the Section 13.2 discipline is
implausible at best. Although the contract coverage standard
does not require that the parties’ Agreement “specifically
mention” the disciplinary action at issue, see Wilkes-Barre
Hosp., 857 F.3d at 377 (quoting Enloe Med. Ctr. v. NLRB, 433
F.3d 834, 839 (D.C. Cir. 2005)), nor does it mean an employer
can unilaterally change the terms and conditions of
employment without bargaining because they fall within a
broad subject area that the parties’ Agreement had addressed in
other respects, cf. id. at 376–77. The Employers’ interpretation
of the Watchmen’s Agreement would render its long-familiar
and carefully bargained-for terms meaningless by achieving
the modification of the Agreement that Local 26 had repeatedly
rejected during bargaining with Pacific. This approach is
contrary to the Employers’ statutory obligations under Sections
8(a)(5) and (d) of the Act to adhere to the terms of the
Agreement and effectively dismisses the Supreme Court’s
reasoning on the importance of abiding by the parties’
Agreement, see First Nat. Maint. Corp., 452 U.S. at 674.

In sum, assuming that both of the theories for violation can
be applied, the court sustains the Board’s determinations that
the Employers made both a midterm contract modification and
a unilateral change to the terms and conditions of Pleas’
employment. The Board could properly conclude, in view of
the plain text of the Watchmen’s Agreement, that there was no
“sound arguable basis” for the Employers to apply the Clerks’
Agreement Section 13.2 procedures and enforce the
Arbitrator’s order against Pleas, who was covered under the
Watchmen’s Agreement. And, by so doing, the Employers
unlawfully unilaterally changed the terms and conditions of
Pleas’ employment. Accordingly, the court denies the petitions
for review and grants the Board’s cross-applications for
enforcement of its Order.
 RAO, Circuit Judge, concurring in part and dissenting in
part: The National Labor Relations Board (“NLRB” or “the
Board”) found the employers in this case violated federal law
by committing two unfair labor practices: first, unlawfully
modifying a collective bargaining agreement without union
consent; and second, unilaterally imposing new terms and
conditions of employment without providing the union notice
and an opportunity to bargain. While the majority enforces both
unfair labor practices, I would vacate the contract modification
finding. The Board may find a contract modification only when
an employer violates a specific contractual term that plainly
bars the actions taken. Because the relevant collective
bargaining agreement is silent or at least ambiguous as to the
discipline imposed in this case, the employers had reasonable
grounds for their disciplinary actions under the “sound
arguable basis” standard. This well-established standard
ensures that the Board does not overreach into ordinary labor
contractual disputes that Congress placed firmly within the
jurisdiction of the federal courts. Because the majority relaxes
longstanding standards for contract modification, I respectfully
dissent from Part II.A of the court’s opinion.

I.

The majority carefully sets out the relevant facts, Maj. Op.
2–7, but I would frame this contractual dispute in a somewhat
different way. The Long Beach Container Terminal and the
Pacific Maritime Association (“the Employers”) entered into
a collective bargaining agreement known as the Watchmen’s
Agreement with ILWU, Warehouse, Processing and
Distribution Workers’ Union, Local 26 (“the Union”). The
Union represents watchmen at the Employers’ port facilities.
Demetrius Pleas was a member of the Union and thus subject
to the Watchmen’s Agreement. Marine clerks at the port
facilities are represented by a different union operating under
a different contract, the Pacific Coast Longshore and Clerks’
Agreement (“Clerks’ Agreement”). When Pleas made racially
 2
insensitive comments in the workplace, a marine clerk filed
a complaint under Section 13.2 of the Clerks’ Agreement,
which sends discrimination complaints to an arbitrator to
resolve factual disputes and recommend appropriate discipline.
The Employers allowed the clerk’s complaint against Pleas to
proceed under Section 13.2 and imposed the arbitrator’s
recommended discipline. Both the Board and the majority
emphasize that the Employers used the wrong mechanism
when disciplining Pleas because they should have filed
a grievance under Article 18 of the Watchmen’s Agreement
rather than use the Section 13.2 process. Pac. Mar. Ass’n, 367
NLRB No. 121, at *5–6 (May 2, 2019); see Maj. Op. 9–19.

The distinction between Section 13.2 of the Clerks’
Agreement and Article 18 of the Watchmen’s Agreement,
however, is a red herring. The contract modification charge
does not turn on whether the Employers disciplined Pleas
pursuant to the Section 13.2 process. Rather, the dispositive
issue is whether the Watchmen’s Agreement allows the
Employers to impose discipline at their discretion or instead
requires the Employers to discipline Union members
exclusively through an Article 18 grievance. Thus, my analysis
focuses on whether the Employers justified disciplining Pleas
under a reasonable interpretation of the Watchmen’s
Agreement—a burden they readily carried here—and whether
the Board respected limitations on its jurisdiction by
adjudicating this case under the appropriate legal standard.

