BP Amoco Corp. v. National Labor Relations Board

United States Court of Appeals

FOR THE DISRTICT OF COLUMBIA CIRCUIT

Argued May 15, 2000 Decided July 11, 2000

No. 99-1368

BP Amoco Corpration, successor by merger of
Amoco Corporation, et al.,
Petitioners

National Labor Relations Board,
Respondent

Oil, Chemical and Atomic Workers International Union,
AFL-CIO, et al.,
Intervenors

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

Jeffrey S. Heller argued the cause for the petitioners.
Stephen D. Erf and Thomas J. Piskorski were on brief.

David Habenstreit, Attorney, National Labor Relations
Board, argued the cause for the respondents. Leonard R.
Page, General Counsel, Linda Sher, Associate General Coun-
sel, Aileen A. Armstrong, Deputy Associate General Counsel,
and David A. Seid, Attorney, National Labor Relations
Board, were on brief for the respondents. Anne M. Lofaso,
Attorney, entered an appearance.

Patrick M. Flynn entered an appearance for the interve-
nors.

Daniel V. Yager and Heather L. MacDougall were on brief
for the amicus curiae.

Before: Williams, Henderson and Rogers, Circuit Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge: The petition-
ers, BP Amoco Corp., successor by merger to Amoco Corpo-
ration, and its subsidiaries (collectively BP Amoco)1 seek
review of a decision and order of the National Labor Rela-
tions Board (NLRB, Board) holding that BP Amoco commit-
ted an unfair labor practice by unilaterally altering its em-
ployee medical benefit plan in violation of the collective
bargaining agreements between Amoco Corporation and five
locals of Intervenor Paper, Allied Chemical and Energy
Workers International Union, successor to the Oil, Chemical
and Atomic Workers International Union (collectively identi-
fied as Union). Because the collective bargaining agreements
expressly incorporated the company benefit plan, which in
turn expressly reserved to BP Amoco the right to amend the
plan at any time, we conclude BP Amoco did not commit an
unfair labor practice. Accordingly, we grant BP Amoco's
petition for review and deny the Board's cross-application for
enforcement.

This dispute involves the medical benefit coverage BP
Amoco provides to employees at its facilities in Texas City,

__________
1 For convenience "BP Amoco" is used to refer to all Amoco
entities, both pre- and post-merger.

Texas, Wood River, Illinois and Yorktown, Virginia. From
1984 until 1989 BP Amoco provided these employees medical
benefit coverage under its "Comprehensive Medical Expense
Plan" (CMEP), a traditional indemnity plan under which
participants chose their own medical providers and received
specific benefits subject to fixed deductibles. The CMEP
expressly reserved to BP Amoco the "right to amend[,]
modify, suspend or terminate" the plan "at any time." Joint
Appendix (JA) 489, 494.

During contract negotiation in 1989 and 1990, BP Amoco
and the Union agreed to replace the CMEP with the "Amoco
Medical Plan" (AMP), a similar indemnity plan. The AMP
contained the following reservation of rights provision:

The company expects and intends to continue these plans
indefinitely. However, the company reserves the right
to amend or terminate these plans at any time and for
any reason. If any of these plans are amended or termi-
nated, you and other active employees may not receive
benefits as desribed [sic] in other sections of this book.
You may be entitled to receive different benefits, or
benefits under different conditions. However, it is possi-
ble that you will lose all benefit coverage. This may
happen at any time, even after you retire, if the company
decides to terminate a plan or your coverage under a
plan. In no event will you become entitled to any vested
rights under these plans.

JA 654. Pursuant to this provision, BP Amoco amended the
plan in 1991 and 1992 by distributing amending documents to
employees but the amendments did not affect the reservation
of rights provision.

During contract negotiation in 1992 and 1993, BP Amoco
announced its intent to adopt some form of managed care
health plan to replace the indemnity plan. In January 1993
BP Amoco issued a bulletin to plan participants informing
them of the planned change. Additional bulletins were issued
later in the spring providing details of the proposed managed
care features and of two other changes affecting retiree
benefits.

After the Union demanded bargaining on the plan changes,
BP Amoco met with the various locals to discuss the matter
throughout the summer. The Union, however, offered no
proposals and in September 1993 BP Amoco declared an
impasse. BP Amoco implemented the modified plan effective
October 1, 1993.

The Union filed charges on behalf of its locals2 and the
NLRB issued four complaints based thereon, which were
consolidated. In October and November 1994 the administra-
tive law judge (ALJ) conducted a four-day hearing. In a
decision issued March 17, 1995 the ALJ concluded there was
no unfair labor practice because the Union was "bound" by
the AMP's reservation of rights clauses which had been
"adopt[ed]" in the collective bargaining agreements. 1999
WL 871774, at *12 et seq.

