United States Court of Appeals
For the First Circuit
__________________________
No. 00-1421
POSADAS DE PUERTO RICO ASSOCIATES, INC.,
Petitioner,
v.
NATIONAL LABOR RELATIONS BOARD,
Respondent.
_____________________
ON PETITION FOR REVIEW AND CROSS-APPLICATION FOR
ENFORCEMENT OF AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD
_____________________
Before
Lynch and Lipez, Circuit Judges,
Garcia-Gregory,* District Judge.
_____________________
Edwin J. Seda-Fernandez, with whom Marshal D. Morgan, and Adsuar
Muñiz Goyco & Besosa, P.S.C. were on brief, for petitioner.
Joan E. Hoyte, with whom Leonard R. Page, General Counsel, Aileen
A. Armstrong, Deputy Associate General Counsel, Frederick C. Havard,
Supervisory Attorney, and Bridget O’Connor, Attorney, National Labor
Relations Board were on brief, for respondent.
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March 23, 2001
_____________________
* Of the District of Puerto Rico, sitting by designation.
GARCIA-GREGORY, District Judge. The General Counsel of the
National Labor Relations Board brought an unfair labor practice charge
against Posadas de Puerto Rico Associates, Inc. for having unilaterally
discontinued certain group insurance policies it had obtained for its
employees. Posadas now petitions this Court for review of a decision
and order in which the Board concluded that Posadas had committed an
unfair labor practice. The General Counsel has, in turn, cross-
petitioned to enforce the order. The Board found that Posadas engaged
in an unfair labor practice in violation of sections 8(a)(1) and (5) of
the National Labor Relations Act, 29 U.S.C. §§ 158(a)(1) and (5), when
it unilaterally discontinued a group cancer and life insurance policy
that had been in effect for 20 years without first bargaining to
impasse with the Union. Because the Board’s order is supported by
substantial evidence on the record as a whole, we deny Posadas’s
petition for review, and grant the Board’s cross-petition to enforce
its order.
I. BACKGROUND
Posadas operates the Condado Plaza Hotel and Casino, a hotel
in San Juan, Puerto Rico. Some of the casino employees are represented
by the Asociación de Empleados de Casino (the “Union”). In April 1978,
Posadas took out a cancer and life insurance policy with Maccabees
Mutual Life Insurance Company to enable its employees to obtain life
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and cancer insurance at group rates.1 For almost 20 years, Posadas made
payroll deductions from its unit employees’ paychecks to cover premium
payments, and remitted the total amount to Maccabees and to the other
insurance companies.
On April 14, 1998, Posadas notified the insurance companies
that it would no longer make payroll deductions for the life and cancer
policy premiums as of May 1, 1998, and asked the companies to “make the
necessary arrangements to invoice the employees directly.” The next
day, April 15, 1998, Posadas notified its employees of the decision.
Shortly thereafter, Union president Victor Villalba contacted Eddie
Ortiz, Posadas’s personnel director, to discuss the matter and explore
plausible alternatives. Ortiz replied that the matter was out of his
hands, and told Villalba that the decision to discontinue the group
policies had been made “higher up.”
On April 22, 1998, a week after Posadas notified its
employees about the decision, Kenneth S. Krans of Adolfo Krans
Associates, Inc., a general insurance agency representing several of
the insurance companies that extended group coverage to Posadas, wrote
a letter replying to Posadas’s April 14, 1998 letter. Krans stated
1 In addition to its policy with Maccabees, Posadas made
similar arrangements with various other insurance companies to provide
its employees additional options for obtaining life and cancer
insurance at group rates. As with the Maccabees policy, Posadas would
deduct the premium amounts from its covered employees’ paychecks and
remit the total amount to the insurance companies.
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that the then-existing group coverage was provided through a
“‘bonafide’ group contract,” and added that such a contract “was
applied for and issued under the representation that it was an
employer-paid benefit.” Krans further stated that his company had no
knowledge about any internal agreement between Posadas and its
employees regarding payment of the policy premiums.