Understanding the Board’s limited authority over
contractual matters requires recollecting the distinction
between unfair labor practices under the National Labor
Relations Act of 1935 (“NLRA”) and breaches of contract
under the Labor Management Relations Act of 1947
(“LMRA”), a distinction the majority overlooks. The NLRA
creates public rights related to collective bargaining and
 3
empowers the Board to adjudicate unfair labor practices
infringing those rights. Section 8(a)(5) and (1) of the NLRA
make it unlawful for an employer to “refuse to bargain” with
employee representatives on wages, hours, and other
mandatory subjects of bargaining. 29 U.S.C. § 158(a)(5), (1).
Section 8(d) protects the integrity of the collective bargaining
process by prohibiting parties from “terminat[ing] or
modify[ing]” provisions “contained in” a collectively
bargained agreement. Id. § 158(d), (d)(4). The Board’s
authority over matters of contract extends only as far as
adjudicating unfair labor practices. Traditional contractual
disputes, by contrast, are reserved for the federal courts under
Section 301 of the LMRA, which recognizes that collective
bargaining agreements are voluntary contracts between
employers and unions giving rise to private rights when
breached. To vindicate contractual rights, the LMRA grants
district courts broad jurisdiction over “[s]uits for violation of
contracts between an employer and a labor organization.” 29
U.S.C. § 185(a); see Dist. No. 1 v. Liberty Mar. Corp., 933 F.3d
751, 756–58 (D.C. Cir. 2019).

The jurisdictional division between the NLRA and the
LMRA means the Board interprets contracts only “so far as [is]
necessary” to determine whether an unfair labor practice
occurred. Honeywell Int’l, Inc. v. NLRB, 253 F.3d 119, 124
(D.C. Cir. 2001) (quoting NLRB v. C&C Plywood Corp., 385
U.S. 421, 428 (1967)). “But the federal courts, not the Board,
are legislatively empowered to be the primary interpreters of
contracts.” Id. (citing Litton Fin. Printing Div. v. NLRB, 501
U.S. 190, 202–03 (1991)). Under prevailing standards for
contract-related unfair labor practices and associated defenses,
the Board performs a “limited review” of a labor contract’s
plain language to determine whether to assert jurisdiction. MV
Transp., Inc., 368 NLRB No. 66, at *17 (Sept. 10, 2019).
Resolving contractual ambiguity by reaching beyond the plain
 4
meaning, however, is a task reserved for the courts. As the
agency freely admits, “the Board is not an expert in contract
interpretation, nor was it intended to be.” Id. at *9 (cleaned up).
When contractual obligations are in dispute, “[t]he Board is not
the proper forum for parties seeking an interpretation of their
collective-bargaining agreement.” Vickers, Inc., 153 NLRB
561, 570 (1965). That much flows from the bargaining
structure of the NLRA, which leaves employers and unions free
to set the terms and conditions of employment by mutual
consent rather than administrative fiat. Orders of the Board are
“ineffective to determine any private rights of the employees
and leave[] them free to assert such legal rights as they may
have acquired under their contracts.” Nat’l Licorice Co. v.
NLRB, 309 U.S. 350, 366 (1940); cf. Stern v. Marshall, 564
U.S. 462, 484 (2011) (“[I]n general, Congress may not
‘withdraw from judicial cognizance any matter which, from its
nature, is the subject of a suit at the common law, or in equity,
or admiralty.’”) (quoting Murray’s Lessee v. Hoboken Land &
Improvement Co., 59 U.S. (18 How.) 272, 284 (1856)).

Jurisdictional considerations thus operate in the
background of the Board’s adjudication of contract
modification charges under Sections 8(a)(5) and (d). Judicial
review of such cases ensures the Board respects limits on its
authority and does not decide breach of contract claims that
Congress assigned to the courts. Accordingly, we review the
Board’s contract interpretation de novo while according
substantial evidence deference to the agency’s findings of fact.
StaffCo of Brooklyn, LLC v. NLRB, 888 F.3d 1297, 1302 (D.C.
Cir. 2018). To determine whether the Board misapplied
governing law in an arbitrary and capricious manner, “we must
identify the standard at issue, examine its application in prior
adjudications, and then determine whether the instant case is
a faithful application of existing law or instead a sub silentio
 5
revision.” Circus Circus Casinos, Inc. v. NLRB, 961 F.3d 469,
476 (D.C. Cir. 2020).

II.