The NLRB General Counsel and the Union filed excep-
tions. In a decision dated August 18, 1999, the Board re-
versed the ALJ and held that BP Amoco had violated section
8(a)(1) and (5) of the National Labor Relations Act (Act).
Amoco Chem. Co., 328 N.L.R.B. No. 174, 1999 WL 671774
(1999). BP Amoco petitioned for review of the Board's
decision and the Board cross-applied for enforcement.

II.

Section 8(a)(1) of the Act makes it generally an unfair labor
practice for an employer "to interfere with, restrain, or coerce
employees in the exercise of the rights guaranteed in the
[Act]." 29 U.S.C. s 158(a)(1). Section 8(a)(5) more specifi-
cally makes it an unfair labor practice for an employer "to
refuse to bargain collectively with the representatives of his
employees." Id. s 158(a)(5). "An employer violates sections
8(a)(5) and 8(a)(1) of the Act if it makes a unilateral change in
a term or condition of employment--so-called 'mandatory
subjects'--without first bargaining to impasse." NLRB v.

__________
2 On August 20, 1993 one of the Union's locals filed a grievance
over the benefit change. The grievance was denied by the arbitra-
tor on October 2, 1994.

United States Postal Serv., 8 F.3d 832, 836 (D.C. Cir. 1993)
(citing Litton Fin. Printing Div. v. NLRB, 501 U.S. 190
(1991)). "However, the duty to bargain under the [Act] does
not prevent parties from negotiating contract terms that
make it unnecessary to bargain over subsequent changes in
terms or conditions of employment." Id. Thus, the parties
may negotiate " 'a provision in a collective bargaining contract
that fixes the parties' rights and forecloses further mandatory
bargaining as to that subject.' " Id. (quoting Local Union
No. 47, Int'l Bhd. of Elec. Workers v. NLRB, 927 F.2d 635,
640 (D.C. Cir. 1991); other citations omitted). " '[T]o the
extent that a bargain resolves any issue, it removes that issue
pro tanto from the range of bargaining.' " Id. (quoting
Connors v. Link Coal Co., 970 F.2d 902, 905 (D.C. Cir. 1992)).
"This court has referred to this inquiry as an analysis of
whether an issue is 'covered by' a collective bargaining agree-
ment." Id. (citing Connors, 970 F.2d at 906; Department of
Navy v. Federal Labor Relations Auth., 962 F.2d 48, 57 (D.C.
Cir. 1992)).

In this case BP Amoco contends the terms of the AMP
were "covered by" the collective bargaining agreements be-
tween BP Amoco and the locals because each agreement
incorporated the AMP by reference, including its reservation
of rights provision. This incorporation, BP Amoco maintains,
removed the AMP's terms from the range of mandatory
bargaining so that BP Amoco's unilateral modification of the
plan's terms was not an unfair labor practice.

Below, as in past decisions, the Board incorrectly applied a
"waiver analysis," concluding that the Union had not made a
"clear and unmistakable waiver" of its right to bargain over
health benefits. 1999 WL 671774, at *3-4. As this court
explained in United States Postal Serv.:

[T]he "covered by" and "waiver" inquiries are analytically
distinct:

A waiver occurs when a union knowingly and voluntari-
ly relinquishes its right to bargain about a matter; but
where the matter is covered by the collective bargaining

agreement, the union has exercised its bargaining right
and the question of waiver is irrelevant.

8 F.3d at 836 (quoting Department of Navy v. Federal Labor
Relations Auth., 962 F.2d 48, 57 (D.C. Cir. 1992); emphasis in
original). Here, the Board acknowledges the force of the
"covered by" principle but contends it does not apply because
the Board's decision expressly found that the collective bar-
gaining agreements did not incorporate the reservation of
rights clauses. For the reasons set out below, we agree with
BP Amoco that the reservation of rights provision was incor-
porated into the five collective bargaining agreements and
that therefore BP Amoco's authority to modify the AMP
without mandatory bargaining was "covered by" the agree-
ments.

Courts generally "accord a very high degree of deference
to administrative adjudications by the NLRB," United Steel-
workers Local 14534 v. NLRB, 983 F.2d 240, 244 (D.C. Cir.
1993), but "[b]ecause the courts are charged with developing
a uniform federal law of labor contracts under section 301 of
the Labor Management Relations Act, 29 U.S.C. s 185 (1988),
we accord no deference to the Board's interpretation of labor
contracts." United States Postal Serv., 8 F.3d at 836 (citing
Litton Fin. Printing, 501 U.S. at 203 (citing Local Union
1395, Int'l Bhd. of Elec. Workers v. NLRB, 797 F.2d 1027,
1030 (D.C. Cir. 1986))). Accordingly, we construe de novo the
language of the collective bargaining agreements here to
determine whether they incorporate by reference the AMP's
reservation of rights provision. See id. We conclude that
they do.