Krans told Posadas that his company could arrange for
individual coverage as of May 1, 1998, but warned that such a change
would not be as simple as Posadas might have believed, given that the
employees previously covered under the group policy would now be
subject to “individual insurability and rates.” Krans suggested that
Posadas extend the policy cancellation date to allow covered employees
sufficient time to secure individual coverage. Posadas declined to
follow Krans’s suggestion, however, and discontinued its withholding
practice -– and thereby cancelled all group cancer and life insurance
policies –- effective May 1, 1998.
The Union filed an unfair labor practice charge, and the
Board’s General Counsel filed a complaint against Posadas shortly
thereafter. On May 5, 1999, the Administrative Law Judge found that
Posadas’s actions constituted an unfair labor practice in violation of
sections 8(a)(1) and (5) of the Act, and ordered Posadas to resume,
upon written request from the Union, its past practice of making
payroll deductions for the group cancer and life insurance policies, to
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use best efforts to restore those policies, and to make Union employees
whole for any losses incurred as a result of the unilateral change.
Both the General Counsel and Posadas filed exceptions to the ALJ’s
findings and conclusions.
On February 25, 2000, the Board upheld the ALJ’s findings and
conclusion that Posadas had violated sections 8(a)(1) and (5) by
unilaterally terminating the payroll deductions for the insurance
premiums for the group life and cancer insurance policies without
bargaining with the Union over the change. The Board modified the
remedies decreed by the ALJ and ordered Posadas to restore the status
quo ante by resuming its past practice of making payroll deductions for
the group cancer and life insurance policies, restoring the policies
for previously covered unit employees, and making the employees whole
for any losses they may have suffered as a result of the unilateral
change. Additionally, the Board ordered Posadas to bargain with the
Union in the future over any changes in the group cancer and life
insurance policies that affect unit employees.
II. STANDARD OF REVIEW
We review the Board’s conclusion of law de novo, NLRB v.
Beverly Enterprise-Massachusetts, Inc., 174 F.3d 13, 21 (1st Cir.
1999), and take the Board’s findings of fact to be “conclusive if
supported by substantial evidence on the record considered as a whole.”
Id.; see also 29 U.S.C. § 160(e). Substantial evidence is “such
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relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.” Beverly Entreprise-Massachusetts, 174 F.3d at
21. Moreover, “the possibility of drawing two inconsistent conclusions
from the evidence does not prevent an administrative agency’s finding
from being supported by substantial evidence.” Id. “In particular,
the credibility determinations of the Administrative Law Judge [ ] who
heard and saw the witnesses are entitled to great weight.” NLRB v.
Hospital San Pablo, Inc., 207 F.3d 67, 70 (1st Cir. 2000) (internal
quotation marks and citations omitted).
III. DISCUSSION
An employer commits an unfair labor practice “if, without
bargaining to impasse, it effects a unilateral change in an existing
term or condition of employment.” Visiting Nurse Servs. v. NLRB, 177
F.3d 52, 57 (1st Cir. 1999), cert. denied, 120 S.Ct. 787 (2000); Litton
Financial Printing Div. v. NLRB, 501 U.S. 190, 198 (1991). The Board
has “the primary responsibility of marking out the scope of the
statutory language and of the statutory duty to bargain.” Ford Motor
Co. v. NLRB, 441 U.S. 488, 496 (1979). Particularly with respect to
determinations that fall within the Board’s “special expertise,” such
as whether an issue is a mandatory subject of bargaining, the Board is
entitled to “considerable deference,” and its determination must be
upheld if reasonable and consistent with the policies of the Act. Id.
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at 497; see also Beverly Enterprises-Massachusetts, 174 F.3d at 26, 29.
We have long held that an insurance benefit is a mandatory
subject of bargaining and that unilateral actions regarding such
subjects are proscribed by the Act. Allied Chem. & Alkali Workers of
Am. v. Pittsburgh Plate Glass Co., 404 U.S. 157, 159 (1971) (citing
W.W. Cross & Co. v. NLRB, 174 F.2d 875, 878 (1st Cir. 1949)).