As the Board has explained on multiple occasions, contract
modification and unilateral change unfair labor practices “are
fundamentally different in terms of principle, possible
defenses, and remedy.” ADT, LLC, 369 NLRB No. 31, at *3
(Feb. 27, 2020); MV Transp., 368 NLRB No. 66, at *27–28;
Bath Iron Works Corp., 345 NLRB 499, 501 (2005). In this
case, the Board found that the Employers both unilaterally
changed established practice and modified the Watchmen’s
Agreement by imposing terms from Section 13.2 of the Clerks’
Agreement. Pac. Mar., 367 NLRB No. 121, at *5–6. In doing
so, the Board contradicted precedents that foreclose finding
both unilateral change and contract modification based on the
same underlying employer conduct.1 Because the Employers

1
Although our court has yet to definitively address the issue, the
Board’s precedents have long treated contract modification and
unilateral change as mutually exclusive. Contract modification
charges “require greater proof” because their remedy—specific
performance of the contract’s terms—is more severe than that
assessed for the “lesser allegation” of unilateral change. ABF Freight
Sys., Inc., 369 NLRB No. 107, at *4 & n.8 (June 19, 2020) (citing
Bath Iron Works, 345 NLRB at 502–03). In rare situations, the Board
has found both violations when an employer imposed multiple rules
at the same time, some of which modified an existing contract and
some of which altered established practice. See, e.g., Comau, Inc.,
364 NLRB No. 48, at *4–6 (July 14, 2016). Since deciding this case,
the Board has reaffirmed that the findings are mutually exclusive:
“Unlike an employer that unlawfully modifies a contract, an
employer that implements an unlawful unilateral change only needs
to restore the status quo ante until the parties reach an impasse in
bargaining. Because the remedies are mutually exclusive, an
allegedly unlawful employer decision cannot be both a unilateral
 6
failed to challenge the joint nature of the findings, however, we
cannot vacate the Board’s order on this basis. 29 U.S.C.
§ 160(e); see Maj. Op. 8.

On these facts, I join the majority in enforcing the Board’s
unilateral change finding because the Employers imposed new
terms and conditions of employment without giving the Union
notice and an opportunity to bargain. Pac. Mar., 367 NLRB
No. 121, at *6; see Maj. Op. 19–22. Unilateral changes to prior
practices violate Sections 8(a)(5) and (1) by circumventing the
Section 8(d) procedural protections meant to promote
collective bargaining. NLRB v. Katz, 369 U.S. 736, 743 (1962).
To prove a unilateral change, the Board must show (1) “an
established past practice” and (2) “‘a material, substantial, and
significant change’” to that practice without bargaining. ABF
Freight Sys., Inc., 369 NLRB No. 107, at *2 (June 19, 2020)
(quoting MV Transp., 368 NLRB No. 66, at *4). Substantial
evidence supports the Board’s view that the Employers had
established past practices of investigating discrimination
allegations against watchmen informally and imposing less
severe penalties than those levied against Pleas. By
participating in and adopting the results of procedures from
Section 13.2 of the Clerks’ Agreement, the Employers made
material changes to employee discipline, an employment term
recognized as a mandatory subject of bargaining. See El Paso
Elec. Co., 355 NLRB 428, 453 (2010).

Yet these same facts do not support a contract modification
violation, which turns on matters of contract interpretation for
which the Board has considerably less prerogative and enjoys

change and a contract modification.” ADT, 369 NLRB No. 31, at *3
(citing Bath Iron Works, 345 NLRB at 503). While the NLRB’s
general counsel may allege both theories in the alternative, the Board
will not find both violations simultaneously. Id.
 7
no judicial deference. Contract modification is an unfair labor
practice under Sections 8(a)(5) and (d) because failing to
adhere to agreed-upon terms undermines collective bargaining
and a union’s role as the employees’ chosen representative. To
find contract modification, the Board must (1) identify
“a specific term ‘contained in’ the contract” to which a party
failed to adhere without the consent of the counterparty, United
Auto. Workers v. NLRB, 765 F.2d 175, 179 (D.C. Cir. 1985)
(quoting 29 U.S.C. § 158(d)(4)), and (2) assess the four corners
of the agreement to determine whether the charged party has
a “sound arguable basis” for interpreting the contract to support
its actions, Bath Iron Works, 345 NLRB at 502. Under the
“sound arguable basis” standard, an alleged breach of contract
is not an unfair labor practice if the party acted under
a “reasonable” interpretation of the contract. MV Transp., 368
NLRB No. 66, at *28. “[W]hen ‘an employer has a sound
arguable basis for ascribing a particular meaning to his contract
and his action is in accordance with the terms of the contract as
he construes it,’ the Board will not enter the dispute to serve
the function of arbitrator in determining which party’s
interpretation is correct.” NCR Corp., 271 NLRB 1212, 1213
(1984) (quoting Vickers, 153 NLRB at 570). In other words,
only clear violations of an unambiguous term rise to the level
of an unlawful contract modification.