The two Texas City, Texas agreements recite that specified
"Employee Benefit Plans," including the "Amoco Medical
Plan," "are generally set forth in the current Benefits Plan
Booklet[s]," although "it is understood that certain provisions
in the Booklet have been superseded by negotiation between
the parties." JA 981, 1221.3 The Wood River, Illinois, and
Yorktown, Virginia facilities' agreements provide: "Benefit

__________
3 Each of the agreements set forth specific superseding provi-
sions. See JA 981, 1221.

plans for the Company ... will continue in force during the
life of this Agreement with the understanding that these
Plans may be bargained upon but will not be subject to
arbitration." Id. at 828, 874, 916.4 In each case, the quoted
language explicitly makes the plans a part of the collective
bargaining agreement, subject to specific, negotiated varia-
tions. The Board itself acknowledged as much when it stated
"the AMP summary plan description is a primary reference
for identifying the medical insurance benefits that the Re-
spondent has contractually agreed to provide unit employ-
ees." 1999 WL 671774, at *4 [JA 1532] (emphasis added).

Because the agreements incorporated the AMP generally,
they incorporated all of the plan's provisions not expressly
superseded in the agreements, including the reservation of
rights clause. As we noted in Air Line Pilots Ass'n, Int'l v.
Delta Air Lines, 863 F.2d 87 (D.C. Cir. 1988): "It is generally
held that '[w]hen a document incorporates outside material by
reference, the subject matter to which it refers becomes part
of the incorporating document just as if it were set out in
full.' " 863 F.2d at 94 (quoting Cunha v. Ward Foods, Inc.,
804 F.2d 1418, 1428 (9th Cir. 1986)). In Mary Thompson
Hosp., 296 N.L.R.B. 1245, 1247 (1989), enf'd, 943 F.2d 741
(7th Cir. 1991), the Board itself noted that "[t]he word
'incorporate' means, of course, that all provisions of the plan
become part of the contract itself." Specifically, the Board
concluded there that by incorporating the plan, "the Union
affirmatively agreed that the [employer] could terminate its
pension plan at any time," as the employer was authorized to
do under the plan's reservation of rights clause. Id. "[T]he
right of the [employer] to do so, free and clear of mandatory
consultation or of union objections, was contractually estab-
lished." Id. The same result obtains here. There was no
need, as the Board suggests, for BP Amoco to separately
negotiate the reservation of rights clause before it could

__________
4 The Board stated below, inexplicably, that "only three of the five
local contracts even mention the summary plan as a source for
general description of the AMP's benefits." 1999 WL 671774 , at *2.

become a part of the agreements. No such negotiation was
required in Mary Thompson.

In sum, the express incorporation of the AMP into the
collective bargaining agreements made the plan's reservation
of rights clause a part of each agreement and thereby autho-
rized BP Amoco to unilaterally modify the AMP without the
Union's consent. This authority was limited only by the
parties' "understanding," expressed in the agreements, that
the AMP "may be bargained upon" and "that certain provi-
sions in the Booklet have been superseded by negotiation
between the parties." JA 981, 1221. The only superceding
provision in the agreements addressed the proportionate em-
ployer and employee plan contributions. BP Amoco's reser-
vation of the right to amend the plan was not superseded and
therefore remained a part of the plan as incorporated into the
collective bargaining agreements.5 Because BP Amoco was
contractually authorized to amend the plan unilaterally, it
committed no unfair labor practice by doing so. According-
ly,6 the petition for review is granted and the Board's cross
application for enforcement is denied.

__________
5 BP Amoco's reserved authority to "terminate" (as opposed to its
right to "amend") seems to be circumscribed, however, under the
Wood River, Illinois, and Yorktown, Virginia collective bargaining
agreements, each of which requires that the AMP "continue in force
during the life of [the] Agreement." JA 828, 874, 916. BP Amoco
appears foreclosed by the quoted language (even apart from the
constraints of its own self interest and the mandates of the Employ-
ee Retirement Income Security Act) from canceling the AMP
altogether, at least for Union employees at these two facilities.

6 In light of our disposition, we need not consider BP Amoco's
alternate argument that if there was a bargaining obligation, it was
satisfied because BP Amoco bargained to impasse. See Pet'r Br. at
34-36; NLRB v. McClatchy Newspapers, Inc., 964 F.2d 1153, 1165
(D.C. Cir. 1992) (in banc) ("Generally, once the parties reach a
good-faith impasse, the duty to bargain is at least temporarily
suspended, and the parties, typically the employer, may enact any
change in a mandatory subject reasonably contained within its final
proposal."). Nor need we consider BP Amoco's additional argu-

So ordered.

__________
ment regarding the unenforceability of the Board's remedy. See
Pet'r Br. at 36-41.