Insurance benefits have been typically regarded as mandatory subjects
of bargaining because they provide “direct and immediate economic
benefits from the employment relationship,” and because they “provide
a financial cushion in the event of illness or injury ... at less cost
than such a cushion could be obtained through contracts or insurance
negotiated individually.” W.W. Cross & Co., 174 F.2d at 878.
Posadas’s principal argument is that the withholding practice
was neither a benefit nor a term or condition of employment, but rather
a mere internal mechanism that it was free to eliminate unilaterally
when it so chose. Posadas contends that it was not required to bargain
to impasse before making the unilateral change because it did not
contribute to the premium payments, but merely collected the premiums
and remitted them to the insurance companies. Posadas concedes, as it
must, that an insurance benefit is “vital” to employees and is a
mandatory subject of bargaining, but argues that the impact of its
decision on the group insurance policies was merely incidental.
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Posadas’s attempt to frame its actions as having to do only
with an internal company mechanism is disingenuous. The record plainly
shows that the withholding practice and the group insurance policy were
inextricably intertwined. The April 1998 exchange of letters between
Posadas and Krans reveals that the unilateral decision that Posadas was
contemplating would have had the effect of eliminating the group
insurance policy altogether. A corollary of that decision, therefore,
would be that previously covered employees would be forced to secure
individual coverage at individual policy rates. Thus, by eliminating
the withholding practice, Posadas did much more than eliminate an
“internal mechanism”; it unilaterally removed a group insurance policy
that Posadas’s unit employees had been able to avail themselves of for
almost twenty years. Given that the decision had the effect of
unilaterally changing a long term benefit, Posadas was required to
bargain with the Union to impasse. We doubt that Posadas could hide
behind an ignorance defense, but, even if it could, such a defense is
not supported by the record.
Moreover, the Board found, based on the uncontested testimony
offered by Elsie Santana, a Krans employee, that group policies were
considerably less expensive than individual policies. Accordingly,
Posadas’s longstanding practice of withholding and remitting premiums
allowed covered employees to obtain group coverage at rates
significantly below what they could have obtained individually. Such
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a benefit existed regardless of whether Posadas itself contributed to
the premium payments.
Posadas’s reliance on Seattle First National Bank v. NLRB,
444 F.2d 30 (9th Cir. 1971), McCall Corp. v. NLRB, 432 F.2d 187 (4th
Cir. 1970), and Westinghouse Elec. Corp. v. NLRB, 387 F.2d 542 (4th
Cir. 1967) for the proposition that its unilateral action did not
impinge on an issue traditionally considered “vital” to employees is
unavailing. None of these cases even remotely suggests that an
employer can unilaterally eliminate a benefit (insurance-related or
otherwise) without bargaining with the Union, by claiming that it
actually intended to undertake an unrelated, internal administrative
action that happened to cause an adverse effect on the benefit at
issue. In Seattle First National Bank, for example, the Ninth Circuit
specifically noted (pointing to our opinion in W.W. Cross Co., supra)
that group insurance plans involve issues traditionally considered
“vital” to employees, as opposed to bank services, the putative benefit
at issue in that case. Seattle First National Bank, 444 F.2d at 35
n.8.
Similarly, McCall and Westinghouse involved minor food price
increases -- issues quite different from those presented here. In both
cases, the employees had alternative places to eat, or they could bring
their own lunches; in neither instance were the cafeteria plants so
isolated that employees were dependent on the food that caused the
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controversies. Although the Fourth Circuit held that such issues were
not required subjects for bargaining, none of the actions complained of
in either case impinged (directly or indirectly) on a traditionally
“vital” issue, such as insurance benefits. Westinghouse, 387 F.2d at
550; McCall, 432 F.2d at 188.