In finding contract modification on these facts, the Board
departed from longstanding precedent in three ways. First, the
Board failed to identify a specific contract provision “contained
in” the Watchmen’s Agreement that the Employers modified.
Second, the Board misapplied the “sound arguable basis”
standard by rejecting the Employers’ reasonable interpretation
of the Watchmen’s Agreement as allowing employee discipline
outside the Article 18 grievance process. Third, by relying on
extrinsic evidence of bargaining history, the Board
transgressed the limitations on its contract interpretation
 8
authority. In my view, any one of these errors requires vacating
the contract modification finding. Taken together, they
represent a troubling departure from applicable standards and
undermine the clarity and predictability of federal labor law.

A.

To determine whether the Employers unlawfully modified
the contract, the Board was required first to identify a specific
term “contained in” in the Watchmen’s Agreement that the
Employers ignored without the Union’s consent. United Auto.
Workers, 765 F.2d at 179; see also St. Vincent Hosp., 320
NLRB 42, 42 (1995); Milwaukee Spring Div., 268 NLRB 601,
602 (1984). The Board concluded the Employers modified
Articles 18(D) and (H) by disciplining Pleas after arbitration
under Section 13.2 of the Clerks’ Agreement rather than filing
an employer grievance under Article 18 of the Watchmen’s
Agreement. Pac. Mar., 367 NLRB No. 121, at *5–6. Although
employee arbitration under Section 13.2 was a departure from
prior practice and thus an unlawful unilateral change, this does
not necessarily mean the Employers modified Article 18 when
they adopted the results of arbitration. Instead, the ultimate
question is whether the Watchmen’s Agreement requires the
Employers to discipline Pleas exclusively through Article 18’s
“Grievance Machinery.” Watchmen’s Agreement at 33
(“W.A.”). For the following reasons, the Watchmen’s
Agreement provisions identified by the Board do not require
the Employers to discipline employees exclusively through an
employer grievance under Article 18.

As an initial matter, “grievance” is a term of art in the
collective bargaining context that means more than
a “complaint” or “dispute.” As the Supreme Court has
explained, “[t]he processing of disputes through the grievance
machinery is actually a vehicle by which meaning and content
 9
are given to the collective bargaining agreement.” United
Steelworkers of Am. v. Warrior & Gulf Nav. Co., 363 U.S. 574,
581 (1960). The Watchmen’s Agreement grievance machinery
is a specific type of complaint process that covers some, but
not all, disputes arising between employees and the Employers.
Article 18(D) requires the Employers to attempt informal
resolution with affected parties before submitting
a “grievance” to the joint Labor Relations Committee.2 If the
Committee is unable to negotiate a resolution, the matter may
proceed to arbitration between the Employers and the Union.
W.A. at 33–34; see also Art. 18(E)–(G), W.A. at 34–35.
Nothing in Article 18(D) requires or suggests that the

2
Article 18(D) reads, in relevant part:
Prior to a complaint being filed by the Employer or the
Union, the following procedures shall apply:
(1.) (A.) The Employer shall notify and discuss the alleged
incident with the individuals involved and president and/or
a steward of [the Union] and attempt to resolve the matter.
Whatever evidence the parties have or have relied upon
relating to the discharge and/or grievance shall be provided
to the Union at the time of request. … Following a good faith
discussion with the Union, … the Employers may implement
the established procedures as outlined in Articles 18 and 19
of the Agreement.
(B.) The Union shall notify and discuss the alleged incident
with management and attempt to resolve the matter. …
Following a good faith discussion with the Employer, … the
Union may implement the established procedures as outlined
in Article[s] 18 and 19 of the Agreement.
(2.) In cases of discipline and/or discharge, the Employer
shall identify, specifically, and describe in detail the
violation committed by the watchman. The Employer shall
specify the company procedure and/or Contract provision
violated.
 10
Employers must file a contractual grievance before
investigating employee misconduct or imposing discipline.

Similarly, Article 18(H) speaks to the scope of the
grievance procedure but does not require prior Labor Relations
Committee approval of employee discipline: “This grievance
machinery shall be the exclusive remedy with respect to any
dispute arising under the Collective-Bargaining Agreement
and no other remedies shall be used by the Union, the
Employer, or any covered employee until the grievance
procedures have been exhausted.” W.A. at 35. Article 18(H)
says nothing about employee discipline. Yet the Board and the
majority would insert new language into the Watchmen’s
Agreement by reading Article 18(H) to “expressly limit[] the
Employers’ ability to discipline employees ‘with respect to any
dispute arising under the [Agreement].’” Maj. Op. 11
(emphasis added). There is simply no textual basis for claiming
that Article 18(H) makes any provision, express or otherwise,
regarding the discipline of employees. Accord Pac. Mar., 367
NLRB No. 121, at *12 (Kaplan dissenting).

The Watchmen’s Agreement subjects only those disputes
“arising under” its terms exclusively to the Article 18 grievance
process. Grievances “aris[e] under” a contract provision when
“the resolution of that claim hinges on the interpretation
ultimately given the contract clause.” Nolde Bros., Inc. v. Local
No. 358, 430 U.S. 243, 249 (1977). Despite containing detailed
rules on many aspects of the employment relationship, the
Agreement is generally silent on matters of discipline. The
Employers’ decision to discipline in this case does not “arise
under” the Agreement because no term speaks to Pleas’s
conduct or the resulting consequences. Grievance procedures
like those in Article 18 cannot be read expansively to cover
matters outside the contract without undermining the freedom
of contract policies embedded in federal labor law. Cf. Dep’t of
 11
Navy v. FLRA, 962 F.2d 48, 57 (D.C. Cir. 1992) (“Because of
the fundamental policy of freedom of contract, the parties are
generally free to agree to whatever specific rules they like, and
in most circumstances it is beyond the competence of the …
National Labor Relations Board or the courts to interfere with
the parties’ choice.”). Without any indication that the parties
intended to do so, we have no basis for assuming a contractual
grievance process covers individual cases of employee
discipline.3

In reaching a contrary reading of Articles 18(D) and (H),
the Board stated only that “article 18’s plain language
establishes that the parties intended to prohibit all other
mechanisms—including, a fortiori, one set forth in a different
contract covering a different bargaining unit—for addressing
alleged watchman misconduct.” Pac. Mar., 367 NLRB No.
121, at *5. The majority now adopts this finding by relying on
an argument the Board did not: that this dispute “arose under”
Article 16 of the Watchmen’s Agreement, which “broadly
prohibits discrimination against ‘any person’ on the basis of
‘race, color, national origin, [and] religious or political
beliefs.’” Maj. Op. 11, 18–19. The Board, however, relied
exclusively on its reading of Article 18 to find an unlawful
contract modification. See Pac. Mar., 367 NLRB No. 121, at

3
The grievance provision of the Clerks’ Agreement, by contrast,
explicitly specifies that a joint labor relations committee shall
“investigate and adjudicate any complaint against any clerk whose
conduct on the job … causes disruption of normal harmony in the
relationship of the parties hereto or the frustration and/or violation of
the provisions of the working or dispatching rules or of this
Agreement.” Clerks’ Agreement § 17.125, at 59. The contrast
between this language and Article 18(H) demonstrates the
Employers and the Union had alternative language readily available
but instead left discipline outside the scope of matters subject
exclusively to the grievance process in the Watchmen’s Agreement.
 12
*5–6.4 We cannot sustain an agency’s decision on a different
basis than the one relied upon below. See SEC v. Chenery
Corp., 332 U.S. 194, 196–97 (1947); Point Park Univ. v.
NLRB, 457 F.3d 42, 50 (D.C. Cir. 2006) (“Nor can our Court
fill in critical gaps in the Board’s reasoning. We can only look
to the Board’s stated rationale.”).

Because the Board cannot identify a specific term in the
Watchmen’s Agreement that subjects employee discipline to
the grievance procedure, the Employers did not modify specific
terms and conditions contained in the Agreement. The Board
failed to establish an unlawful contract modification.

B.

Even if Article 18 addressed the question of employee
discipline, the Board cannot sustain a contract modification
charge if the Employers had a “sound arguable basis” for
interpreting the Watchmen’s Agreement to permit their
disciplinary actions. Reading the Watchmen’s Agreement as
a whole, the Employers clearly had a “sound arguable basis”
for their conduct because the Agreement was at least
ambiguous with respect to employee discipline outside the
contractual grievance procedures of Article 18.

As discussed above, nothing in the plain terms of Article
18 requires discipline to proceed through an employer
grievance. Moreover, despite relying heavily on Article 18(D),
the Board and the majority ignore clear references to employee

4
The Board referred to Article 16 to reject an argument by one of the
Employers that the provision, if applicable, would allow the
Employers to investigate and discipline based on such complaints.
See Pac. Mar., 367 NLRB No. 121, at *6 n.20. But the Board never
found the Employers filed a complaint under Article 16 or that the
dispute turned on interpreting this provision.
 13
discipline arising outside the grievance machinery. For
instance, Article 18(D)(1) presupposes that a discharge and
a grievance are distinct employer actions: “Whatever evidence
the parties have or have relied upon relating to the discharge
and/or grievance shall be provided to the Union at the time of
request.” W.A. at 33–34 (emphasis added); see Encino
Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1141 (2018)
(“‘[O]r’ is ‘almost always disjunctive.’”) (citation omitted).
Moreover, Article 18(D) uses the past tense when referring to
employee discipline, suggesting review of discipline under the
grievance process could occur post hoc. See W.A. at 33–34.
These provisions at a minimum support a sound arguable basis
for concluding that employee discipline may occur before or
apart from filing an employer grievance under the Watchmen’s
Agreement.