Posadas further contends (again focusing solely on the
withholding practice) that its unilateral action was not one
traditionally considered “vital” because unit employees “could have
maintained the life and cancer insurance policies by simply making the
premium payments themselves . . . .” Posadas Brief at 11. The record
provides no support for that proposition. To the contrary, Krans’s
April 22, 1998 letter, stating that the cancellation of the policy
would subject covered employees to “individual insurability and rates”
(emphasis supplied), suggests precisely the opposite. Indeed, the
record shows that the employees could not have maintained the same
coverage at the same cost – even assuming they were individually
insurable – by making the premium payments themselves.
None of Posadas’s remaining arguments calls for a contrary
conclusion. Posadas contends, for example, that its employees could
have maintained their coverage by making premium payments directly to
the insurance companies. The record shows, however, that Posadas’s
employees could not have maintained the same level of coverage by
paying the premiums themselves; any coverage after May 1, 1998, would
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have been subject to individual rates, and would therefore have been
more expensive.2 Posadas also contends that its withholding practice
was not a term and condition of employment because it was not embodied
in the collective bargaining agreement with the Union. The argument is
meritless. An item that is not addressed in a collective bargaining
agreement can become a term and condition of employment, and hence a
mandatory subject of bargaining, if it has been “satisfactorily
established” by past practice or custom. See, e.g., Exxon Shipping Co.,
291 NLRB 489, 493 (1988). Here, we have a practice that was carried
out for almost twenty years, resulting in substantial reliance by
Posadas’s unit employees. As the Board noted, it is that longstanding
history -- coupled with the nature of the benefit at issue -- that
transformed this practice into a term or condition of employment. As
such, Posadas was required to bargain to impasse.
We need go no further. The record amply supports the Board’s
conclusion that Posadas provided its unit employees with an insurance
benefit, and that, as a result, it was not free to eliminate that
benefit unilaterally without offering the Union the opportunity to
bargain concerning that change. Posadas’s unilateral actions
2There is a dispute regarding whether unit employees could have
continued to receive group rates had they transferred over within a
specific grace period provided by the insurance companies. Even
assuming arguendo that this alternative solution was available,
Posadas’s argument ignores the fact that its own actions created the
problem of which it now complains.
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effectively eliminated the group policy and left previously-covered
employees without a critically important benefit. Posadas’s past
practice of withholding premium payments was a term and condition of
employment that triggered the duty to bargain. Its failure to do so
constituted an unfair labor practice.
Lastly, Posadas argues that the remedy imposed by the Board
constituted an abuse of discretion. It is well-settled that the Board
has “the primary responsibility and broad discretion to devise remedies
that effectuate the policies of the Act,” and that discretion is
“subject only to limited judicial review.” Pegasus Broadcasting of San
Juan v. NLRB, 82 F.3d 511, 513 (1st Cir. 1996). Pursuant to its
authority under 29 U.S.C. § 160(c), the Board ordered a remedy
directing Posadas to, inter alia, (1) resume its practice of making
payroll deductions for group cancer and life insurance policies, (2)
restore the policies for previously covered unit employees, and (3)
make the employees whole for any losses they may have suffered as a
result of the unilateral change. We have consistently maintained that
a Board-ordered remedy “should stand unless it can be shown that [it]
is a patent attempt to achieve ends other than those which can fairly
be said to effectuate the policies of the Act.” Id. (quoting Virginia
Elec. & Power Co. v. NLRB, 319 U.S. 533, 540 (1943)).
The Board acted within its sound discretion in ordering the
restoration of the status quo. Had it not been for Posadas’s
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unilateral alteration of the terms and condition of employment, the
covered employees would have continued to enjoy the benefit of life and
cancer insurance at group rates. Posadas’s proposed remedy –- to
bargain over the resumption of payroll deductions, which Posadas had no
right to eliminate unilaterally -– would effectively place the unit
employees “behind the line of scrimmage.” Id. at 514. There is no
reason to disturb the remedy ordered by the Board.
IV. CONCLUSION
For the foregoing reasons, we deny Posadas’s petition for
review and grant the Board’s cross-petition to enforce its order.
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