Next, the Board and the majority fail to consider the
broader structure of the Labor Relations Committee as
reflected in Articles 18(A) and (J). Article 18(A) establishes
the Committee “to resolve grievances, secure conformance to
the terms of the Agreement, maintain current employee
registration rosters, maintain dispatch procedures, and
generally administer the Agreement.” W.A. at 33. None of
these roles for the Committee include employee discipline, and
the term “grievance[]” is not naturally read to include
allegations of employee misconduct. Supra at 8–10. Article
18(J) includes an extensive list of topics the Committee must
discuss on at least a monthly basis. W.A. at 35.5 Yet despite

5
Article 18(J) reads:
There shall be designated monthly [Labor Relations
Committee] meetings for the following purposes:
(1.) Two (2) regularly scheduled meetings each month
exclusively for general LRC issues
 14
containing significant detail, the list does not include matters
of employee discipline. If the Committee were intended as the
sole adjudicator of misconduct allegations for hundreds of
employees at a large shipping terminal, one would expect this
responsibility to be explicit.

Finally, the Employers offer a persuasive interpretation of
Article 18(C), which includes the Agreement’s only reference
to disciplinary rules.6 This provision instructs the Labor
Relations Committee to “establish rules and regulations
governing the conduct of watchmen as well as penalties for the
breach of these rules and regulations,” and provides further that
“nothing herein shall restrict the Employer’s existing right to
discipline or discharge” for five enumerated offenses not
implicated in this case. W.A. at 33. According to the

(2.) One (1) meeting exclusively for Registered Watchmens’
complaints (non-dispatch issues)
(3.) One (1) meeting exclusively for Dispatch Violations
(4.) One (1) meeting exclusively for Emergency watchmen
complaints
(5.) One (1) Dispatch Committee meeting exclusively for
Time Books and Emergency Watchmen Dispatch Audit
(6.) One (1) meeting exclusively to audit Registered guards
Dispatch Records and Reports
(7.) One (1) meeting exclusively for Watchmen Safety.
6
Article 18(C) reads:
The Labor Relations Committee shall establish rules and
regulations governing the conduct of watchmen as well as
penalties for the breach of these rules and regulations.
However, nothing herein shall restrict the Employer’s
existing right to discipline or discharge men for intoxication,
pilferage, assault, incompetency, or failure to perform work
as directed, but any man who considers that he has been
improperly disciplined or discharged may appeal to the
Labor Relations Committee.
 15
Employers, Article 18(C)’s reference to an “existing right”
means they retain the right to discipline for an offense unless
the Committee issues rules and penalties applicable to that
offense. The five enumerated offenses represent carve-outs for
which the Committee cannot preempt the Employers’
discretion. Read together, “a reasonable interpretation is that
[Article 18(C)] is limited to granting the [Committee] the
power to make disciplinary rules, so long as those rules do not
restrict the employers’ right to discipline for the five
enumerated offenses, but does not limit the Employer’s ability
to discipline employees in the absence of any controlling
[Committee] rule.” Pac. Mar., 367 NLRB No. 121, at *12
(Kaplan dissenting). The majority says this interpretation
renders the enumeration superfluous, Maj. Op. 12, but the
Employers’ interpretation of Article 18(C) preserves a role for
the grievance process to resolve complaints by the Union and
the Employers, to channel disputes into binding arbitration, and
to allow grievances to be filed after discipline if its imposition
conflicts with the Agreement.

The majority’s “sound arguable basis” analysis does not
square with precedent. Rather than engage de novo with the
plain meaning of the contract, the majority seeks to squeeze its
interpretation into substantial evidence deference whenever
possible. See Maj. Op. 13–16. Yet disputed evidence of past
practice and bargaining history cannot supplant plain meaning,
which, as discussed further below, is the lodestar of the sound
arguable basis analysis. At most, the majority demonstrates that
Article 18 may be interpreted to cover individual cases of
employee discipline. But one plausible interpretation does not
foreclose the Employers’ interpretation as fundamentally
unsound.

To defeat this contract modification charge, the Employers
needed only a “sound arguable basis” to argue the Watchmen’s
 16
Agreement allowed disciplining Pleas for racial harassment
without filing an Article 18 grievance. Because the Agreement
is at a minimum ambiguous on employee discipline outside the
contractual grievance procedure, the Employers had a “sound
arguable basis” for their disciplinary actions.

C.

The Board further erred by supporting its contract
modification finding with extrinsic evidence that the Union
rejected terms like those in Section 13.2 of the Clerks’
Agreement and that the parties had not previously applied such
procedures to discrimination allegations. The Board concluded
that “the parties’ past practice and bargaining history” meant
that the Employers “could not have mistaken or misunderstood
[the Union’s] intent that no such [Section 13.2] procedure be
applicable to watchmen.” Pac. Mar., 367 NLRB No. 121, at
*5–6, *16. Under the “sound arguable basis” test, however, the
Board’s authority to interpret contracts ends where ambiguity
begins. Rather than dismiss the charge in the face of ambiguity,
the Board reached beyond the four corners of the Watchmen’s
Agreement by looking to the evidence it used to find
a unilateral change violation. Yet as noted earlier, the contract
modification analysis does not turn on whether the Employers
applied Section 13.2 to Pleas, or whether the Union would have
consented to amending Article 18 to include such procedures.
Rather, the issue is whether the Employers had a “sound
arguable basis” for disciplining Pleas without filing a grievance
under the Watchmen’s Agreement. Relying on extrinsic
evidence caused the Board’s decision to run crosswise with
longstanding precedent.

To begin with, the Board’s use of extrinsic evidence to
rebut the Employers’ otherwise “sound arguable basis” rests on
a misreading of prior cases. For example, the Board cites
 17
Knollwood Country Club, 365 NLRB No. 22 (Mar. 8, 2017),
for the proposition that plain meaning and extrinsic evidence
stand on equal footing when interpreting a contract. In
Knollwood, however, the Board rejected an employer’s
interpretation as unreasonable because the employer failed to
read the contract as a whole and merely noted that extrinsic
evidence “also” was consistent with the plain meaning of the
contract. Id. at *1 & n.8. This holding is consistent with
ordinary principles of contract interpretation embracing the
plain meaning approach. Moreover, Knollwood relied in
relevant part on Mining Specialists, Inc., 314 NLRB 268, 268–
69 (1994), a unilateral change case emphasizing that
“contractual language … is always paramount.” Neither the
Board nor the majority cite to a single case in which extrinsic
evidence supported a finding of contract modification when the
provision in question was ambiguous. In fact, both the agency’s
precedents and the law of this circuit are clear that plain
meaning governs when adjudicating unfair labor practices
arising from contract.7 The Board’s limited statutory authority
7
See, e.g., Metalcraft of Mayville, Inc., 367 NLRB No. 116, at *4–5
(Apr. 17, 2019) (dismissing charge where employer had
a “colorable” argument that “conforming to applicable law”
provision allowed it to stop deducting union dues pursuant to state
law); MV Transp., 368 NLRB No. 66, at *28–34 (dismissing several
charges where employer had a “sound arguable basis” for
interpreting contract to allow new company policies); see also Am.
Fed’n of Gov’t Emps. v. FLRA, 470 F.3d 375, 381 (D.C. Cir. 2006)
(“Interpretation of a contract, like statutory and treaty interpretation,
must begin with the plain meaning of the language.”). Evidence of
prior practice and bargaining history, if mentioned at all, are cited
only to note its consistency with plain meaning. See, e.g., ADT, 369
NLRB No. 31, at *5 & n.10 (concluding plain language required
dismissing modification charge and then noting the parties’ past
practice “further supports” the interpretation offered by the
employer); Comau, 364 NLRB No. 48, at *5 & n.16 (in the absence
of an applicable contract provision, prior practice demonstrated the
 18
over contract disputes necessarily means it cannot use extrinsic
evidence to refute plain meaning or resolve ambiguity, which
is a role reserved for the courts.

Perhaps the fundamental problem of the Board’s approach
here is that it sought to revise the contract modification
standard sub silentio. By deploying extrinsic evidence in
a “sound arguable basis” inquiry, the Board failed to adhere to
governing law setting out distinct evidentiary standards for
contract modification and unilateral change. For example, in
Bath Iron Works, the Board distinguished between contract
modification and unilateral change and rejected arguments to
apply the same standard to both charges. See 345 NLRB at
501–02. Instead, the Board reaffirmed that the “sound arguable
basis” test governs contract modification charges—a policy the
Board continues to follow. See MV Transp., 368 NLRB No. 66,
at *13–17, *28 (emphasizing the Board’s limited authority to
interpret contracts and declining to go beyond plain meaning
when adjudicating unfair labor practices). Here, rather than
assess the Employers’ “sound arguable basis” against the plain
meaning of the Agreement, the Board held the Employers to
a different standard by faulting them for not proving the Union
would have accepted procedures like those in Section 13.2 of
the Clerks’ Agreement.8

contract applied to employees in question); Hosp. San Carlos, Inc.,
355 NLRB 153, 153 & n.5 (2010) (concluding plain meaning
foreclosed employer’s interpretation before observing that testimony
regarding the parties’ intent also supported the conclusion).
8
To determine whether an employer unilaterally changed an
established prior practice, the Board often looks to evidence of
conduct and bargaining history—typically a mix of testimony and
non-contractual written records. See, e.g., ABF Freight, 369 NLRB
No. 107, at *2–3 (discussing evidence of employer’s past actions).
Similarly, extrinsic evidence is relevant when an employer raises
 19
This intermingling of legal frameworks for contract
modification and unilateral change, however, has never been
adopted by the Board as a whole and has been previously
advanced only in dissenting opinions.9 Yet in this case, two
members of a three-member panel conflated the evidentiary
standard for contract modification with those for unilateral
change and waiver. Unlike many multi-member agencies, the
NLRB decides cases by delegating to three-member panels as
a matter of course. See 29 U.S.C. § 153(b); NLRB, Guide to
Board Procedures § 3.8(a) (Apr. 2017). As a consequence of
this practice, a position held by a two-member minority of the
five-member Board may prevail on a panel in a manner
inconsistent with the Board’s governing precedents.10

a waiver defense, which requires showing the union clearly and
unmistakably waived its statutory right to bargain on the contested
issue. See, e.g., Provena Hosps., 350 NLRB 808, 811 (2007).
9
Over the years, a persistent minority of the Board has questioned
whether Bath Iron Works was wrongly decided and advocated for
limiting the “sound arguable basis” standard or imposing a different
standard that falls within the scope of the Board’s substantial
evidence deference for factfinding. See, e.g., Metalcraft, 367 NLRB
No. 116, at *15 (McFerran dissenting); MV Transp., 368 NLRB No.
66, at *41 (McFerran concurring in part and dissenting in part);
Knollwood, 365 NLRB No. 22, at *1 n.5 (separate footnote by Pearce
and McFerran); Comau, 364 NLRB No. 48, at *4 n.14 (separate
footnote by Pearce and Hirozawa); Bath Iron Works, 345 NLRB at
504 (Liebman dissenting); see also Pac. Mar., 367 NLRB No. 121,
at *5 n.15 (separate footnote by McFerran) (reserving the question
of whether Bath Iron Works was wrongly decided).
10
The question is not whether the procedure is permissible under the
NLRA, or whether the Employers challenged its use in this case. Cf.
Maj. Op. 18–19. Rather, the question is whether this panel of the
Board followed the agency’s announced standards. Given the
unexplained break with precedent evident in this case, I would
answer that question in the negative.
 20
Although the NLRA authorizes decisions by delegated panels,
those panels must follow the Board’s announced standards in
order to satisfy the reasoned decisionmaking requirement
applicable to all administrative action. See Allentown Mack
Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998). As
a reviewing court, we must ensure the Board adheres to its
announced standards, not the preferred interpretations of
individual members. See Pub. Citizen, Inc. v. FERC, 839 F.3d
1165, 1169–70 (D.C. Cir. 2016) (applying the “almost
universally accepted common-law rule” that “only a majority
of a collective body is empowered to act for the body”)
(cleaned up).

The majority endorses the Board’s use of extrinsic
evidence by taking a myopic view of governing law. When
reviewing an adjudicatory standard, we must examine its
application in prior cases and then determine whether the
instant case is a faithful application of existing law. See Circus
Circus, 961 F.3d at 476. Instead, the majority relies on
a selective reading of the Board’s decision in Knollwood, see
Maj. Op. 14, and fails to engage with cases like Bath Iron
Works and MV Transportation that set out a clear plain
meaning requirement. It is a fundamental principle of
administrative law that prior departures from announced
standards do not excuse an agency’s duty to acknowledge and
justify a change in policy. “It is hard to imagine a more violent
breach of that requirement than applying a rule of primary
conduct or a standard of proof which is in fact different from
the rule or standard formally announced. And the consistent
repetition of that breach can hardly mend it.” Allentown Mack,
522 U.S. at 374; see, e.g., ABM Onsite Servs.-West, Inc. v.
NLRB, 849 F.3d 1137, 1144–46 (D.C. Cir. 2017) (vacating
order when the Board improperly applied the applicable
standard over the course of four years). Without a reasoned
revision by the Board of the “sound arguable basis” standard,
 21
this court must reject individual decisions departing from those
standards. The Board in this case was wrong to dislodge the
employer’s reasonable interpretation using extrinsic evidence.

* * *

Contract modifications are breaches of contract that rise to
the level of offending public rights by undermining the
collective bargaining process. The “sound arguable basis”
standard provides a means of separating unfair labor practices
from contractual disputes reserved for the courts. See
Honeywell, 253 F.3d at 123–25; Int’l Union, United Mine
Workers of Am. v. NLRB, 257 F.2d 211, 215 (D.C. Cir. 1958).
By finding a contract modification in these circumstances, the
Board departed from precedent in an arbitrary and capricious
manner and exceeded its limited jurisdiction over contract
disputes. I therefore respectfully dissent from enforcing the
Board’s contract modification finding.